Today's Local Real Estate News: "This housing market is killing, killing small business in Florida and California."

The Sun-Sentinel reports on slowing new residential construction:

“Construction of single-family homes in October skidded to the lowest level in 16 years, although the slide was cushioned somewhat by a rebound in apartment building.”

“The Commerce Department reported Tuesday that total housing construction rose by 3 percent in October to a seasonally adjusted annual rate of 1.229 million units. But all the strength occurred in a hefty rebound in apartment construction, which is extremely volatile.”

“The bigger single-family sector actually fell by 7.3 percent to an annual rate of 884,000 units, the slowest pace since October 1991, when housing was going through another steep downturn. In another worrisome sign, applications for building permits fell for a fifth consecutive month.”

“The housing slump is expected to worsen in 2008. Builders are cutting jobs, selling land and slashing prices to weather the downturn. Bonita Springs-based WCI Communities Inc., which builds in South Florida, recently cut 575 jobs. Meanwhile, Fort Lauderdale-based builder Levitt and Sons filed for Chapter 11 bankruptcy this month after defaulting on more than $300 million in loans. In the past two months, the builder laid off most of its 412 workers and stopped construction of homes.”

“Hollywood-based builder TOUSA Inc. also is considering bankruptcy and said it has serious doubts about whether it can remain in business.”

In very troubling national news that shows that the credit crisis is not limited to subprime, Freddie Mac announced ballooning losses:

“The mortgage crisis intensified Tuesday as Freddie Mac, the nation's No. 2 buyer and guarantor of home loans, posted its largest quarterly loss ever and warned that it may need to curtail its business unless it can raise fresh capital.”

“Freddie Mac lost $2 billion in the third quarter, much more than Wall Street was expecting, primarily because it needed to set aside $1.2 billion to account for bad home loans. Freddie Mac also said it may slice in half its quarterly dividend of 50 cents per share — which would be its first dividend cut since becoming a public company in 1989.”

“That double dose of bad news sent Freddie Mac's shares skidding 28.7 percent, the largest decline in the two decades its shares have traded in public markets.”

The Sun-Sentinel reports on development in Plantation:

“When the city decided to redevelop 860 acres in the Midtown district five years ago, officials estimated it would take until 2025 to complete the job.”

“Builders, eager to profit from the housing boom, drew up elaborate plans for large buildings that would combine retail and residences, flanked by fountains and lush parks. But the housing slump threatens to delay the project's completion by five years, City Councilwoman Diane Veltri Bendekovic said.”

“Already, a growing number of jittery buyers are looking to bail out of their condominium contracts, and some major developers are slowing plans for new housing. The convergence of these factors may mean the city's tax base will suffer, forcing cuts to staff or services to make up the difference as operating costs continue to rise, City Councilman Jerry Fadgen said.”

Local office supply giant, Office Depot, announced reduced earning due to the housing slump:

“Office Depot Inc., the world's second-largest office supply retailer, unveiled a turnaround strategy Tuesday after announcing that its third-quarter profit dropped about 9 percent compared with the same period last year.”

“Third-quarter 2007 net earnings were $117 million compared with $129 million in the same period last year. Revenue increased 2 percent to $3.9 billion. Sales at North American stores open at least one year were down 5 percent.”

“Company officials pegged North American sales declines to a soft housing market in Florida and California, where consumers and small businesses have curtailed spending and face a credit crunch. About 25 percent of Office Depot's retail business and 30 percent of its business sales are concentrated in Florida and California.”

“‘This [housing market] is killing, killing small business in Florida and California,’ Odland said.”

Not that we should trust their data at all, Zillow reports that many homeowners in the past year now have negative equity. In their report, they rank the major Metropolitan Statistical Areas (MSAs). The Miami-Ft. Lauderdale MSA ranks second worst only behind Los Angeles with 30% of all homeowner who purchase in the past year with negative equity:

“Home values nationwide declined for the fourth consecutive quarter, down 5.7 percent year-over-year -- the largest year-over-year decline in more than a decade, according to Zillow's Q3 2007 Home Value Report (1) released today. This brings the U.S. Zindex(R) home value indicator (2) to $244,000, down 2.8 percent from the second quarter. The Zindex is the median Zestimate(R) valuation and measures all homes in an area, not just those that have sold during the quarter.”

“For many homeowners who bought during the last two years when most local markets reached their peak, subsequent declines in value have left them with negative home equity, owing more than the home is currently worth. As of September 30, nearly 16 percent (15.6%) of homeowners nationwide who bought in the last year (3) and 17.5 percent of those who purchased two years ago have current home values that are less than the original mortgage amount. By comparison, less than 2 percent (1.8%) of those who purchased a home five years ago have seen their equity slide into the negative.”

“Not surprisingly, markets with the greatest proportion of homes with negative equity were those hit hardest by declining values. For example, people who purchased homes in California's Central Valley, parts of Florida and Las Vegas during the past year have seen double-digit depreciation and negative equity rates reach up to five times the national median.”