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Homebuilders spend least since 2002

With fewer people buying homes, building permits in the bay area fall 43 percent.

By SCOTT BARANCIK
Published September 2, 2006

Homebuilders raced at NASCAR speed last year to satisfy the public's craving for housing. Now that the demand is softening, they're slamming on the brakes.

Private spending on housing construction and renovation fell for the fourth straight month in July. The 2 percent decline, from $640.5-billion in June to $627.4-billion in July, was the steepest monthly drop since January 2002 and was far worse than Wall Street forecasters had expected.

Meanwhile, the number of building permits issued in the Tampa Bay area fell an average of 43 percent between July 2005 and July 2006, according to U.S. Census Bureau data, which excluded Citrus County. The hardest hit: Pasco County, where permit totals plummeted 63 percent.

"Most builders I'm aware of have rescaled their plans to not be too ambitious," said McCar Homes executive Kevin Robles, whose Atlanta-based company has housing developments in Pasco and Hillsborough counties. "Oh, I won't build 100 this year. I'll build 50."

Though clusters of "For Sale" signs have provided abundant proof of a housing glut, evidence that home builders were getting the message was elusive until recently.

Last month, luxury-home builder Toll Brothers said that it was abandoning certain options to purchase land and that its customers had ordered 48 percent fewer homes during the most recent quarter. WCI Communities, a publicly traded builder based in Bonita Springs, disclosed that it had laid off an unspecified number of staffers in Florida and elsewhere during July, due to declining sales.

But the government's new statistics, in particular the permit data, may be the best indicators yet that industry leaders are aiming to reduce inventory and restore a greater balance between supply and demand.

Not that home builders are pressing the panic button. Marvin Rose, publisher of Rose Residential Reports in Tarpon Springs, said it's a mistake to compare current housing trends to 2005's "overheated" results; better to compare them to more normal years, such as 2003 or 2004, he said.

Jim Knetsch, owner of RE/MAX Realty Associates in Carrollwood, said that while some cautious lenders have placed a "temporary moratorium" on funding for new subdivisions, the scaling back of construction plans foretells a return to normalcy. Robles, the McCar executive, said the market's underlying economic conditions - interest rates, job growth, unemployment - remain encouraging, while problem areas such as gas prices and raw material costs are moderating.

"Has anybody walked away from a development, thrown in the towel? No, that's not it," Robles added. "But everybody has revisited their plans and business plans." Anyone who says otherwise is lying, he said.

Even so, he said, everything evens out in the long run.

"We probably did two years work in one year (2005)," Robles said. "So we'll just twiddle our thumbs for the second year."

Scott Barancik can be reached at barancik@sptimes.com or (727) 893-8751.

 Construction spending

Spending on residential construction in the United States fell 2 percent, the largest month-to-month drop since January 2002.

July 2006 $627-billion

June 2006 $640-billion

Source: U.S. Census Bureau

Building permits issued, single-family homes

July 2006 July 2005 Change

Pasco 238 644 -63%

Pinellas 146 204 -28%

Hillsborough 735 1,129 -35%

Hernando 210 345 -39%

Source: U.S. Census Bureau; Citrus data not available

[Last modified September 1, 2006, 22:46:58]