Of Bubbles and Space Travel...

The mantra for the last three years in South Florida, was that you could keep building and building, and that the supply would be feverishly bought up. To boldly go where no builders have gone before!! Never mind that according to some real estate cheerleaders there was in fact no more land to build on in the first place, or that the supply to demand ratios were in nose bleed territory. Buyers lined up to wait for hours, sometimes months in advance of new developments breaking ground for the chance to purchase a property. You couldn't lose! Errr..right?

Like the episode in Star Trek where the crew of the Enterprise were transported with their alter egos , builders are suddenly thrust into the mirrored dimension of the unthinkable- too many houses and too few buyers. Beam me up Scotty!!

As reported in the Palm Beach Post , builders (which like sharks die if they stop moving) have....gasp... stopped building houses. Captain!! She's breaking up!!!

"Free markets supply a bitter antidote to the problem of too many unsold houses, and last year, home builders in Palm Beach County and the Treasure Coast took the cure.

They stopped building."


The dollar value of new residential construction plans in Palm Beach, Broward and Miami-Dade Counties dropped by 24 percent in 2006, according to fresh-off-the-press numbers from McGraw Hill Construction. The dollar value of new home permits even in home building hot spots like St. Lucie County fell by 33 percent - and St. Lucie is considered one of the fastest-growing areas in the country.


It also gives home builders time to lick their wounds. Tuesday morning, WCI Communities Inc. reported cancellations outnumbered new orders in Florida. D.R. Horton Inc. reported a 64 percent drop in first-quarter earnings. "

Presently, there is about a published four year supply of South Florida of properties. That doesn't include FSBO's, REO's, or properties that are being pulled and relisted on the MLS. The builders need to work through their remaining unsold inventory, and are dropping prices like bombs across the country. This is doing two things- first, it is killing the private sellers that cannot compete with the huge price incentives, and second, it is driving the comps down. It is a viscous spiral downward that will continue until they bleed of their inventory, which is going to take some time. These builders are writing down the land they own at massive losses. They are reporting more cancellations than closings. They need to sell and sell NOW. Warp speed Mr. Sulu!!

Not to sound smug, but it's not as if you weren't warned on this blog and many others over the past year that like all bubbles, they eventually pop. And when the bubbles disappear, your exposed to the world.