Building permits for residential construction was off 17% from March, and down 69% from a year ago, and may be just what the doctor ordered.

A study released this past Monday shows that inventory levels of vacant houses in SW Florida started to fall in 2007 while the number of homes under construction declined sharply.  Because we have such an oversupply of homes on the market, we really needed for construction of new homes to slow until the market can catch up.

Investors forced builders to speed up production faster than they normally would have.  When the market topped out, builders were left with unsold inventory they thought was previously sold as investors backed out of deals.  This left us with a trtemendous oversupply of homes in Southwest Florida, and demand is back to normal 2001 levels.

Many people realize that a falling real estate economy leads to job layoffs and fallout throughout the business community.  Many builders have laid off employees, and some have had a hard time paying subcontractors because investors have backed out of sales contracts.  The builder is stuck with paying the bills.  This business model works when most of the buyers actually close on the property they contracted to purchase.  The breakdown has been when scores of buyers have backed out; some at the very last minute without warning.  Some of the buyers have very clever schemes designed to back out of contracts, leaving the builder in the lurch.

We’ve all seen the reporting on the First Homes scandal, and alleged misrepresentations by their Broker D’Alessandro & Woodyard Commercial Realtors.  We are not the judge or jury in this case, and we believe the truth will eventually work itself out regarding mortgage fraud, securities fraud, inflated appraisals, and representations in general.  Nobody knows the "Real Truth", and we may not for some time until the entire investigation is over.

The story that hasn’t been told though is the story of local builders who have been harmed, have had a difficult time paying employees and subcontractors, and large carrying costs associated with financing of land, property taxes, and construction.

In a follow-up Blog article we’ll focus on a few builders and the struggles they’ve encountered in this very difficult market.  We may produce this article in conjunction with the News Press.

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