By EVE SAMPLES
Palm Beach Post Staff Writer
Sunday, February 17, 2008
****T ST. LUCIE =97 Like all legendary parties, the boom-time bash in
****t St. Lucie raged on for too long.
The carousing should have stopped by 2006, when hundreds of empty
houses ac***ulated on city blocks. But builders continued building
homes and buying overpriced land.
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Home buyers didn't hear "last call" either. Enchanted by the prospect
of owning part of one of the fastest-growing cities in America, they
continued paying top prices - months after the demand-driven peak of
the market had passed.
Now the city is doing its penance. The consequences are unmistakable:
The median price of an existing single-family home in the metro area
that includes ****t St. Lucie has dropped for 20 consecutive months,
leaving homeowners such as Jeffrey and Joanna Walk upside down in
their home loans and struggling to avoid foreclosure.
The number of building permits issued for single-family homes in the
city has plummeted 59 percent since 2005, delivering a blow to one of
****t St. Lucie's biggest industries: construction.
Empty homes languish in almost every neighborhood of the 114-square-
mile city.
St. Lucie County's foreclosure rate is the highest in the three-county
region that stretches south to Palm Beach County.
Its unemployment rate is, too. It reached 6.9 percent during the
second half of 2007 - a level not seen since 2004, when two hurricanes
tore through the Treasure Coast.
Jaime Gomez is feeling the pain. The 28-year-old mortgage broker was
laid off from a national bank last year after home-loan business dried
up. The one-bedroom ****t St. Lucie condo he bought for $110,000 in
2004 is worth about 25 percent less now, he estimates. And a second
home he owns with his mother and sister in western ****t St. Lucie sits
next to an empty foreclosure.
"It's a scary feeling having a home in this neighborhood, and
especially in St. Lucie County," Gomez said.
****t St. Lucie's huge amount of undeveloped land, coupled with its
reputation as an affordable bedroom community, made for an
irresistible cocktail that fueled the real estate revelry. It also
makes the morning after rougher. In January, the metro area including
****t St. Lucie tied with Punta Gorda for the state's steepest single-
family home price decline.
"At some point in time, when you have as rapid growth as we had, it
always slows down," said Don Cooper, the longtime city manager.
"Everybody thought it was just going to keep going."
Prices may continue to fall
In 2005, the year the U.S. Census declared ****t St. Lucie the fastest-
growing city in America, Rudy Howard's insurance agency was buzzing.
=46rom his strip-mall office on U.S. 1, he wrote policies for building
contractors. He found coverage for five or six residential
construction sites a month.
Then the building spree created a housing glut.
In 2007, Howard, 56, wrote policies for about six home sites all year.
Gone are the tile and site-cleanup contractors he used to serve.
Companies are buying less workers compensation insurance because they
have fewer workers.
"It's probably affected my income to the tune of 25 percent," Howard
said.
He cut one employee from his agency, R.V. Howard & Associates, and
he's trimming expenses for what experts forecast will be a rough year.
Moody's Economy.com projects that home prices in the ****t St. Lucie
metropolitan area, which includes Martin and St. Lucie counties, will
continue falling until the second quarter of 2009. By then, they will
have tumbled 21 percent, Moody's predicts.
Because ****t St. Lucie's economy grew so quickly on the back of the
housing market, the pain of the extended slump feels especially acute
here.
"For independent agents especially, it's been pure hell because we had
hurricanes in '04, hurricanes in '05, and then the economy went to the
dumper in '06," Howard said.
He laughed a thick, hearty laugh.
That's all you can do, he said.
More than 4,800 homes in St. Lucie County - about 1 in 25 - were in
some stage of foreclosure in 2007, according to clerk of the court
records. In Palm Beach County, where foreclosures also have spiked,
the figure was 1 in 45.
Jeffrey and Joanna Walk are trying to avoid that fate.
The couple were living in Palm Beach County in 2004 when they signed a
contract to build a $182,500 three-bedroom, two-bath home in ****t St.
Lucie. Approved for a $200,000 mortgage, they had decided to move
north, where they could get more square footage for their buck.
They also made another move that seemed smart during the boom: They
took out a second mortgage to pay down high-interest credit card debt.
The year after they settled into the house, an escrow deficit caused
by higher taxes and insurance drove monthly payments on their mortgage
to $1,900 from $1,300. When Joanna Walk, 30, called the lender to try
to work out a payment plan, she was told she first had to be 60 days
behind on her account.
"I struggled as long as I could to not let that happen," she said.
"Finally, I needed them to talk to me because we weren't going to make
it. We let the payments get behind so we could do it."
By then, the lender told her, they were too big a risk. The company
recommended tapping her husband's pension to square up. They did - to
the tune of $6,000.
This year, Jeffrey Walk, 36, a West Palm Beach firefighter, got
injured on the job. That eliminated the thousands of dollars in
overtime he had been making.
With two small children, they ran out of money to pay their credit
card bills. Joanna, who said she had never even had a late payment
before this, now scours supermarket circulars to find the cheapest
milk and other staples.
"We never in a million years thought that would be us," she said.
They sold about $10,000 worth of their possessions on eBay, and Joanna
has sent out more than 100 r=E9sum=E9s hoping to find work to supplement
her part-time job at a legal office.
They want nothing more than to keep their house.
"The American dream is to own your own home - not to, you know, be a
renter for the rest of your life," Jeffrey said. "I mean, we've done
that."
Too much inventory
If there's solace for the Walks, it's that they're not alone. Several
of their neighbors also face losing their homes.
Though foreclosures in Martin and Indian River counties are subsiding,
the end is not in sight in St. Lucie County, said Brad Myers, a real
estate agent who specializes in short sales. The big problem in St.
Lucie, he said, is inventory.
"Too many investors jumped in, and too many homes were built, and none
of it was planned," Myers said. "And now we've got way more inventory
than most counties in Florida - and in fact most counties in the
country."
Last year St. Lucie County had one of the most troubling housing
inventory problems in the country, said Brad Hunter, a West Palm Beach-
based analyst at the data firm Metrostudy. That hasn't changed, he
said.
During the fourth quarter of last year, St. Lucie had 11.8 months
worth of brand-new homes to burn through - much less than the 21
months of inventory it had in 2006, but almost double the 6.8 months
Palm Beach County had in the fourth quarter, Metrostudy said.
Hunter estimates 11/2 months is a healthy level.
The fallout is visible in ****t St. Lucie on Bayshore Boulevard, a busy
street east of Florida's Turnpike that's lined with model homes. Now,
many have closed shop or trimmed hours.
The small builder Chateau Homes first cut staffing at its Bayshore
model in April. In August, it closed.
"We just had no traffic whatsoever," said owner John Grobelny, who is
based in Lake Worth. "We were paying salespeople to sit there and not
get any sales."
He blames the dearth of buyers on a wild run-up in prices.
When he started building in ****t St. Lucie in 2001, his 1,800-square-
foot model was going for $145,000, including the lot. By 2006, land
prices climbed so much that the same package was almost $285,000.
Many of his subcontractors have retreated from the city, too.
"They've gone on to the Carolinas or Georgia to find work," he said.
Others are returning to the service jobs they abandoned for
construction work during the boom, said Bob Stevenson, owner of a gas
station and Dairy Queen in Martin County.
"Now all these guys that were making $25 (an hour), they're back in
the restaurants and hotels making $10, $11 an hour," Stevenson said.
Builder casualties including the bankruptcy of Fort Lauderdale-based
Levitt and Sons, which abandoned work on a 1,200-house subdivision in
the Tradition development, put a huge dent in contractors' local
business.
"I've had a lot of people stop and ask me, 'Are we looking at double-
digit unemployment?'" said Gwenda Thompson, president and chief
executive officer of the Workforce Development Board of the Treasure
Coast.
She doesn't think so.
But "does it hurt?" Thompson asked. "Yes."
Patti Kozeluh, 65, said she was laid off from her job as a sales and
marketing assistant at Mercedes Homes about a week before
Thanksgiving. She loved working there but understands layoffs are a
reality in a slow market.
Since her Social Security payments won't amount to much, she needs an
income to cover the mortgage on her ****t St. Lucie home.
"I just feel that in another six months it's going to start coming
around," Kozeluh said. "It has to start coming around."
Ripple effect on business
So far, there are no signs of a recovery at Delmonico Grill in western
****t St. Lucie.
The restaurant was once a popular lunch spot for Realtors and
insurance agents, but business has dropped precipitously with the
housing market, said owners Michelle DeRoche and Wayne Goings.
The restaurant took in about $1 million in sales in 2004, the year it
opened. Then it was hit by a bad review, which DeRoche and Goings say
drove some customers away.
After that, the housing market started its free fall. By late last
year, the business partners were pulling in only about $20,000 a month
in sales.
"Business since the housing market (slowdown) is terrible, absolutely
terrible," said DeRoche, 43. "And you hear it from everyone coming in
here."
She and Goings, 50, put the business on the market in December, asking
for $395,000. They're planning to switch careers after more than a
decade in the business.
"We went from being management of our restaurant and having a staff of
34 to waiting on tables," DeRoche said. "We have no staff anymore
except for our family."
Still, Cooper, the city manager, is optimistic that this downturn
won't be as severe or long-term as others the city has weathered.
For one, ****t St. Lucie has had recent success recruiting
biotechnology companies. And its employment base is more diverse than
it was during the last real estate downturn in the early 1990s - after
the city's original developer, General Development Corp., filed for
bankruptcy.
"In the housing recession, it's going to go very slowly, and one day
we'll wake up and say, 'We're out of it,'" Cooper said.
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