A longtime associate member of the Florida Building Materials Association told president Bill Tucker that he wouldn't be able to make his dues for the year.

"He was down to himself and his sister," Tucker says. "And he was going to have to lay off his sister."

The story is emblematic of Florida's home-building industry, particularly the southern portion of the state, where several markets rank among the nation's worst. "When we went down, it wasn't rolling downhill–we fell off a cliff," says Al Bavry, president and owner of Kimal Lumber, based in Nokomis on the Gulf Coast.

But so far, the region's pro-oriented independent dealers have survived. While some of the nation's biggest LBM operations have chosen to pull out of south Florida, the locally owned independents are making drastic cuts to staffing and operations, learning new tricks, and generally treading water until conditions improve.

Raymond Building Supply Corp., the eight-unit dealer based in North Fort Myers, saw single-family home starts plummet 50% to 75% in the markets it serves, compared to 2005-06 levels, while multifamily and condominium levels fell 60% to 80%, according to Brian Marten, executive vice president and COO. That's largely why Raymond's employee count has dropped from 1,000 two years ago to 300 now.

Among the top 75 markets ranked by Hanley Wood Market Intelligence, a sister company of ProSales, Naples ranked 72nd, Miami was 74th, and Fort Myers finished dead last in building permits issued in the 12 months ended Sept. 30, 2008, compared with the previous 12-month period. All three markets had a decline in starts of at least 56%, with Fort Myers seeing a 77.7% plunge.

Tucker says dealers across the state had the capacity to deliver materials for 200,000 housing starts in 2008. But at press time, he expected the year to finish with about 30,000 starts. "That was the problem in Florida: something had to give," he says. "There was too much capacity, and somehow you have to bring it back to equilibrium."

Sudden Stillness

In this case, getting back to equilibrium means a near-total halt to construction. The Fort Myers market had 29,330 housing permits issued in 2006, Hanley Wood Market Intelligence reports. In 2008, it was around 1,650. Just to the south, the Naples market has experienced an 84% drop in permits issued between 2005 and 2008. Meanwhile, on the Atlantic Coast in the Miami-Dade County market, the number of residential permits issued crashed from 26,120 in 2005 to an estimated 3,300 last year–an 87% decline.

The housing crash was preceded by a similarly steep rise in housing prices that triggered the land rush. Between 2000 and 2006, the median price of a single-family home in Florida increased by 66.4%. In Fort Myers, conditions were even hotter; the median existing home price rose 73.9% from $156,600 in 2003 to $272,300 in 2006.

"The fast appreciation also brought a rapid end to the housing market," Tucker says. "It outpriced everyone." Partly as a result, existing home sales in the Fort Myers-Cape Coral market fell 37% between 2006 and 2007, while sales in Miami fell 39%, according to the Florida Association of Realtors. The relatively affluent Naples market (its median home price is nearly triple that of Fort Myers) was somewhat insulated during the period, with sales falling just 11%.

Home prices in all three markets have fallen this year–in Fort Myers, the median price for a home sale as of last fall was $141,000–but they haven't been enough to overcome the more general effects of the economic slump. Florida has the third-highest foreclosure rate in the nation. As of November, the state had 166,000 households in foreclosure, according to Gov. Charlie Crist (R). Lake County, just west of Orlando in central Florida and served by Raymond Building Supply, had 29,000 foreclosures in 2008 alone.

Kimal's Al Bavry has been in the industry for 45 years and has seen at least five cycles where it has fallen off, then bounced back. But this time it was a "perfect storm," he says.

"We bulked up this industry over the last five years. Homes we should have been building in 2007 and 2008 we built in 2004 and 2005," explains Brad Wanzenberg, executive vice president of Deerfield Builders Supply in Deerfield Beach and FBMA chairman.