Shake-Up In The Housing Market

One by one, Alex and Deena Fuertes watched their neighbors sell their homes for big profit. Three months ago, they decided to try to cash in while they still could.

The couple asked $295,000 for their 2,000-square-foot Valrico home - $135,000 more than they paid two years ago - and signed a contract on a smaller pre-construction town home. They thought the profit on the sale of their house would guarantee the family a low enough mortgage that Deena could afford to stay home with their two young children.

But the offers they’d hoped for didn’t come. They lowered the price several times, then decided to stay put. Now, the Fuerteses face losing their $10,000 deposit on the town home.

“I was thinking money, money, money,” said Alex Fuertes, a truck driver. “Now, I’m looking at it like it’s just not worth it. The market is so bad right now that everybody is trying to get something for nothing.”

Buyers and sellers alike are finding that the real estate boom of the past five years is fizzling. There are now about 28,000 pre-existing homes on the market in Tampa Bay, nearly four times as many as in spring 2005. Homes are taking months to sell instead of days or weeks like last year. And prices are appreciating at a much slower pace - a couple thousand dollars every few months instead of every few days.

Real estate agents say their clients are frustrated because they’re holding on to hope that they can make as much money as their neighbors have. Many aren’t prepared for a long wait to sell. In desperation, some offer incentives such as cash, upgrades, even cars to entice buyers.

Cathleen Smith, the Tampa Bay regional senior vice president for Coldwell Banker, said she’s seen a dramatic change in the market since January and advises her agents and clients to change their mindsets.

“A lot of people think they’ve missed the market, and they want to sell before the prices go down,” Smith said. “But most sellers are still thinking of their house value from last year.”

Prices of homes in competitive neighborhoods used to go up by as much as $75,000 in one day, Smith said. But today, she noted, a $350,000 home will still cost $350,000 tomorrow. Florida homes have consistently increased by double digits for the past couple of years, according to data from the Florida Association of Realtors.

Lawrence Yun, an economist with the National Association of Realtors, predicts that prices in Florida will continue to appreciate, just at a much slower pace.

Existing home prices in the Tampa region, for example, are going up slightly from month to month, from a median price of $222,800 in March to a median price of $225,500 in April.

The number of homes sold, however, is declining.

The Florida Realtors group last month released data that showed that Florida is seeing some of the largest sales declines in the nation. April sales declined 31 percent compared with sales at the same time last year.

Sales in the Tampa-St. Petersburg-Clearwater area have dropped 37 percent since April 2005. That was one of the biggest drops in the state.

Real estate is slowing all over the country because of rising mortgage interest rates, but Florida has the added pressure of rising insurance rates. Realtors report clients dropping contracts because they can’t find or afford insurance, Yun said. Also, he said, areas that saw the largest increases in prices during the real estate boom can expect to cool more than areas where prices didn’t increase as much.

The changing market has forced real estate agents to work harder to sell homes, walking through neighborhoods and ringing doorbells, said Shirley Cicero, of Keller Williams in Brandon. Cicero said she has always gone door-to-door to attract clients and potential buyers but has noticed more agents doing the same thing.

“It’s not like the frenzy of last year,” she said. “This year, at least we get to market our homes. We have to market them right to get the best price.”

A key to making a good profit, Cicero said, is pricing the house right to begin with. If buyers are greedy, they often end up disappointed when they have to lower their prices, she said. The price range that is selling most quickly, she said, is the $200,000 to $250,000 range.

George Bodmer, the executive director of the Greater Tampa Association of Realtors, said even though sales are slipping and price appreciation has slowed, 2006 still will likely be the third-best year in real estate for the Tampa Bay area.

“But when you’re coming off the first-best year, it looks like things are going down,” Bodmer said.

Sales of new homes have slowed, too. The Commerce Department recently reported that new home sales nationally have dropped 11.2 percent since January and are remaining on the market longer with slower price appreciation.

The backlog of unsold new homes rose by 2.4 percent to a new record of 565,000 homes on the market at the end of April. It would take 5.8 months to deplete that backlog at the April sales pace, according to the Commerce Department.

Michael Carliner, an economist with the National Association of Home Builders, said the slowdown should not severely affect the overall economy. It will, however, change it because the housing market has been its driving force, Carliner said. Other sectors, he said, will have to pick up the slack.

As far as Alex Fuertes is concerned, buying and selling is just a matter of timing. If he were only trying to buy now, he said, he’d love the market and would low-ball sellers to get a good deal.

As a seller, though, he plans to stay out of real estate until it changes again.

“We can’t complain because we could still make a pretty penny,” Fuertes said. “But I didn’t want to go down that much. I know things will bounce back up in about two years, and I may sell then.”

by: Shannon Behnken