Housing Prices Continue to Slide
Standard and Poors housing index shows biggest decline in 20 year history; Tampa real estate market shows biggest decline in group of 20 major markets; Sarasota real estate not far behind; Northport-Port Charlotte real estate values quasi crashed.
There's no telling it seems when we will hit bottom in this market, and all the wishful thinking in the world will not change the fact that values in many areas of the country were so outrageously over the top to begin with that there continues to be more room for a decline.
Sky Sotheby's auction little over a week ago gave us all a reality check; market value is what a buyer is willing to pay and a seller is willing to sell for and in many of the sales conducted that price was 40% below the most recent list and asking price.
The Standard and Poors housing index was released today and it showed a 4.5% drop nationwide in home prices for the 3rd quarter over a year ago. The Florida Association of Realtors released its numbers painting an even grimmer picture for this area.
Of 20 major metropolitan areas in the S&P index, Tampa and Miami led the pack with 11% and 10% declines respectively; The Florida Association of Realtors report shows a 6% decline for Sarasota and 18% for North Port/Port Charlotte, a virtual crash in my book.
Moodys recently released a study showing anticipated declines over the next 2-3 years of 15-18% for some market areas, based on a ratio of housing prices vs market rents. The idea being that local market rents are one of the most reliable indicators of home values, and while rents appear to be on the rise somewhat (not in Sarasota) there is still a tremendous disconnect between cost to rent vs. cost to buy. If you can rent a house for $1,500 that would cost $3,000/month to buy then many will opt to rent instead.
Another way to look at home values and to get an indication of where we should be is to step back to 2,000 and calculate from there on forward what values would be today based on a moderate 5-7% annual increase in values. Compounded that would result in an approximate increase of 45-80% over 7 years, and not the 150-250% we've seen.
So what's the silver lining, if there is one?
To me personally, the silver lining are the solid demographic numbers here in the US and in Florida specifically. Regardless of the tremendous inventory overhang we have, including over 2 Million vacant homes for sale, fact remains that annually our population grows by approx. 2 million households with Florida being the second fastest growing state. Household growth translates into need for additional housing units, or simply put - our population growth will in due time cause the inventory of homes to be absorbed.
I do believe however that this will take another couple of years at a minimum, and in most cases home prices will have to come down further.
Many sellers are now coming to the realization that either they should not be selling at all right now, or if they absolutely have to sell then they need to price their property extremely aggressively. Home buyers today are more informed and have more choices than ever before and while many sales are taking place, they are absolutely not willing to overpay and instead are pushing prices where they should be.
Pricing is more critical today than ever before, and proper pricing requires furthermore that you have to continually monitor the pulse of the market and adjust accordingly. Today $349,000 may make a home the best priced home in any given neighborhood; one month from now it may be the most expensive home in that same neighborhood as other sellers reduce their prices. Only the very best priced homes in any given area will get a buyer's attention. Unfortunately this may mean you need to continuously adjust your price, and if you did not price your home right from the start you may end up chasing the market down, eternally having the most expensive house on the block.
We do not have control over external circumstances, i.e. the market overall. I'll be the first to admit that I, too, have been caught off-guard when looking back at my own 'predictions' of 1 year ago. What we can do however is decide how to best act in the face of adversity, and for some sellers this may simply mean taking their homes off the market and staying put for a few years until things have blown over; for others it may mean making drastic re-evaluations of where their property needs to be priced in order to attract showings and to sell.
This is not a time to be greedy. If you bought a home for $250K in 2,000 and you can get $450K today then that's an awesome return; never mind that you 'could have gotten $700K two years ago. Who cares? I bought CMGI for $180/share in 2,000 - today its worth less than $2/share. That's life.
If you must sell and you do owe more than the home is worth, talk to your bank (or your broker) about exploring a short sale possibility. Your home *will not* be worth more 1 year from now than it is today in all likelyhood, so your situation is not going to improve. Best case it will remain the same.
Again, homes are selling, and at Bravo we are now selling more properties in a month than we sold in the first six months of the year put together.
Sincerely,
Thomas Heimann, President & CEO
BRAVO REAL ESTATE SOLUTIONS
Bravo Brokers/Bravo Title/Bravo Lending
There's no telling it seems when we will hit bottom in this market, and all the wishful thinking in the world will not change the fact that values in many areas of the country were so outrageously over the top to begin with that there continues to be more room for a decline.
Sky Sotheby's auction little over a week ago gave us all a reality check; market value is what a buyer is willing to pay and a seller is willing to sell for and in many of the sales conducted that price was 40% below the most recent list and asking price.
The Standard and Poors housing index was released today and it showed a 4.5% drop nationwide in home prices for the 3rd quarter over a year ago. The Florida Association of Realtors released its numbers painting an even grimmer picture for this area.
Of 20 major metropolitan areas in the S&P index, Tampa and Miami led the pack with 11% and 10% declines respectively; The Florida Association of Realtors report shows a 6% decline for Sarasota and 18% for North Port/Port Charlotte, a virtual crash in my book.
Moodys recently released a study showing anticipated declines over the next 2-3 years of 15-18% for some market areas, based on a ratio of housing prices vs market rents. The idea being that local market rents are one of the most reliable indicators of home values, and while rents appear to be on the rise somewhat (not in Sarasota) there is still a tremendous disconnect between cost to rent vs. cost to buy. If you can rent a house for $1,500 that would cost $3,000/month to buy then many will opt to rent instead.
Another way to look at home values and to get an indication of where we should be is to step back to 2,000 and calculate from there on forward what values would be today based on a moderate 5-7% annual increase in values. Compounded that would result in an approximate increase of 45-80% over 7 years, and not the 150-250% we've seen.
So what's the silver lining, if there is one?
To me personally, the silver lining are the solid demographic numbers here in the US and in Florida specifically. Regardless of the tremendous inventory overhang we have, including over 2 Million vacant homes for sale, fact remains that annually our population grows by approx. 2 million households with Florida being the second fastest growing state. Household growth translates into need for additional housing units, or simply put - our population growth will in due time cause the inventory of homes to be absorbed.
I do believe however that this will take another couple of years at a minimum, and in most cases home prices will have to come down further.
Many sellers are now coming to the realization that either they should not be selling at all right now, or if they absolutely have to sell then they need to price their property extremely aggressively. Home buyers today are more informed and have more choices than ever before and while many sales are taking place, they are absolutely not willing to overpay and instead are pushing prices where they should be.
Pricing is more critical today than ever before, and proper pricing requires furthermore that you have to continually monitor the pulse of the market and adjust accordingly. Today $349,000 may make a home the best priced home in any given neighborhood; one month from now it may be the most expensive home in that same neighborhood as other sellers reduce their prices. Only the very best priced homes in any given area will get a buyer's attention. Unfortunately this may mean you need to continuously adjust your price, and if you did not price your home right from the start you may end up chasing the market down, eternally having the most expensive house on the block.
We do not have control over external circumstances, i.e. the market overall. I'll be the first to admit that I, too, have been caught off-guard when looking back at my own 'predictions' of 1 year ago. What we can do however is decide how to best act in the face of adversity, and for some sellers this may simply mean taking their homes off the market and staying put for a few years until things have blown over; for others it may mean making drastic re-evaluations of where their property needs to be priced in order to attract showings and to sell.
This is not a time to be greedy. If you bought a home for $250K in 2,000 and you can get $450K today then that's an awesome return; never mind that you 'could have gotten $700K two years ago. Who cares? I bought CMGI for $180/share in 2,000 - today its worth less than $2/share. That's life.
If you must sell and you do owe more than the home is worth, talk to your bank (or your broker) about exploring a short sale possibility. Your home *will not* be worth more 1 year from now than it is today in all likelyhood, so your situation is not going to improve. Best case it will remain the same.
Again, homes are selling, and at Bravo we are now selling more properties in a month than we sold in the first six months of the year put together.
Sincerely,
Thomas Heimann, President & CEO
BRAVO REAL ESTATE SOLUTIONS
Bravo Brokers/Bravo Title/Bravo Lending
posted by Thomas Heimann at 5:39 AM
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