Florida Real Estate Market Sends Mixed Messages to Buyers and Sellers

If you’re actively seeking a Florida home loan, this could be a difficult time. Or a great one.

If you’re hoping to sell your property, this could be a troubling time. Or a hopeful one.

Yes, it’s a confounding time for both buyers and sellers, as various factors within the housing market help and hinder each side. On the one hand, inventories of unsold listings are up and sales are sagging in most areas. Unsold inventories are rising in Florida, California, Arizona, New York and Washington, D.C., and other large markets as well.

Nationwide, according to the National Association of Realtors, the inventory of unsold houses on the market is at its highest level in seven years - more than a five-month supply. The number of unsold houses listed for sale has swollen to 2.8 million, up 580,000 in the last 12 months.

The dilemma for sellers in this market

Looks like a tough time to be a seller. But here’s where things get confusing. The latest federal and private-sector statistical reports suggest that price inflation in dozens of metropolitan areas is still chugging along at a double-digit clip.

The Office of Federal Housing Enterprise Oversight found average home values rose by nearly 13 percent from the fourth quarter of 2004 through the same period of 2005. Moreover, The National Association of Realtors found that a record 72 metropolitan areas saw double-digit annual increases in median resale home prices in the final quarter of 2005.

Some of the price gains measured by federal researchers were stunningly high. Arizona had an average house price inflation rate of 35 percent from the end of 2004 through December 2005, according to OFHEO. Florida’s statewide average was nearly 27 percent, the District of Columbia 22 percent, Maryland 21.5 percent and California 21 percent.

Yet all these markets are simultaneously experiencing rising inventories, slower sales and reports of asking-price reductions. How can all of this be going on at the same time? If markets are cooling - and just about everybody agrees that’s the case - then why isn’t that being reflected in prices, nationally and locally?

Here are a couple of thoughts that might help you with your buying/selling strategy.

BALANCED BARGAINING
Lawrence Yun, the Realtor’s senior forecast economist, puts it bluntly: Looking ahead in 2006, he says, “double-digit price appreciation mostly is history. Home sellers will have to adjust their expectations and sell at more competitive prices.”

Put another way: The breathless fourth quarter 2005 price appreciation numbers aren’t necessarily a smart guide to pricing your real estate this spring.

If you’re selling in one of the 72 markets that saw median prices jump by double digits, don’t expect to lard on a double-digit increase over what you might have commanded last spring. Don’t overprice your property.

”Rather than putting a home on the market at a 15 percent higher price than last year,” advises Yun, try ”for 5 percent” more this spring.

On the flip side, buyers shouldn’t expect to negotiate prices that are far below 2005 levels, unless the property they want to buy is in an area that has been affected by employment layoffs or excessive supply in a niche segment such as investor condos.

INTEREST RATES
Equally important: Keep your eye on interest rates. As long as 30-year mortgages hover near the 6 percent range - cheap money by any historical measure - home prices are not going to budge much.

In setting your strategy, talk to multiple experts on the front lines - top real estate agents, appraisers, locally based loan officers - to find out where prices are trending.

What is the conclusion Florida home loan hopefuls and Florida home sellers can draw from this? Be patient. Conduct research. Both sides can enter into a deal that is satisfactory because there isn’t a major advantage in either direction.