Report: Central Florida Housing Market in Good Shape; Buyers Returning in Full Force

New figures show that Central Florida housing market prices have not fallen during the last 12 months, particularly in terms of vacation homes and second properties. Buyers are out in full force, leading many to believe that Florida housing bubble predictions do not hold water.

There are unmistakable signs of a return towards normality in the Central Florida real estate market. Since the beginning of the year, Hightower Realty has been looking for signs of life in the weak market that followed the frantic sellers market of the previous two years. Recently, area agents are reporting more requests to show homes for sale. Offers are coming in for more realistically priced homes. Over-priced homes, meanwhile, are disappearing from the market or being reduced in price to more reasonable levels.

Despite earlier predictions, it is becoming clear that selling prices for vacation homes in Central Florida have held up remarkably well throughout the recent strong buyers market, disproving alarmist predictions of many ‘bubble burst’ theorists. Current statistics show that the recent market problems have had little to do with values, and everything to do with the absence of buyers.

Many reports over the last year have talked about the famed bubble and how the Florida housing market in particular would burst as a result of the constant inflation over the past few years. Especially in the market for vacation homes, the doomsday predictions were in no short supply. But was there ever even a bubble to burst?

Average market prices in the state rose by more than 25 percent a year for more than two years, making it easy to think of this as an overshoot of sustainable values — which would be followed by a major downward correction. However, some analysts have always maintained that the rising prices were actually the correction — that the values four years ago were uncharacteristically low.

There has been much confusion about how Central Florida home prices have changed over the last year. While there have been drops of 10 percent noted by the media, remember that these statistics often relate to asking price, not to the actual price achieved. For the first three months of 2006, there were so few actual sales closed that it wasn’t possible to derive meaningful stats on actual selling price changes.

Now that we have data to work with, it is clear that the drop in list price was far less relevant than imagined. It simply reflected decreasing numbers of sellers, as people clung to last year’s belief that you can ask for any number you want and probably get it. When you look at actual sales prices, the Central Florida vacation home market has seen no reduction in home values over the last year.

Take the case of a typical 4-bed pool home on a representative sample of five of the larger vacation home communities spread through the region:

• January-June, 2005: $322,000
• July-December, 2005: $344,000
• January-April, 2006: $345,000

In short, the bubble talk has amounted to a lot of hot air, if you will, at least in certain markets. Look for a slow return to a balanced market over the rest of this year, which will probably sustain itself into 2007. Before we see any substantial increase or decreases in value of residential homes, either primary homes or secondary residences, in Central Florida, another year or year and a half will pass.

Buyers will come back to the market in increasing numbers, but this time round they will be genuine buyers, not short-term speculators. Few buyers will write a contract on a new home or a re-sale property now in the hope of flipping it for a quick profit. This will keep the market activity well below what we were seeing a year or two ago, but in the longer term this can only be a good thing for the market.