South Florida Housing Market Cooling, But Many Buyers Still Left Out in the Cold
The cooling Florida housing market offers a bit of good news for cash-strapped home buyers, reports today’s Palm Beach Post.
The affordability squeeze has eased slightly, according to recent data. But the income needed to buy an average home in the county is still twice what it was just four years years ago. Buying a median-priced home in Martin and St. Lucie counties in the first three months of 2006 required an annual household income of $54,587, down from the $54,954 needed to qualify for a Florida home loan in Q4 of last year.
“Sellers are being more reasonable and giving concessions, so that is helping affordability,” said Douglas Rill, head of Century 21 America’s Choice in West Palm Beach.
Rising Florida home loan rates are cramping consumers’ budgets, however. Local employers and politicians continue to fret about the ability of middle-class professionals — people such as teachers, nurses, paralegals — to afford housing. Frustrated Florida home loan seekers are turning to more creative financing, such as adjustable-rate loans and even 40- and 50-year mortgages. That, or staying out of the market altogether.
The typical Treasure Coast home cost $260,200 in the first three months of the year, the Florida Association of Realtors said. That figure marks a drop from $262,500 in last year’s fourth quarter, and an even bigger dip from the median price of $267,500 in the third quarter. Still, a buyer needed to make $54,587 a year to qualify for a traditional Florida home loan on that $260,200 home, based on a 20 percent down payment and a 30-year fixed-rate loan at a 6.24 percent rate — which has since gone up.
During the booming housing market of the past four years, the amount of income required to buy a median-priced home has doubled. In the first quarter of 2002, when the median-priced home was $124,300, a buyer needed less than $28,000 in income to qualify for a Florida home loan, assuming principal and interest made up a debt-to-income ratio equivalent to 28 percent of the borrower’s income.
Nowadays, as the region’s once white-hot seller’s market cools to a buyer’s market, experts say the affordability crunch is finally showing signs of loosening slightly.
“That’s good news, to a very small extent,” said Mario Villena, V.P. of Marketing for HomeKeys, a Miami-based company.
Indeed, the lull in South Florida’s five-year run-up in prices may result in fewer potential buyers contemplating a move out of the area, but many sitting on the sidelines waiting for prices to fall further. What that means, for the near future, is that sellers will have to contend with a glut of inventory and tepid interest from buyers, a reality reflected by the fact that Treasure Coast sales are down 15 percent from a year ago.
“Is this a bad year? Yes. Your numbers will be down,” David Lereah, chief economist at the National Association of Realtors, told Palm Beach County Realtors last month. “Are you going to bust? No. Prices got a little too high. We got ahead of ourselves. We needed to catch our breath.”
Prices also dipped in the Palm Beach County housing market, with a first-quarter median of $392,900, down from $415,800 in Q4 of last year and $399,900 in Q3. With those prices, affording a typical home in Palm Beach County required an income of $82,426 in the first quarter, down from $87,000-plus in the fourth quarter. As prices continue to fall, sales are plunging. Palm Beach County’s sales dropped 32 percent in the first quarter from a year ago.
The Florida Association of Realtors blamed falling prices on two factors:
- Rising numbers of homes for sale.
- Rising rates on Florida home loans.
Last year, the typical 30-year fixed-rate Florida mortgage cost borrowers about 5.75 percent. As of last Friday, the going rate had climbed in six of the past seven weeks and sat just below 6.60. In other words, enough to hurt potential Florida home loan applicants, even as prices recede. We will keep monitoring the situation daily and pass along anything that we hear.
