Central Florida Buyers, Sellers in Stalemate Over Florida Home Loans, Prices

It’s a financial tug of war. Who will win such an intense battle over Florida home loans?

Across Central Florida, home buyers and sellers are in a virtual stalemate: housing prices are holding steady at high 2005 levels, but more properties are remaing on the market for a longer peiod of time.

With the inventory of existing homes for sale up fivefold in a year, owners, agents and new-home builders in Central Florida are pulling out all the stops - except lowering prices - to move houses and attract Florida home loan seekers.

Inside the Central Florida housing market

The average resale home spent 27 days on the market last summer during the red-hot market - an historic low for the Orlando area, according to Orlando Regional Realtor Association records. But that average has since grown to 49 days … and it’s still climbing. Inventory is constantly rising.

Some Florida real estate agents have boosted their marketing with added fliers and “talking houses” equipped with small AM radio transmitters. But many sellers are clinging to unrealistic price expectations.

“They not only think it’s still 2005, they think it’s the summer of 2005 - the peak of the market,” said Barbara Brady, a Realtor at Coldwell Banker Residential Real Estate in Orlando.

So far, local sellers are not making drastic cuts in their asking prices, Realtors and other industry experts say. But the pressure to do so is building.

“The trend is definitely downward,” said Chris McCarty, economist and director of the survey-research center at University of Florida’s Bureau of Economic and Business Research. “And it’s going to continue.”

Throughout Florida, median home prices are beginning to slip, especially in places where the price escalation was most rapid - such as Naples, Miami, Fort Myers and Fort Lauderdale, McCarty said. Rising Florida home rates are making Florida mortgage loans less affordable, as speculators who bought homes with riskier financing, such as interest-only mortgages, have been selling despite the declining market, adding to the inventory and downward price pressure.

An influx of risky Florida home loans

A Harvard University study released last week found that nearly one-third of U.S. home buyers last year used riskier Florida home loans such as interest-only financing or “payment option” loans that give the buyer the ability to skip a payment.

Many of those homes were bought by speculators, McCarty said, and as those properties are unloaded for less than top dollar, “it lowers the value of other homes around them.”

Orlando and Tampa are not as likely to see major drops in their median prices as some South Florida locales, he said, because their values did not rise as much. Still, prices in the Orlando area could be flat or slow to rise for some time - significantly weaker than in recent years under the best of circumstances — and certain expensive homes will be tough to sell, McCarty said.

“How many people can afford to live in $300,000 homes without an interest-only loan?” he said. “By the fourth quarter and the first quarter [of 2007], you’ll see the full brunt of the declining real-estate market.”

Pricing a Florida home in such a housing market

Pricing a home so that it sells within a reasonable period of time is one of the talents a Realtor brings to the table, said Coldwell Banker’s Brady, which helps explain why homes sell faster when listed through a Realtor. But persuading clients to sell their homes now for less than their neighbors did last year is a challenge, she said.

Some agents are adding more informational fliers in weatherproof tubes near the home’s front entrance, or providing recorded messages that potential buyers can hear via radio transmission as they drive by. They’re also taking advantage of the online mortgage world. But face-to-face sales contact works best, Brady said.

“I don’t believe in those fliers or recorded messages,” she said. “It doesn’t allow you to talk directly to the customer.”

As the market continues to cool, however, buyers will have significant advantages. They can currently afford to wait until prices truly drop and Florida home mortgage loans are easier to afford.