Housing Markets Weaken in Florida, Nationally

The housing market continues to weaken in much of the country as inventory rises and sellers slash their asking prices, a quarterly survey by The Wall Street Journal shows.

While there is no sign of a broad collapse of housing prices about a year after the once-hot Florida housing market entered a cooling phase, a high level of prices is gradually edging down in some areas and leveling off in others, while the supply of homes on the market keeps rising.

The number of homes for sale in the Orlando real estate market, for one example, is nearly five times what it was earlier this year level, while the inventory has tripled or quadrupled in places such as Tampa, Phoenix, Ariz., and Washington, D.C. Nationally, the Commerce Department said that housing starts fell 5.3 percent from May to June.

A major side effect of softening markets? Sellers willing to barter.

“Let’s make a smoking deal,” John Nichols wrote this week in an ad for his three-bedroom ranch house in Sacramento, Calif., posted for sale on the popular website craigslist.org for $315,000, but presumably available for less.

“Make an offer,” the ad states. “You won’t necessarily insult me.”

A far cry from even 12 months ago, when anything but a full-price or above-market offer would be scoffed at in many markets. Examining the residential real estate outlook for 26 major metro areas, the Wall Street Journal has gathered inventory data of homes for sale at the end of the second quarter from a variety of sources. Its findings are both consistent with previous predictions and a little surprising.

• Metro areas showing large increases of homes for sale and relatively weak employment growth include Boston, Los Angeles, Philadelphia and New York.
• Among the strongest markets in the U.S. are Houston, Dallas-Fort Worth and Seattle, all three of which are benefiting from robust job markets, and, in the case of the Lone Star State, modest Texas real estate costs.

In New England, however, the job market is flagging and the median price for single-family homes in May was down 1.2 percent from a month ago and nearly 6 percent below the peak reached in July 2005. The supply of homes available for sale in May was enough to last 11.3 months at the current sales pace, up from 8.7 months at this point in 2005.

In Miami, prices have remained flat for recent months, and experts are predicting condos in less-attractive parts of the area to fall slightly in coming months. Condos in better parts of the area are more likely to stay flat, or even pick up modest appreciation of up to 5 percent, despite a consistent rise in Florida home loan costs.

South Florida is a prime example of a national trend in which conditions vary considerably within a metropolitan area, as well as among different types of housing.

Among the 26 metro areas surveyed by the newspaper, the Orlando market showed the biggest surge in inventory. But Beverly Pindling, the Orlando Regional Realtors Association President, said that figure can be a bit misleading as the inventory was remarkably low a year ago, while the region’s job market remains strong.

Prices in the Orlando area are down about 3-7 percent from a year ago, and builders are romancing Realtors and buyers in an effort to make sales — sometimes with lucrative incentives. Some sellers are advertising prices below recently appraised values, and others are offering to pay closing costs for buyers who are short on cash.

Many in the industry say the media have overplayed weakness in the market. The National Association of Realtors projects sales of previously owned homes will fall 6.7 percent from last year’s record, but that still would give the industry its third best year in history. Many investors have been scared out of the market, but plenty of other people must buy new houses because of regular changes in their lives.

The bottom line? While the national and local housing markets may avoid disaster, they may also not return to full power anytime soon.

Even if there is no surge in foreclosures or declines caused by investors bailing en masse, some formerly hot markets in Florida and beyond could be looking at 5-10 years of flat or slightly higher home prices. Florida’s markets will likely be buoyed by an influx of retirees, and at the same time held in check by higher Florida home loan rates and already-high home prices that limit affordability for many.