Plenty of Florida Sellers in Limbo

In a modern Florida housing market of shrinking lots and cookie-cutter subdivisions, Armand Davalos has something special to offer: a two-story home on a rustic two acres of land, situated near a tranquil pond.

Ideally, Davalos would sell the home for roughly $400,000 and finance a comfortable retirement while leaving a considerable amount of money to his children. That may have been possible a year ago, but with the market cooling, Davalos’ plans no longer seem so certain.

Rising Florida mortgage rates, property taxes, property insurance and the exodus of real estate investors brought Polk County’s housing market to a crawl, compared with the frenzy just a year ago. Still, the Davaloses find themselves in a situation all too common. They can sell their Polk County home for a good sum, but that amount won’t be enough to find a new — and likely smaller — home.

Home prices in Polk County, like in other parts of the state and country, have risen rapidly, fueled by population growth and investors looking to capitalize on that growth.

As part of an ongoing series, the Lakeland Ledger looks at what happened to home prices and the impact on the American Dream of homeownership.

Davalos, 81, has lived with his wife, Bernice, 73, for the past 16 years at Walk-In-Water Estates in East Lake Wales, Fla. Like many retirees, they’re seeking a home that will involve less maintenance.

“We have been thinking about (selling) and asking around for what we can find. This is too much, mowing the lawn and all,” Davalos said.

The couple have already inquired about property in both Polk and Lake counties, searching for a three-bedroom, two-bath single-family home at about $185,000. While there are properties listed for that price, the Davalos’ haven’t found any that match their idea of a future home.

What they have discovered are houses in the $300,000-400,000 range, which don’t include much in the way of amenities when compared to their current home. But Davalos doesn’t think he can even fetch that kind of price for his current property.

As a seller, Davalos feels restrained by the market. He wants the best price for his home, but at the same time he doesn’t want to ask too much and see it languish in the Central Florida real estate listings.

“It is a buyer’s market. People can’t ask outrageous prices anymore. That’s what we try to tell our clients,” said Jan Bellamy, a Realtor with Re/Max Paramount Properties in Lakeland.

HOMES AT A HIGH PRICE

The change in the market and its prices isn’t a big surprise to Davalos, a Los Angeles native. After moving cross country in the 1950s, he sought the South Florida beach life in Hollywood, where he bought a four-bedroom home for $14,900. He finally sold it in 1990, more than a decade before the most recent real estate boom, for about $75,000.

“I thought I was getting a good deal then,” Davalos said with a chuckle.

Now, he reports, that same home would be priced at more than $400,000.

Home prices also have soared around Davalos in Lake Wales.

“Homes around the Bok Tower area were around $90,000 to $100,000. Now they are over $200,000. That was only a couple years ago. They have more than doubled the price,” he said.

For first-time home buyers, the area’s housing landscape has certainly changed. Going back 20-30 years, starter homes were priced for young singles and families. Homeowners could buy a home, spend a few years there, and then sell and move to a larger house as life, and their income, progressed.

While that desire for home ownership hasn’t changed, theprices have.

“There aren’t a whole lot of young, single people buying properties,” said Mark Piburn, sales manager for Wells Fargo Home Mortgage in Lakeland.

While there are some homes on the market at prices lower than $100,000, they aren’t what was traditionally seen as a starter home: a new home with a good financing plan in a nice neighborhood. Current salaries for first-time buyers aren’t often in line with the asking prices of many homes.

TAMING THE MARKET

There is hope, however, that prices might come down or at least level off. As inventory keeps on rising, existing home sales and building permits for new home construction have declined significantly in recent months, indicating a slowing market.

Local home sales dipped 24 percent in July, falling to 462 homes from 609 the year before. But last year’s sales were a tough act to follow: It was the busiest year on record for Polk.

July also was the fifth month in 2006 where home sales had dropped from the year before. The sweltering month also had the largest decline of home building permits, down 56 percent from a year before, in county history, according to the Ledger. Builders pulled 409 permits in June, compared with last year’s total of 932.

State and national figures show the decline in building permits is not specific to the Polk County region.

With Florida home mortgage loan costs up sharply from a year ago, sales of single-family existing homes totaled 14,451 in July, down 33 percent from 21,691 homes in 2005. Nationally, 6.33 million homes were sold in July, down nearly 11.2 percent from 7.13 million a year before.

But Polk County isn’t taking a hit like some other markets, Realtors say. It’s in a hot spot for growth, even in slower times for real estate. And being surrounded by counties with higher costs of living doesn’t hurt.

“We have nearly 9 million people who live within 100 miles of Lakeland. Clearly our affordable housing is driving consumers in both Tampa and Orlando to relocate to Lakeland compared to the prices over there,” McLaughlin said. “So it is both the availability of housing, the fact that people can find something affordable and the influx of homeowners in Central Florida that is driving this boom.”

PRICED OUT

While Polk might be cheaper in terms of overall cost of living, rising home prices still make the average person’s wallet a lot lighter.

Polk County’s median family income was listed at $46,700 in 2004 by the U.S. Department of Housing and Urban Development.

But with the county’s median home price around $180,000, a $46,700 income is not nearly enough for many families to qualify for a home loan.

Based on a 30-year Florida home loan with a 7 percent interest rate, the down payment required for a median priced home on a median income would be near $22,000. Monthly mortgage payments, including taxes and insurance, would run around $1,275 a month.

Making the median isn’t too likely, said Piburn of Wells Fargo Home Mortgage. “It’s hard to afford the average sales price. It is almost like the local person is getting priced out of the market.”

The solution: Find a cheaper home.

“They have to find a lesser home or find another program that can meet their needs,” Piburn said.

In recent months, several Florida mortgage lenders have started offering non-traditional 40- and 50-year mortgages, allowing customers to have lower monthly payments to afford homeownership.

“It’s scary to think of a 40-year mortgage,” Piburn said. “But it’s because of the way prices are going. With that, it’s going to be a long time before you can build up any home equity.”

INSURANCE TROUBLE

Then there is another stumbling block, one that comes with the price of living in a hurricane-prone state: insurance.

“When we are writing contracts now, we are telling our customers to get an insurance quote. We used to be able to guess on the insurance. Now we can’t do that. It changes so much,” said Bellamy of Re/Max Paramount Properties in Lakeland.

Major insurers have all implemented insurance hikes in Florida, or in some cases dropped significant amounts of customers, making the search for coverage even harder. But while housing costs are on the rise and it might not look like things are getting any better, business continues and the housing market remains steady. For now.