Glut of Available Homes Puts Florida Mortgage Applicants in Control
Why are home prices in Broward County and other areas dropping? It may have a lot to do with the glut of homes for sale in most of the country.
Such an inventory means buyers should have plenty of choices and lots of bargaining power in the spring selling season - typically the busiest time of the year.
Many builders and Florida mortgage brokers, for their part, hope the housing market will start recovering this year as buyers respond to price cuts and other sweeteners offered by increasingly nervous sellers. In some markets, agents say, buyer traffic has picked up in the last month or two.
But any recovery is likely to be gradual. Donald Tomnitz, chief executive officer of D.R. Horton Inc., a home builder, told investors this week that the market, which began slumping in 2005, may bottom out by mid-2007, but that “we don’t see any rapid improvement thereafter.”
Given all that, sellers should expect buyers to take their time and be tougher negotiators.
David Lee, who recently moved to Wenham, Mass., to take up a post as an associate professor of physics at Gordon College, has rented a home for his family and says they plan to be “quite picky and choosy” as they look for a home to buy. Dr. Lee doesn’t feel any pressure to decide quickly because he figures housing prices won’t rise in the near term and could fall further.
A quarterly survey of housing conditions in 28 major metropolitan areas by The Wall Street Journal showed that the inventory of unsold homes at the end of 2006 was up substantially in nearly all of the markets from the already plentiful level of a year earlier. The biggest increases were in the metro areas of:
- Miami-Fort Lauderdale
- Orlando
- Tampa
- Jacksonville
- Phoenix
The survey also includes recent pricing trends - nearly all negative - based on surveys of real estate agents by Banc of America Securities in New York, a unit of Bank of America Corp., as well as data on late Florida mortgage loan payments and job-creation prospects from Moody’s Economy.com, a research firm in West Chester, Pa.
In Miami-Dade, the number of existing condos on the market is enough to last 27 months at the current sales rate, says Jack McCabe, a real estate consultant in Deerfield Beach, Fla. The oversupply will grow, he says, as about 8,000 condos are expected to be completed this year and 12,000 in 2008.
“It’s going to get bloody down here,” Mr. McCabe says.
He estimates that Florida condo prices in Miami-Dade fell between 8% and 10% last year and will drop 20% in 2007. Eventually, he predicts, hedge funds and other investors will step in to buy surplus condos in bulk at huge discounts.
