New North Florida Housing Market Question: How Low Will it Go?

With the last half of 2006, the pivotal question in the local home market underwent an evolution.

For first-time home buyers, the question is no longer “Will prices drop?”

During six months in 2006, they did drop almost 15 percent.

Now, as the number of sales still hovers about 20 percent below that of last year, the slow market conjures a different question:

“Where’s the bottom?”

According to the Florida Association of Realtors, the median single-family home price in the Jacksonville area peaked at $213,500 in June and has fallen nearly 15 percent to $182,000 in November. Between October and November, the price fell about 8 percent.

Meanwhile, the number of sales continues to be low - about 19 percent fewer single-family homes were sold in November than in November 2005.

The North Florida housing market has been so weak that some economists fear it will drag down the rest of the economy.

The Federal Reserve Bank of Atlanta event predicted moderate growth in the entire Southeast this year, dragged down in part by the anemic Florida real estate market.

Meanwhile, local analysts have varying opinions of what the bottom will look like - both here in North Florida and nationally. At the end of last year, Wachovia economist Mark Vitner estimated that the market was in the midst of a correction that would last another 6-9 months.

University of North Florida real estate professor Sid Rosenberg arrives at a “fair market value” far below even the November figures. According to Rosenberg, the value of homes in Jacksonville should be about $165,000 based on what an earner with the local median income can afford.

That doesn’t mean Rosenberg expects the median price to fall another 9 percent. Instead, it just won’t go up, as the fair value catches up to actual sales prices, he said.

In fact, if prices had risen at the same rate during the past three years as they had in the year before the local boom, the median price would actually stand at about $165,000 already.

“Buyers know that they’ve got a buyers’ market, and if it were me, I’m going to sit there and negotiate very hard,” Rosenberg said.

“Just make a offer that’s lower than normal, and if it’s not accepted, just move on. Because right now, you can.”

Few analysts expect a decrease as rapid as the stock market decline five years ago. The housing market doesn’t act like the stock market. Homes can’t be sold as easily as stocks, and even though the national market, on average, might dip, unique characteristics of every home - not to mention the volatility of Florida home mortgage costs - keeps home prices from moving uniformly.

Local home builders say the bottom is already here. To try to drum up confidence in the local market, the local builders’ association started an advertising campaign several months ago heralding the Jacksonville housing market as a great buy. The city’s strengths? Record low unemployment - 3.4 percent in November - and a historically steady price run-up.

“I believe we’re at the end of the price discounting period,” said David Parker, president of local real estate consulting firm Parker Associates.

Parker said home builder discounts and incentives have already pulled some buyers off the fence and into sales offices. Although he said he doesn’t expect prices to rise at a rate comparable to that of two years ago, prices will rise modestly in the first quarter.

Local real estate analyst Ray Rodriguez advises that those trying to sell shouldn’t be greedy as the market corrects itself.

Those selling their old home must compete against home builders trying to get rid of excess inventory, high Florida mortgage costs due to the high listing prices, and buyers tending to prefer a new product in this area.

“Do not look for a quick turnaround. We might have some initial signs, like builders reporting increased foot traffic. But it finishes with closings. Closings are what matter,” he said.