Editorial: As Home Prices Fall, State’s Fortunes Will Rise

Not only is a drop in home prices good for Palm Beach County, the Treasure Coast and all of Florida, prices need to go down more, and soon.

That’s the gist of a Palm Beach Post editorial, which states firmly that the housing shakeout won’t be easy, but it’s necessary and overdue.

It would be accurate to say that much of Florida, including Palm Beach County and vicinity, is in a real-estate recession.

Though it’s been about a year since the housing bubble burst, the numbers still don’t match real estate reality.

The median price in Palm Beach County is $377,900, down from a peak of $421,500 in November 2005.

For Martin County and St. Lucie County, the price is $237,100, having peaked at $261,000.

Overall sales, though, remain very slow.

Some sellers haven’t acknowledged that they won’t get the price they might have gotten two years ago. Some homeowners overbought when the market had the vertical leap of Michael Jordan and money was cheap. Now, their houses aren’t worth what they paid, and they face a loss if they sell.

It’s all sand in the Florida real estate engine.

With economic forecasters warning of a sluggish market until 2009, South Florida home prices will go lower as sellers realize that what looked like an unacceptable offer six months ago looks much better.

For perspective, six years ago, the median-priced home was $152,900 in Palm Beach County and $112,300 on the Treasure Coast.

The last year or so has been hard on anyone tied to real estate and development. It’s been especially hard on people who got into the condo-flipping market after the smart money split or house-hopped from year to year looking to trade up on paper profits.

But the party had to end, because the trend was unrealistic.

The energy-drink housing boom, powered by a unique set of circumstances, jazzed the economy and made some people rich, but it harmed the state in several ways:

• It gave local government too much free money.
• It artificially increased the amount of hurricane insurance exposure, which drove up premiums, increased the cost of owning a home and made life even harder for buyers and sellers.
• It over-emphasized bad credit Florida mortgage financing, and now lenders are upping their standards, affecting those with good credit as well.
• It artificially priced too many workers out of the Florida housing market.
• It artificially drove up tax bills for anyone without Save Our Homes.

A softening of home prices will loosen up the real-estate market as more people may qualify for (realistic) Florida mortgage financing.

At the same time, it could ease the insurance crisis and bring property tax relief.

Obviously, a crash in prices would prolong the problems. Once emerging from the 1990-92 recession, however, the state’s economy hummed along nicely throughout the decade, with values rising steadily, not spasmodically.

For most of the 1990s, property tax collections increased each year by single digits, not the double-digit run-ups that began in 2001.

Florida’s financial situation is precarious, and depends to a large degree on the hurricane season. But if the housing hangover is milder than the binge, the state will find that sober feels pretty good.

SOURCE: Palm Beach Post