Prices in Central Florida Housing Market Start to Fall

Prices for single-family homes are down throughout Central Florida, in some areas for the first time in nearly a decade.

The second-quarter index from the U.S. Office of Federal Housing Enterprise Oversight shows prices for homes falling in Metro Orlando as well as in Volusia and Brevard County and statewide.

“It is a scary market,” University of Central Florida Finance professor Stanley D. Smith said in analyzing the numbers released Thursday.

The index, based on repeat sales or Florida mortgage refinance activity of the same properties over time, is an approach that eliminates some variables in Realtors’ monthly median-price figures, which aren’t drawn from the same types of houses in the same locations each time.

The Realtors’ data have already shown a couple of declines in median price so far in 2007.

The federal index is also considered a conservative measure of home-price appreciation because it uses data only from the area homes financed with conventional Florida home loans.

So the second-quarter decline, while slight, means that people with good credit in good neighborhoods - not just the bad credit Florida mortgage holders in marginal areas - are starting to see a sag in prices.

The 0.3 percent drop in the four-county Orlando metro area - Orange, Lake, Seminole and Osceola - is the first since the second quarter of 1998 and the largest since a 0.41 percent dip in the second quarter of 1997.

Several economists have concluded recently that because the Orlando metro area’s economy is stronger than those of most other regions of the country in terms of indicators such as job growth and foreign investment, the slowdown is not likely to be as severe or prolonged as elsewhere.

Hank Fishkind, an Orlando-based economist, said on his weekly radio show that, “While recovery may be some time off, it is clear that Florida’s housing markets have bottomed out.”

He said areas more overbuilt than the Orlando housing market will take much longer to recover, and while he expects prices to be flat for the next 18-36 months, he does not expect them to decline further.

Smith, who studies a report each quarter for the Mortgage Bankers Association of Central Florida, said the collapse of the nation’s subprime-lending market - home loans with higher mortgage rates for borrowers with weak credit - is not yet fully reflected in the numbers, so the slump probably has not hit bottom.

Soaring defaults in the bad credit mortgage market have triggered a reaction felt around the world in recent weeks, with many lenders closing their doors and others cutting back, even in Orlando.

For the hard-hit Brevard County metro area, the quarter’s 1.76 percent drop was the fourth straight quarter of declining prices - a full year’s worth - as measured by the federal index.

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