All the problems swirling around the Sunshine State’s real estate climate don’t concern a developer looking to make his mark in the North Florida housing market. (more…)

The city of Tallahassee’s recent decision to join a real estate developer’s application for a $5 million state grant isn’t sitting well with some affordable housing advocates.

Their concern: Almost half of the city’s $2.69 million match, or $1.2 million, would come from the city’s Affordable Housing Trust Fund.

In the past, the Tallahassee Democrat reports, money has gone to help a poorer population than the teachers, firefighters and other professionals targeted by K2 Urbancorp’s “essential workforce housing” proposal.

“That fund was not created to be used the way the city is using it,” said Dorothy Inman-Johnson, executive director of the Capital Area Community Action Agency.

But David Wamsley, K2’s CEO, said the company committed to making a $600,000 donation back to the fund, which held about $1.8 million in September. And over time, part of the new homes’ appreciating values would be funneled into a new affordable housing trust that the city could use for whatever housing projects it chooses.

Wamsley estimated that new fund would grow between $600,000 and $750,000 every five years. In the past, the existing trust fund has been used to help people pay make a down payment or for infrastructure at a multihome Habitat for Humanity project, for example.

This time, it would help K2 keep costs low enough to offer homes below market rates. But they’d still be too expensive for a lot of people for whom making today’s Florida mortgage payments would be impossible.

“It’s a legitimate philosophical discussion,” said City Commissioner Mark Mustian. “There are limited resources, so what do you use them for? We don’t have enough money now for the lower-income people, and this serves a slightly higher income group.”

Mustian abstained from voting because of a potential conflict of interest with his law firm. The other commissioners all agreed to the concept in November.

The city’s $2.69 million share, plus $358,000 in private land donations, adds up to the 15-percent match of the $20.2 million development that the state requires.

Proponents say city-developer partnerships are the way of the future and will help working class people afford homes close to where they work instead of having to move into outlying rural counties where land prices haven’t surged yet.

“The soul of the community is lost when people can’t live where they work,” said Jeffrey Sharkey, a lobbyist who helped draft the legislation creating the state grant program.

Between 2002-2005, the state’s median existing home price jumped more than 70 percent, while the median family income went up less than 2 percent, according to the Florida Association of Realtors and the U.S. Department of Housing and Urban Development.

The disparity isn’t as wide in the North Florida housing market - the median price for an existing house went up 43 percent from 2001-2006 in Tallahassee, according to the Florida Association of Realtors - but some working people are still getting priced out of the market.

To help remedy the problem, the 2006 Florida Legislature passed a housing bill that includes $50 million for an affordable-housing pilot program called the Community Workforce Housing Innovation Pilot Program, or CWHIP. The program seeks to offset developers’ costs by providing money and making permitting faster and easier.

If K2 is awarded a CWHIP grant, they propose to build 92 one-, two- and three-bedroom town houses on the site of the ongoing Evening Rose development, inside Capital Circle Northeast just north of Mahan Drive. That would almost double the number of homes at Evening Rose, which is the first development built under the city’s inclusionary-housing ordinance and is currently set to feature 99 units, 10 of which will be priced just under $160,000.

With the state grant, a two-bedroom/two-bath town house would sell for as low as $159,000, instead of the market rate of $260,000, according to the developer. Assuming a 20 percent down payment, that would knock the monthly Florida home loan payment down significantly, from $1,500 a month or more to under $1,000 at current rates.

While some areas in Florida have seen the economy cool and the housing market slip a bit, Tallahassee would not be counted among them. As local real estate experts and builders have been stating for some time, this is an attractive locale for anyone seeking a Florida home loan.

On Tuesday, Stewart Title’s senior vice president and chief economist, Ted Jones, confirmed such beliefs. He spoke before a crowd of over 200 Florida real estate agents, brokers and lenders.

“I’m not worried about your market or home prices,” said Jones.

Stewart Title of Tallahassee sponsored the talk, which had Jones giving an economic outlook on the local and national economy.

He said Tallahassee’s job growth has contributed to its healthy housing market. The city has gained 3,900 new jobs over the past 12 months. Jobs here, he said, are growing at 2.27 percent annual rate. Comparitively, national jobs are growing at a 1.59 percent annual rate.

Jones also expected Florida home loan rates to rise and told his audience to abandon the thought that there’s a housing bubble - at least in the Tallahassee area. But there are “some overheated real-estate markets that will either pop or leak air” such as the housing markets in California and South Florida.

A housing bubble occurs when homes increase in value to the point where they reach an unsustainable level relative to incomes and other economic factors. That is followed by rapid depreciation that can result in a homeowners’ debt-to-income ratio not being sufficient for Florida home loan approval.

A real-estate bubble, he said, exists where there is overbuilding, where interest rates are rising, where there are job losses and in markets that have run out of real estate investors.

None of that fits Tallahassee/Leon County.

In fact, the market here has been faring well. There have been a little more than 3,000 building permits applied for single-family homes over the past 12 months. Jones, who was given information by Florida home loan experts about the Tallahassee housing market, said there is a little more than five months inventory on the market.

Over the past 12 months, 4,707 homes were sold, which means it took agents more than five months to move them off the market. Meanwhile, it took them about seven months to move 464 condos off the market over the same period.

“You’re not overbuilding here,” said Jones.

Nine to 10 months is considered a normal amount of time to move homes off the market, he said. Usually, prices then go down. Homes moved in less than eight months will generally show price appreciation.

“We have a very healthy market here,” said Don Pickett, chairman of the market research and trends committee for the Tallahassee Area Board of Realtors. “Houses are selling well, except when you get up in the ranges over $500,000. There’s a good supply of homes there and it will take a while to sell them.”

Currently, there are 118 homes in northeast Tallahassee, including new construction, priced at $500,000 or more. It will take real estate agents 11 months to sell them. Last year, there were 83 of those homes and it took a year to sell them.

The buyers will likely be baby boomers, people born between 1946 and 1964. That’s because they’re the ones, according to an article in American Demographics, that will inherit $41 trillion from their parents, said Jones.

“And what they are buying,” Jones said, is “real estate, because they don’t trust Wall Street.”

In this case, therefore, a Florida home loan is being considered as a better investment than stocks.