When the flood of fresh home listings stopped rising last fall, the Tampa Bay housing market appeared poised for a recovery.

Welcome to the recovery that wasn’t.

Therefore, many for-sale homes continue to bloat the area real estate market - nearly 41,000 - that sales as a share of total home listings are at their lowest point in recent memory.

Realtors call it “absorption” and it’s easy to calculate: Just divide total monthly sales by the total number of homes on the market.

In February, it was 5.4 percent. In other words, about one home of every 20 on the market found buyers. In hard numbers that’s 2,225 out of 40,896 single-family homes and condominiums.

Two years ago, during the peak of the last boom market, absorption was running beyond 50 percent, meaning half the homes on the listings sold in a given month. Realtors, usually a confident lot, are making few attempts to sugarcoat the recent numbers. They’ve pored through historical data and have yet to find a worse absorption rate.

“It’s pretty huge, pretty staggering,” said Ann Guiberson, president of the Pinellas Realtor Organization, which represents about 7,200 agents and Florida mortgage brokers.

At the current pace of sales, the supply of homes on the market in Pinellas, Pasco and Hillsborough counties stands at 18 months. Realtors haven’t seen such an out-of-whack proportion of buyers to sellers in years.

What’s it all mean? For starters, home values will likely stagnate or fall this year, a far cry from the bidding wars of 2005. Although the Florida Association of Realtors reports that Tampa area home prices fell 2 percent in the past year to a median of $213,300, declines have exceeded 10 percent in many neighborhoods.

Most sellers will have to yield on price further if they hope to sell quickly, or at least offer concessions such as paying buyers’ closing costs, Realtors say.

Stephen Johnston, chief executive of Tampa realty company Home Discovery, began 2006 with the assumption that the slump would last through about mid 2007. In light of the latest numbers, he has lowered his expectations.

“I’m saying there’s a good 18 months left before it will even remotely shift to a seller’s market,” Johnston said Thursday.

Pinellas suffers the most with an absorption rate of 4.6 percent in February. Of its 18,242 home listings, more than a third are condos. Expensive coast properties move slowly, not just from high prices but from punishing taxes and insurance.

“A lot of the high-end stuff is extremely soft,” Guiberson said. “$500,000, $600,000, $700,000: That’s just not what the average worker in Pinellas can afford.”

Pasco’s absorption rate is better than Pinellas’ but not by much. Hillsborough comes off the best, with about one in 15 homes selling.

But Carlos Fuentes, a Lutz Realtor who presides this year over the Greater Tampa Association of Realtors, said Florida mortgage applicants haven’t turned out as expected this year.

He blames the standoff mostly on sellers fixated on reaping top dollar for houses that have depreciated.

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Across the Tampa Bay housing market, Brandon remains the community with the most residential rental vacancy for the fourth quarter of 2006, but it might not be that way for long.

Rental occupancy in Brandon has jumped nearly 23 percent over the past year in its 11 communities, according to the most recent survey conducted by RealFacts. Its average rental rates edged higher with it, jumping 2.7 percent to just under $900.

Renters also are looking to neighboring community Riverview to live as well, especially as housing affordability in the region remained an issue.

Occupancy there rose 15.8 percent over the year to finish at just 2.7 percent vacancy. Rents there also have risen, this time by more than 4 percent, to an average of $919 a month. How come? Because landlords raise prices as Florida mortgage activity slows down. They have leverage over tenants.

Brandon and Riverview were the exceptions, however, as occupancy has taken a dip in the Tampa and Sarasota housing markets as renters start to react to rising costs, RealFacts executives said.

Occupancy in Tampa has remained steady in 2006 compared to the previous two years, according to the survey, with just 6 percent vacancy in Tampa, St. Petersburg and Clearwater. The same cannot be said for the Sarasota/Bradenton/Venice area, however, as occupancy dropped 5.6 percent to 92.3 percent while average rents in that area jumped 4.2 percent to $928 monthly.

Only Naples-Marco Island ($976) and the Miami real estate market ($1,135) had higher average monthly rents.

For the year, average rents per square foot were up in Tampa, from 88 cents in 2005 to 93 cents this year.

Transactions of multifamily properties are down so far year-to-year; however, some end-of-year data may not yet be included, RealFacts said. The Tampa market reported 19 transactions in 2006, allowing 4.8 million square feet to change hands for $503.4 million. If rents and Florida mortgage loan costs continue to rise, most people will just stay put.

Despite a stock market that recorded 22 record highs in 2006, a sluggish Florida housing market could keep a drag on the local economy for much of 2007.

That’s some of the outlook of Joseph T. Keating, chief investment officer at First American Bank, lead bank of Alabama Bancorp. Keating, a regular contributor to CNBC’s Squawk on the Street, was the featured speaker Tuesday at the Tampa Bay Business Journal’s monthly “Power Breakfast” series.

A year ago, the biggest question mark regarding the economy was Florida mortgage interest rates and the Federal Reserve’s monetary policy, he said. But by mid-July of 2006, it appeared the rate hikes were over, and while keeping the “door open” for more rate hikes, the Fed appeared finished with rate hikes for the short term.

Common stock prices advanced 10.3 to 16.8 percent in 2006, largely on the back of the sharp move higher since the recent low on July 17, Keating wrote in an investment analysis online in December.
The key for 2007 is the housing market.

“The question remains how far will the slowdown in the housing market spread?” he asked

While other prognosticators have made brighter forecasts for the housing market in the near term, Keating believes affordable housing in Florida and pricing is going to be a drag on the economy.

“I don’t buy it,” Keating said referring to talk of a quick housing rebound and/or increase Florida home mortgage demand. “We are now at an all time low in affordability.”

Improved income and better Florida mortgage financing rates won’t help.

“It’s price that’s the issue,” he said.

A new national report may show new home sales making a 3.4 percent jump for November, but sales of existing homes in the Tampa Bay region still appear to be in a decline, according to recent statistics from area Realtor organizations.

Residential sales in Hillsborough and Pasco counties dropped 31 percent in November, as Florida mortgage loan activity waned. However, the average sales price continues to increase, this time to $267,741 compared to $264,144 a year ago, according to the Greater Tampa Association of Realtors.

Condominium prices, however, are dropping from $213,024 average sales price in November 2005 to $185,756 in November 2006.

The busiest areas in the two-county region continue to be Brandon and Lutz where homes are selling for $267,072 and $185,756 on average respectively.

Pinellas County has had its lowest volume of sales in the last five years with just 849 units being sold in November, compared to 1,433 the previous year. Until prices come down, there’s a good chance Florida home loan demand will remain slow.

Listings also continue to climb in the county where 16,759 units are now on the market, compared to just 7,726 the year before. Such an inventory truly makes the region a buyer’s market.

The median sales price for single-family homes in Pinellas is $215,000 in November, down 17 percent from the $259,000 median price in November 2005. It’s the lowest median price the market has seen since the beginning of 2005 when homes were selling for just over $216,000.

Condominiums are now selling at a median sales price of $155,900 for November, down 11.9 percent from the $176,900 they were selling for a year ago. That’s the lowest median price for condos in Pinellas County since April 2005.

The number of Florida home loans going into default in Tampa is increasing. By how many, though, isn’t clear.

ForeclosuresDaily.com recently began to track foreclosures in the region. Its numbers for both October and November saw increases of between 45 and 53 percent year over year, including a 111 percent spike in the Sarasota housing market and Manatee county in October.

Reasons for Florida foreclosures

Increasing insurance rates, higher property taxes and a host of other problems have taken the blame for the increase in foreclosures. But if a culprit is to be fingered, housing speculation and adjustable rate mortgages are really to blame, say real estate practitioners.

A lot of people were approved for Florida mortgage loans that maybe shouldn’t have necessarily qualified, said Mike Kane, president of ForeclosuresDaily.com.

“With Sarasota and Manatee, there was a big appreciation (in home values), and now that’s slowing down,” Kane said. “Things had been appreciating so fast that no one wanted to think that it was going to slow down and stop. What happened, though, is that it came to a screeching halt. People are stuck with these ARMs, they can’t [Florida mortgage refinance] and take money out because there’s no equity, and that’s what is causing the increase in delinquency.”

More than 40 percent of mortgages are adjustable rate these days; people with those Florida home loans started seeing monthly payments rise over the summer to have an impact now, Kane said.

Different numbers

But the numbers are different at RealtyTrac, the Irvine, Calif.-based foreclosure broker. Its data shows foreclosures as staying mostly even in the Tampa Bay housing market for the first 11 months of 2006 compared to the same time period the year before at around 24,000 filings.

In fact, while RealtyTrac shows an increase between October 2005 and October 2006 of more than 1,000 filings, its November numbers went a different direction from 2,233 in 2005 to 1,415 in 2006.

“We’re coming out of a period where foreclosures were below historical averages that was largely out of the real estate boom we just came out of,” said Rick Sharga, VP of marketing for RealtyTrac. “When there’s a real high appreciation rate on housing and when there are a lot of buyers in the market, it tends to keep the foreclosure rate down. But the housing market has slowed down considerably, and it creates an imbalance of inventory of housing in the market.”

Speculators Fueling Foreclosures

Pinellas County has witnessed foreclosure filing jumps of 74 percent and 53 percent respectively in October and November, according to Kane’s data, showing that even “built-out” counties were not immune to the problems following the rash of speculative purchases over the last two years.

“The three things that I have seen [causing foreclosures] is an increase in insurance, the increase in property tax and the maturing of adjustable rate mortgages,” said Askia Muhammad Aquil, executive director of St. Petersburg Neighborhood Housing Services that offers foreclosure counseling. “People got into ARMs, and it was not necessarily a bad ARM. They just were not prepared for the increase in their mortgage payments along with everything else.”

Aquil said he expects to see more and more people seeking protection from these dangerous Florida home loan products coming through his offices as late as the end of next year, and RealtyTrac’s Sharga said he was in no position to disagree.

“The foreclosure rates will continue to increase into 2007, not at the rate of increase we’ve seen this year, but they will still go up,” he said. “Places where the housing market accelerated too rapidly, like Florida, are probably the first ones to get hit the hardest. There was a lot of speculative buying going on. The seasoned investors know how to play the game, but the novices, they were coming in at the peak of the market in any investment scenario and are at the most risk of getting burned, and they did.”

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Once completed, TerraLargo will have six residential villages with 618 single-family homes and executive residences on 50- and 70-foot-wide home sites.

Avatar plans to offer 10 floor plans ranging from 1,400 to more than 3,000 square feet of living space priced from the low to mid-$200s.

The community’s 5,000-square-foot TerraLargo Club includes a reception lounge, kitchen, multipurpose room, fitness center and children’s playroom. Outside the club is a deck and terrace with another 6,000 square feet that circles around a 3,500-square-foot pool.

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The fact that Florida mortgage rates are slightly on the rise isn’t encouraging news to sellers and Realtors. But here is something they can look forward to:

The holidays.

Thanks to tax implications, December closings are typically a popular across Tampa Bay and other parts of the state. The question now is whether the sluggish 2006 will show a holiday bump that could also add momentum into next year.

“Things are picking up, and if you’re a savvy buyer, you know that already,” said Hermun Puri, a Realtor with Keller Williams Realty’s Fate Team in Tampa. But many of the issues that led to the market slowdown are still in play, like insurance and taxes, so while potential Florida home loan borrowers might be venturing out to test the market again, there’s no guarantee they will be ready to commit.

The Homestead deadline

December has traditionally been a good closing month for sellers, averaging a 27.9 percent increase between November and December for existing homes between 2003 and 2005, Florida Association of Realtors data shows.

“At the end of the year, there’s usually a push to close,” said Cathleen Smith, Coldwell Banker’s regional senior VP for the Tampa Bay region. “If they don’t close in time, they won’t get their Homestead (exemption) for the year, and that’s $25,000.”

Interest from buyers was higher in years before the tough hurricane seasons of 2004 and 2005 prompted higher insurance rates. Also contributing to 2006’s unpredictability is the slight dip in the median price, which shows buyers paying practically the same amount they did a year ago during the housing boom and 31 percent more than two years ago.

State elected officials appear to be working on ways to alleviate skyrocketing insurance costs, but they may be too late to help December sales, said Brad Monroe, president of the Greater Tampa Association of Realtors. He’s afraid Florida home mortgage numbers won’t match those of the past.

“Our November numbers were fairly lackluster in terms of sales, but I have had a dozen people tell me that things really seem to be picking up,” Monroe said. “They’re getting more buyers’ calls, more activity, so hopefully we’ll be seeing some turnaround.”

End of investor interest

“It was a true success for us in 2006 to pull this many sales together,” said Felix Amon, CEO of Amon Investments, who is building the $50 million, 126-unit Station Square on Cleveland Street. “The media was drumming that there was an oversupply of property, and who knows if we can ever absorb it. We felt that if we could manage to meet a 60 to 65 percent sales quota, we were going to build it. We did, and we estimate the market will come back as well in 2007 or 2008.”

If there was any positive in the 2006 housing market downturn, it would have to be found in what it created, said Puri, who became a Realtor while the boom was still on.

The investors are gone, so those buying homes in Florida are people planning to stay, Puri said. Joining those investors out of the market are Realtors who were just looking to make a quick buck while the market was hot.

“I’m in it for the long run,” Puri said. “If you can make it through this period, you will be doing great on the other side.”

The Tarpon Springs city staff called it a “redevelopment opportunity.”

The landowners suggested it may address one of most serious problems facing the Tampa Bay region. But resistance from residents was so swift and steadfast, it might as well have been Yucca Mountain moving into their neighborhood.

One source of the outrage was clearly a suggestion the project may include ample “affordable housing,” an evolving term for homes middle class families can afford in overheated real estate markets.

Politicians, business leaders and city planners agree the stock of workforce housing in Tampa is perilously low and anticipate the shortage will create more sprawl, congestion and longer commutes.

“Workforce housing” is one fix widely touted by experts and officials. But the mere mention of the term touched off waves of confusion and hesitation in Tarpon Springs. To prospective neighbors it was just a thinly veiled euphemism, a polite way of saying “the projects.”

“I am strongly opposed to any building of ‘workforce housing better known as low income housing,’” one resident wrote. “Clearly this action would create higher crimes and lower property valuations.”

Even as Florida mortgage costs become more than many residents can bear, the creation of affordable housing continues to meet resistance on many grounds. The backlash in this case began at a City Commission meeting in October.

The impetus was a presentation by Cynthia Tarapani, a consultant hired by two landowners planning to build a cluster of new townhomes. Tarapani was facing a formidable task: persuading officials to approve land use and zoning changes to allow denser development along Jasmine Avenue.

It is not exactly a location ripe for increased density. The twisting two-lane road provides the only outlet to major throughways for hundreds of multi-family home units and the city’s recreation center. To bolster her argument, the professional planner argued that there was a common good served by allowing more units per acre.

“The purpose is quite simply to provide for workforce housing,” Tarapani said. “There is a need for housing throughout Pinellas County… for our policemen, our teachers, our public workers, folks who may be buying their first home.”

Consider the alternative, she urged:

“The lower the density, the larger the lot. The larger the lot, the bigger the house. The bigger the house, the more it costs. It is not affordable and it is not workforce housing.”

It is a paradox that the Southwest Florida housing market - and countless communities across the state and nation - created a housing shortage.

“Increasing land cost, construction costs, insurance costs - all get into housing prices. It’s becoming more and more difficult for people to find affordable housing,” said Ian Smith, a spokesman for the Florida Housing Finance Corporation.

The gap between income and cost of living has priced many out of the market and forced teachers, police offers, firefighters to live far away from the cities where they work. In Pinellas County, the median household income increased 43 percent over the past decade, while home prices have surged 144 percent, according to a recent county report.

Yet until there is widespread support, and plans are worked out that can clearly benefit the intended recipients, qualifying for a Florida home loan will remain out of reach for many lower- and middle-class residents. It is not proving to be an easy fix, regardless of the intentions of the powers that be.

The Naples housing market is not the only sector of the state to be struggling. Sales of single-family existing homes totaled 43,395 during the third quarter in Florida, a decrease of 34 percent compared to 65,364 homes sold during the same time a year ago.

The statewide existing-home median sales price remained stable at $247,900 during these three months; a year ago, it was $247,800. Until it drops significantly, there’s little reason to expect great pick-up in demand for Florida home loans.

Inside the Tampa Bay housing market

Housing in Tampa Bay is doing slightly worse, with sales declining 43 percent (to 8,009) from a year ago and 21 percent from last month’s 10,187. The median price increased 8 percent, to $234,000, from a year ago, and 1 percent from last month’s $232,200.

Tampa Bay’s prices peaked in June at $239,600.

In a new survey conducted by the University of Florida’s Center for Real Estate Studies, the threat of spiraling insurance rates was mentioned as the biggest concern, followed by the softening housing market as the second most-mentioned trend.

Nevertheless, even if a sharp downturn in the housing market occurs as some analysts predict, Florida will be less affected by it than other states because of the insulating effect of its high population growth rate, said Dr. Wayne Archer, director of UF’s Center for Real Estate Studies, in a release.

In other words: the Florida mortgage loan may be slowing, but it’s typically stronger than most areas of the country. This should continue to be the case heading into next year.

If you thought the Central Florida housing market was poised for a crash along the lines of what’s going on in the Southern portion of the Sunshine State, you’d better reexamine your thinking.

Home values in Metro Orlando and two other Florida markets were among the nation’s fastest growing in the third fiscal quarter, an analysis by an online real estate research company showed.

The popular site Zillow.com estimated that greater Orlando existing-home values in the quarter rose 17.6 percent from the previous year, trailing the Jacksonville housing market, which averaged 19.1 percent.

Portland-Salem, Ore., also edged out Orlando with 17.9 percent home price appreciation. The Richmond-Petersburg, Va., area was fourth, posting 16.2 percent average, while Tampa-St. Petersburg came in fifth at 15.9 percent.

So much for that rise in Florida home mortgage rates killing demand for properties. While parts of South Florida are struggling mightily in this market, other areas of the state keep chugging along and posting strong growth.

Zillow.com uses a proprietary method for its analysis. The Seattle-based company said that despite a decline in values in many regions during the quarter, home values were up 4.8 percent year-over-year in the 36 regions it studies. Declines were noted for Boston; Hartford, Conn.; Cincinnati; Minneapolis; San Diego; and Sacramento, Calif.