Thursday, June 22, 2006

Housing Sellers and Buyers Deadlock

Home buyers and home sellers are in a virtual stalemate in Central Florida, with housing prices holding at lofty 2005 levels while more properties are hitting the market and lingering longer.

Who will blink first?

With the inventory of existing homes for sale up fivefold in a year, owners, agents and new-home builders in Central Florida are pulling out all the stops -- except lowering prices -- to move houses and attract the attention of prospective buyers.

The average resale home spent 27 days on the market last summer during the red-hot market -- a historic low for the Orlando area, according to Orlando Regional Realtor Association records. But that average has since grown to 49 days and climbing. Although 49 days is not a long time in historic terms, the 22-day shift in the average means that some homes are taking months longer to sell than their owners anticipated.

Some real-estate agents have boosted their marketing with added fliers and "talking houses" equipped with small AM radio transmitters. But many sellers are clinging to unrealistic price expectations, Central Florida agents say.

"They not only think it's still 2005, they think it's the summer of 2005 -- the peak of the market," said Barbara Brady, a Realtor at Coldwell Banker Residential Real Estate in Orlando.

Thomas Kingery had bought and sold four homes through the years and knew the drill, but the 38-year-old Windermere resident was worried earlier this year that he might be stuck trying to sell his latest house.

Realtors he interviewed advised him to price his home at least $10,000 lower than he thought it was worth. Faced with the cooling market, Kingery and his wife, Lisa, tried a different tack: They paid $500 to Florida Flat Rate Realty to list the house for them in the Realtors' Multiple Listing Service and were willing to pay a 3 percent commission to the agency that brought the successful buyer to the table.

Bottom line: They recently sold the house for $470,000 and cleared a small profit without having to slash their price -- though the whole process took 70 days.

"It worked out well," Kingery said. "I saved about $10,000" by avoiding the usual full commission of 5 percent to 7 percent. "This is one way to keep more in your pocket in a slow market."

So far, local sellers are not making drastic cuts in their asking prices, Realtors and other industry experts say. But the pressure to do so is building.

"The trend is definitely downward," said Chris McCarty, economist and director of the survey-research center at University of Florida's Bureau of Economic and Business Research. "And it's going to continue."

Nationally and throughout much of Florida, median home prices are beginning to slip, especially in places where the price escalation was most rapid -- such as Naples, Miami, Fort Myers and Fort Lauderdale, McCarty said. Rising interest rates are making loans less affordable, and speculators who bought homes with riskier financing, such as interest-only mortgages, have been selling despite the declining market, adding to the inventory and downward price pressure.

A Harvard University study released last week found that nearly one-third of U.S. home buyers last year used riskier mortgages such as interest-only financing or "payment option" loans that give the buyer the ability to skip a payment.

Many of those homes were bought by speculators, McCarty said, and as those properties are unloaded for less than top dollar, "it lowers the value of other homes around them."

Orlando and Tampa are not as likely to see major drops in their median prices as some South Florida locales, he said, because their values did not rise as much. Still, prices in the Orlando area could be flat or slow to rise for some time -- significantly weaker than in recent years under the best of circumstances -- and certain homes -- particularly those priced $300,000 or more -- will be tough to sell, McCarty said.

"How many people can afford to live in $300,000 homes without an interest-only loan?" he said. "By the fourth quarter and the first quarter [of 2007], you'll see the full brunt of the declining real-estate market."

Pricing a home so that it sells within a reasonable period of time is one of the talents a Realtor brings to the table, said Coldwell Banker's Brady, which helps explain why homes sell faster when listed through a Realtor. But persuading clients to sell their homes now for less than their neighbors did last year is a challenge, she said.

Some agents are adding more informational fliers in weatherproof tubes near the home's front entrance, or providing recorded messages that potential buyers can hear via radio transmission as they drive by. But face-to-face sales contact works best, Brady said.

"I don't believe in those" fliers or recorded messages, she said. "It doesn't allow you to talk directly to the customer."

So often, she said, "If you just listen to the buyer, you may have these alternatives that they may not be aware of. They may see the square footage [listed on a flier] and think, 'Oh, that's not enough space.' They may not realize they can easily add a suite, for example."

Pamela Ryan, an agent with Kelly Price & Co., has been selling homes in Central Florida for 25 years and said she is "definitely working harder -- 12 to 15 hour days, seven days a week." That's because while there are many more listings, house hunters are still active, sales are taking longer to close, negotiations are lengthier, and some agencies are turning down potential listings after analyzing the offering and concluding that the odds of a sale were not good in today's market.

But the record number of homes available for sale makes it a gold mine for agents with knowledge of the local markets, she said.

"We're very honest. I tell a seller, 'We have to be the best home at the best price, to sell,' " said Ryan, who specializes in the Winter Park and Maitland areas.

"People can take their time. They [buyers] don't feel that sense of urgency," said Ellie Musgrave, an agent with Signature GMAC in the Dr. Phillips area. Sellers are beginning to respond to the growing inventory and lengthening time on the market by setting prices at more competitive levels.

"Reality is setting in," she said.

Builders of new homes and condominiums have more options than existing-home sellers, and they have been pouring resources into marketing and deals in recent months.

Cambridge Homes, for example, has been offering buyers a Mini Cooper automobile with certain homes, or upgrades of similar value. The Vue condominium sales office in Orlando has installed a Kohler tub and granite counters to entice more people to peek inside. Other new-home sellers have been pitching discounts on certain lots of $10,000 to $99,000, though such deals have strings attached.

Condos in particular are skimming away first-time buyers who in years past would have been competing for single-family homes of $200,000 or less, said David Tanner, a top-selling agent in Signature GMAC's Winter Park office.

Orlando has seen an explosion in new-condo construction in recent years, especially downtown; last year it was the second-biggest condo-conversion market in the nation, according to one study.

"Developers [of condo conversions] will pay your closing costs and homeowner-association fees for the first year," Tanner said. "So you can have someone with $1,000 down, and they can get into a condo. Where else can you do that?"

Tanner, 37, said he recommends that existing-home sellers use deal sweeteners as well. "Clients need to help with the closing costs, maybe a home warranty. Throw in some kind of incentive."

Nationally, some home builders are scaling back on projects, profits are slipping and stock values are taking a hit. UF's McCarty said home foreclosures are rising -- and will continue to rise as many homeowners with adjustable-rate mortgages face higher payments they will be hard-pressed to afford.

"People will start lowering prices even more" to sell in the weakening market, McCarty said. "A lot of people knew this would happen, but a lot of people were just hoping that it wouldn't."

2 Comments:

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