A Look Back On The Year That Was

I thought it might be fun to look back on real estate for 2007 and pick the best and worst things I saw in the last twelve months. Let's start with the best ...

Best Things About 2007

1. Prices Dropped. I know, if you're a seller you don't think this is such a good thing. But if you're a buyer, falling prices are about the best thing you can think of. According to all the local market experts (of which I am not one), overall prices dropped about 20-percent compared to where they were in 2006. Of course, they've dropped even more than that if you go back to mid-2005 when the real estate bubble started to burst.

2. Subprime Lending. There is nothing wrong with subprime lending. What's wrong is the abuse of subprime lending to put people into houses they can not afford. Becoming more strict with underwriting procedures is a good thing because in the long run it will restore stability to financial and mortgage markets and help cool down the real estate market.

3. Florida Legislature. Florida's property tax laws are a joke. Or a disgrace. I can't really decide which. But I have to say that one of the good things I saw this year was a lot of Floridians getting involved in the legislative process, contacting their elected officials and making it known to them that the status quo in matters associated with property tax legislation will no longer be tolerated. While I give the Florida legislature a C-minus for the legislative package that will be voted on in January, I will give them a B-plus for their effort. Some of them at least listened to what property owners were saying. Those who didn't listen will probably be voted out of office. It was one of the good things I saw this year.

4. Mortgage Stability. One of the subjects that has gone pretty much under-reported in the media has been the relative stability of mortgage interest rates this year. Big swings in interest rates are a problem for the real estate industry, but overall they've remained pretty stable.

5. Fewer Agents. Hard times means there are now fewer agents trying to list and sell real estate. That's good -- not because it means less competition for those agents who remain in the business -- but because many of those who held real estate licenses did so only because they saw real estate as a way to make a fast buck. They did not approach the business as a long-term profession but as a short-term job. That's why many of them are gone today. Those who remain are most likely career agents who have the long-term interest of their customers and the industry at heart.

Okay, those are some of the best things I saw this past year. You probably saw other things that looked good to you, and I'd like to know what they were. So, drop me an e-mail about you're thoughts when you get a chance.

Let's look at some of the dumb, rotten, silly things from 2007.

Dumb, Rotten, Silly Things About 2007

1. Stubborn Sellers. Sellers who bought property at or near the top of the market, have seen 18 to 24 months of declining prices, and still insist they can sell their property for a lot more than they paid for it top my list of bad things I've seen in the past year. Their attitude simply defies logic.

2. Whiny Buyers. For month after month we've heard buyers whine about prices being too high. Well, prices have dropped a bunch in the last year or two, and buyers still don't seem to have the good sense to make legitimate offers. What are buyers waiting for? I know -- an article on the front page of the newspaper that says "The Real Estate Market Has Bottomed Out -- Buy Now". Buyers will never see that article, and if they do it will be too late and all the good deals will be gone. Buyers need to stop whining and start buying in 2008.

3. Insurance Companies. Earlier this year they passed some laws affecting property insurance in Florida. The insurance companies are simply ignoring the laws and continue to request rate hikes and drop policy holders by the thousands. This forces the State of Florida to become nothing more than an insurance company -- an assignment for which it may not be well suited. Insurance in Florida remains one of the worst things I've seen, and at the heart of it all is plain old ordinary greed.

4. Lower Commissions. Sellers who want to negotiate lower selling fees from real estate agents must be living in Never-Never Land. Sellers need to understand that if they want to sell their property in today's oversaturated real estate market, they have to provide a financial incentive for agents to show the property. Some people seem to have a problem understanding this theory. Perhaps they would understand it better if it came from somebody like Bobby Bowden. I can just hear the coach now: "Listenup, dadgumit. Cutting the dadgum commission means you cut the dadgum incentive and agents won't show your dadgum property. Dadgummit."

5. Rental Market. How many times have sellers said this in the past year: "We'll just rent it until the market turns around." Sure. The rental market is oversaturated too. Way more rental units available than people to rent them. Rental rates are falling, just like selling prices. Really, you might be better off selling for a loss and getting out from under. Just a thought. But the collapse of the rental market is one of the worst things I've seen this year. It's just something else we can blame on rampant speculation.

6. Rippling Effect. We now see that the drop in the real estate market is having a negative effect on the entire U.S. economy. If it effects the U.S. economy, it will effect the world economy. This rippling effect is one of the most dangerous things I've seen all year, and I worry a lot about what might happen next year to all of us -- even those who have nothing to do with real estate or its associated industries. Does the word "recession" have a familiar ring to anybody?

Well, it was an interesting year. I hope next year will be better for everybody, and I've got my fingers crossed. And my toes.

For more information about real estate in the Tampa Bay area, please visit my website at http://www.thestpeterealestatesite.com/.

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Florida Gators Collect More Than Sports Trophies

First it was the national basketball championship. Then the national football championship. Then another basketball championship. Then a Heisman Trophy.

Now, the University of Florida's Warrington College of Business Administration is being awarded $1,000,000 from Gainesville real estate mogul Nathan Collier. The money will be earmarked to endow the Nathan S. Collier Master of Science in Real Estate program.

In addition, the Wachovia Foundation will donate $500,000 to the University of Florida College of Design, Construction and Planning. This money will be used by researchers to more clearly identify the state's affordable housing issues and to do site studies for the suitability of affordable housing development and preservation.

Go Gators!

For more information on real estate in the Tampa Bay area, visit my website at http://www.thestpeterealestatesite.com/.

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Condo Recovery Unlikely In 2008

David Seiders, chief economist for the National Association of Home Builders, has predicted something of a recovery for new home construction in most states during 2008, but that recovery does not include Florida, California and Nevada. He described those as being "overheated" housing markets.

Seiders was highly critical of Florida's condominium markets. In fact, he said that the glut of condominiums in the Tampa Bay market was so bad it would take close to three years to clear away the current inventory given the present sales rate.

During November, only 250 condos were sold in all of Pinellas County according to the Pinellas Multiple Listing Service with a median price of only $150,000. Over 8,300 condos were on the market.

For more information about real estate in the Tampa Bay area, visit my website at http://www.thestpeterealestatesite.com/.

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More Info On Housing Prices

I want to get into this matter of median house prices a little deeper because several people have spoken to me and cited an article from the Times from the 15th as proof that property values have fallen 14-percent in the last year.

On December 15, 2007, the St. Petersburg Times ran an article headlined "Home prices show big drop" with the sub-headline of "The November numbers mark the worst year-to-year price decline in at least a decade".

The article then went on to point out that the median price of a single family home dropped 14-percent between November, 2006 and November, 2007. The article then said "It was the worst year-to-year home price drop in at least a decade ...".

The median price figures do not tell you anything like that. The median price is simply the mid-point of what was sold during a certain time period. It means that half the people who bought paid more than a certain figure and half paid less than that figure. The exact middle figure between the two halves is the median price.

About the only thing the median price is good for is determining what is selling. It shows buying trends. Based on these figures, it appears that lower priced homes are selling now, and a year ago people were buying more expensive homes.

But the figure does NOT tell you that property values have dropped by 14-percent. That's not what median means at all, and when the Times publishes median data and says that property values have fallen by a certain amount, well, that's an erroneous misinterpretation of the facts that misleads people and may cause them to make false assumptions about their selling situation. If that is the case, then the Times has done its readers a grave disservice. If the Times does not know what "median pricing" means, perhaps they should Google-up the term, find the error of their ways and correct their story.

The Greater Tampa Association of Realtors keeps track of the average prices. Their figures show a 5-percent price reduction during the year ended November, 2007, according to the Times article. So, you might be tempted to say that the average house lost 5-percent of its value in Hillsborough County, but then again that "average" figure is based on sales data. So, all we really know is that the average price of the homes that sold in Hillsborough County dropped 5-percent in the last year. This may mean that people are buying less expensive property, not that homes have lost 5-percent of their value. Or, it may mean that there is an active market for lower-priced homes. Who knows?

What I do know is this: Property is worth exactly what a ready, willing and able buyer will pay for it on a given day. No more. No less. To try to interpret median prices and average prices as showing that property value is rising or falling is to misinterpret the data. Clearly, property prices are falling; Realtors are making price reductions in the MLS everyday. But writing that they have fallen 14-percent based on median prices is to misinterpret data and sensationalize facts. So don't be fooled by the Times article.

I hope I have cleared this "median price" matter up.

For more information on real estate in Pinellas County, please visit my website at http://www.thestpeterealestatesite.com/.

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Median Price Drop Is Bigger Than Reported

The St. Petersburg Times ran a story by James Thorner on December 15, 2007 in which it was reported that the median price of a single family home in Pinellas County dropped 14-percent for the year ended November 30, 2007. The article indicated that the November drop was the biggest year-to-year price drop in at least a decade, maybe longer.

Let's be clear about what "median price" means. Median price is the halfway point. It means that half the people who bought a house paid less than the mid-point price and half paid more than the mid-point price. Please do not confuse "median" with "average", they are two different things and can be entirely different numbers. So, when we say that the median price dropped, it does not mean that the average price dropped, and it may not mean that prices dropped at all. It does mean, however, that more people are buying less expensive property. The reason they are able to buy less expensive property may be because prices are coming down overall.

Readers of this blog know that I have written numerous times that the downturn in real estate sales actually began in June, 2005 according to the Pinellas County absorption rate, and that median prices have been dropping since that date. Some months the median goes up a little, some months it goes down a little, but the trend since mid-2005 has been downward and that's when this whole thing started -- at least, in my book that's when it all started.

So, I think it is fair that we take a look at median prices not from November 2006 but go back to November 2005 to see just how deep this decline really is. Here are the numbers from the Pinellas Realtor Organization (PRO), the same source cited by the Times in their story.

November 2005 Median Price: $259,000

November 2007 Median Price: $185,000

If you do the math, you'll see that the median price for the two years ended November 2007 is actually a drop of 29-percent.

Here's my point: median prices have been falling for over two years, not just one.

If you want to know the real figures on this real estate correction, you need to make comparisons from where the market was at the time the correction began, which was in mid-2005.

If you do, you'll see that this is a much deeper and longer-lasting decline than that predicted by those real estate gurus two-and-a-half years ago. You remember those guys, don't you? You know, the nationally syndicated experts who wrote that the real estate market would experience a "soft landing".

The Times article is great news for buyers. A drop in median prices of 14-percent in one year means buyers should be able to find real bargains right now, especially for homes priced over the median figure. The farther you get away from the median figure, the more difficult it is to sell a house, so those sellers should be more willing to negotiate favorable prices and terms with today's buyers. For prices to drop that much in twelve months means sellers may be lowering their asking prices and/or accepting lower offers for property. With huge inventories now on the market, this has got to be a great time to buy.

For sellers, if you want to sell you need to get to rock-bottom on your pricing while remaining within your price range for comparable homes in your neighborhood. Remember, the median price is falling which means buyers are not willing to pay high prices and are making lower offers. I've never seen a more price sensitive market than what we have today. There are buyers out there, but in order to get them to bring you an offer, you're going to have to price your property so that it is the best value in the neighborhood. Today there is an oversupplied real estate market. In such a market, only the best values will be purchased. That's all you need to do, along with implementing a first-rate marketing plan so people know your property is available.

Anyway, if you'd like more info on real estate in Pinellas County, visit my website at http://www.thestpeterealestatesite.com/.

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November Was Not The Worst Month In 2007 For Real Estate Sales -- But It Was Close

No matter what you read in the paper, no matter what some real estate experts say, no matter what your brother-in-law says he heard from a "reliable source", November was not a good month for real estate in Pinellas County.

It was not the worst month. It was the second worst month.

As usual we will first look at the Absorption Rate (AR) for the month. This is the inventory turn, and as you know it is calculated by dividing the number of listings in the month by the number of monthly sales.

Single Family Homes. The AR for single family homes in Pinellas County was a dismal 4.4-percent in November. That is the second worst month so far this year. By comparison, October's AR was 5.2-percent and September's was 4.8-percent.

Condo AR. Condominiums also posted the second worst month for sales. The November AR for condos was 3.0-percent -- that's just horrible. It was at 3.4-percent in October and 3.1-percent in September. Seems like pre-owned condos have lost all their luster and the market for them is flat and virtually non-existent.

Single Family Sales And Listings. The actual number of sales for single family homes in November was the lowest number this year. Only 407 single family homes were sold in Pinellas during the month. October saw 484 homes sold, while 442 were sold in September. Additionally, the median selling price fell from $212,000 in October to $185,000 in November. This means one of two things: either prices are falling or people are buying less expensive homes (or maybe a bit of both, I guess).

Single family home listings remained about the same as the last two months. There were 9,181 single family homes in the MLS system in November as compared to 9,228 in October and 9,233 in September. Not much movement there.

Condo Listings And Sales. In November there were 8,325 condos listed in the MLS system. In October that listing figure stood at 8,270 and in September there were 8,527 units in MLS. The differences in those listing figures are most likely more the result of people putting condos on the market while others take condos off the market than because of sales activity.

The proof of that is in the sales figures. In November, only 250 condos were sold. That's down from the 283 condo sales in October and the 267 which were sold in September. There just are not enough condo sales to really have an impact on the number of listings in the MLS from month to month. Maybe condo sales will increase as the winter buying season comes our way. Both the Canadian dollar and the Euro are in a positive position against the dollar now, so maybe some condo buyers will take advantage of exchange rates and buy some condos here. Let's keep our fingers crossed on that.

Here's something else: Just like single family homes, the median price for condos took a big dip in November, falling from a median of $180,700 in October to November's $150,000. That's over a $30,000 drop in median price in 30 days. I'm hoping that the drop in median prices reflect sellers lowering their asking prices and accepting lower offers from buyers.

The St. Petersburg Times wrote an article on Sunday, December 9th, saying that if sellers want to get their property sold quickly they need to drop the price. It's as simple as that. This is an exceptionally price sensitive market right now. Properties will sell -- and apparently sell quickly -- if they represent a good value. If they are not a good value, buyers will ignore the property and it will sit unsold. Sellers need to accept this pricing strategy and get asking prices down to absolute rock bottom. How far is down? Try looking at prices from 2000 to 2002 -- that's probably about where prices need to be today. I think that's the mindset for most buyers.

For more information about real estate in Pinellas County, visit my website at http://www.thestpeterealestatesite.com/.

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Who The Heck Is Carol Vinzant And Who Cares About Her Opinion Anyway

Carol Vinzant is a New York City-based freelance writer. Recently she wrote an article for AOL.com's Money and Finance section in which she identifies Clearwater as the worst place in America to retire.

Vinzant identifies four problems with Clearwater: 1. bland culture; 2. extreme weather; 3. high real estate and homeowners insurance; and 4. too many old people already living here.

As you might expect, I have a few comments.

Bland culture. You know, I keep hearing that Tampa Bay is a cultural wasteland. Mostly I hear that opinion voiced by people who originate in or identify with New York City, like Carol Vinzant. Frankly, I think such comments are arrogant and elitist.

I will be the first to admit that Tampa Bay does not offer the variety of cultural opportunities as compared with New York City. I don't think there are many cities in the entire world that can compare with the cultural menu available in the Big Apple.

We in Tampa Bay have our own culture, and it is far from bland. It's vibrant, exciting and grows richer with each passing year. Space does not allow me to enumerate the cultural opportunities that are available in Tampa Bay. Clearly Carol Vinzant is either uninformed of our cultural offerings or she does not appreciate them or the rich heritage from which so many of them originated. In either case, to say Tampa Bay is culturally bland is very insulting.

Let me say just two things: first, when I retire I would rather go fishing on a pier in Clearwater with my culturally-deprived grandchildren and watch them have fun than drag them to some art museum in Manhattan where they won't appreciate or understand what they are seeing. Second, if this is such a cultural wasteland, why doesn't Carol Vinzant do one of two things ... either show us culturally deprived locals how to improve our access to the finer things in life, or just stop writing stories about us. Either step would be appreciated.

Extreme weather. I guess "extreme weather" is symbolic language for "hurricane". Hurricanes and tropical storms are just about the only "extreme" weather problems found here, and in all honesty they are highly infrequent visitors to Clearwater and the Tampa Bay area.

Find me a spot on this planet that is not subject to some kind of weather problems. Tornadoes. Ice storms. Blizzards. Fires caused by draught. Floods caused by monsoons. Mudslides. For Pete's sake the entire world is going to have weather changes brought on by global warming, according to the scientists.

I don't know about you, but I wouldn't let the remote threat of a hurricane deter me from retiring in Clearwater -- or Pensacola, or Mobile, or New Orleans, or Galveston or anywhere else for that matter. People who live in Clearwater know how to prepare for these things and know how to evacuate if necessary. Only the foolish "hunker down" and try to "ride it out". To downgrade Clearwater as a retirement area because of the threat of seasonal hurricanes is irresponsible writing and nothing more than fear-mongering.

High real estate and homeowners insurance. Okay, these are problems. The price of real estate was driven up in the last few years primarily due to the activities of real estate speculators. The market is correcting downward now. How long this correction will take before the market "bottoms out" is unknown. Prices will come down. Period.

The high price of home owner's insurance is not a market-driven problem because insurance is a regulated industry in Florida, but it is something that insurance regulators are trying to correct. It is a very, very complicated issue. Everybody from the governor down is working on this problem. I'm confident that an agreement will be put in place soon that can be followed by all parties.

Now, Ms. Vinzant, if you want to talk about high real estate prices and costly insurance premiums, let's discuss your hometown of New York City. Would you like to compare values per square foot to say, Clearwater versus Manhattan? I kinda think I know where my retirement housing dollar will go farther.

Too many elderly folks. There's a serious breakdown in Carol Vinzant's logic on this issue. 21-percent of Clearwater's population is over the age of 65, according to the U.S. Census. If Clearwater was the worst place in America to retire, why would so many retired people already live there?

As I approach my retirement years, I'm looking for a place that has lots of retired people around me. I share a common living experience with those people. We have similar histories. Lived during the same times. Share the same views on life. Have the same needs, the same outlook on life, similar cultural views and the like. We went to the same movies, read the same books, watched the same TV shows, listened to the same music and grew up pretty much the same way. We reached adulthood about the same time, worked hard for a living, raised our kids to the same moral and ethical standards that we all believed in. I don't share that tradition with a bunch of 30-somethings half my age. That's why dedicated retirement communities are so popular! Birds of a feather flock together because they want to, Carol.

The other reason I want to live where there is a high concentration of retired people is because retired people have special wants and needs. By having a high concentration of retirees, specialized businesses and professionals can be found who meet the needs of the elderly. I want access to those kinds of services -- elder care specialists, elder care attorneys, geriatric physicians, hospitals and nursing homes, recreation centers, mental health clinics, financial advisers, restaurants and all the other things needed by retired people.

The fact that Clearwater has a high concentration of retirees means that all those kinds of specialty services are available there. That makes it the ideal place to retire, not the worst place in America as Carol Vinzant and AOL.com would have you believe.

If ever there was a misguided and ill-informed bit of writing, Carol Vinzant has posted it on AOL.com. I think most of it is just her opinion, and who cares what she thinks anyway.

I advise readers of this blog not to take her comments seriously because she is flat wrong about Clearwater and is probably wrong about the other cities she chose to downgrade in her story.

If AOL really wanted to help people select a retirement destination, they should have run an article about the best places to retire. Who cares where the worst places are?

And as everyone should know, the best place to retire is where there are people who love you.

For more information about real estate in the Tampa Bay area, please visit my website at http://www.thestpeterealestatesite.com/.

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Not To Be An I-Told-You-So, Buuuuuutttt ...

Regular readers of this blogsite may remember that late last summer I predicted that October would be a mega month for real estate foreclosures in this area because so many subprime adjustable rate mortgages were due to click up to new, higher interest rates. October just looked like the month it would all hit the fan to me.

Well, the numbers just came out and were reported in ForeclosureDaily.com. I called it right, folks.

There were 835 foreclosure filings in this area during October. And there were an additional 346 in November.

Recently, there have been some talks about government involvment in mitigating foreclosures. That may help in the future. If not, look for this trend to continue.

For more information about real estate in the Tampa Bay area, visit my website at http://www.thestpeterealestatesite.com/.

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A Response To Sara

On November 28th, I wrote a little blog about Tampa Bay being #1 in housing price declines. I blamed much of that loss on

• tax assessors and elected officials who drove taxes up to unheard of levels,
• insurance company greed,
• mortgage brokers and bankers who gave mortgages to virtually anyone regardless of creditworthiness,
• real estate speculators who paid outlandish prices for property and drove values higher than what was affordable for the area's average wage earner.

A reader named Sara e-mailed me, agreed with what I had written and asked a very straightforward question: "... who is going to come off the bench and fix this???"

Hmmm ... yes, who indeed? Nothing like hitting the nail on the head, Sara.

I'm not sure if there is a "who" that will fix these problems. Rather, I think it is a series of "whos" -- a lot of people have to get involved.

First of all, voters. Many of our real estate problems revolve around legislative issues that are solved (or not solved, as the case may be) by elected officials. From city council and school boards to the Governor's office, voters and property owners need to voice their opinions on the need for meaningful, immediate, measureable, and significant property tax reform in this state. No half measures. No knee-jerk reactions. No doing only what is politically correct. No lowering taxes with the right hand while raising them with the left. We need to have a tax system that is affordable for all and fair to all. If those who are now in office can not or will not develop such a taxation policy, then the voters need to elect people who will.

Second, insurance companies. I think everybody understands that insurance companies have to make a profit to stay in business. No argument there. But the issue here is the procedures that are used to set rates in Florida, including re-insurance rates. These are often based upon computer based projections of hurricanes for the upcoming year. Those projections have not proven very accurate -- just look at the recently ended 2007 hurricane season versus the projections. Pretty mild, comparatively speaking. Insurance companies really need to pay less attention to computer models and inaccurate projections. It has proven to be little more than guesswork. They need to follow the letter and spirit of the new laws recently enacted in Florida. Finally, they need to take on a more customer-oriented outlook and stop dropping policy holders just so they can reduce their potential liability and make higher profits while driving the State of Florida deeper into the insurance business -- a function government is not suited to undertake.

Third, the mortgage industry. For the last few years, virtually anybody could get a mortgage. Anybody! Good credit, bad credit, no credit. Mortgage companies started sounding like they were buy-here-pay-here used car lots. They need to return to the mortgage underwriting policies that required people to have the capability to actually afford the house they wanted to buy and the ability to make timely payments. There used to be a catch-phrase that lenders used to use in these matters ... it was called "responsible lending". Perhaps some of you remember it. Lenders need to go back to that standard.

Fourth, buyers. This is real economics 101. If buyers want lower prices, they need to pay less. Buyers need to make lower offers to sellers. If houses sit unsold long enough, sellers will get the message that they are not going to get high prices anymore, and prices will come down. When buyers pay high prices, sellers are encouraged and prices either stay high or may even go up. Buyers make and break markets. An active real estate market is dependent upon active buyers who make reasonable offers based on what they believe to be fair for the property being offered regardless of the seller's asking price, financial position or motivation. Until buyers enter the marketplace and start making offers, the real estate market will remain stagnant.

So, Sara, those are the players who I think need to come off the bench and get into the game. There are other members of the team who have to play well too, but the middle of the line-up is going to be voters, insurance companies, mortgage bankers and buyers. Let's hope they all show up for the game soon.

If you would like more info on real estate in the Tampa Bay area, please visit my website at http://www.thestpeterealestatesite.com/.

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