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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