Foreclosures, Coyotes And Big Foot Sightings!

In his Sunday column for August 17, 2008, St. Petersburg Times business editor Robert Trigaux did a countdown of the worst business news of the week. Number One on his bad news hit parade was real estate.

Why?

Well, let's tick off the reasons ...

• According to Zillow market researchers, if you bought a home in the United States since the beginning of 2003, nearly one buyer in three now has negative home equity.
• If you bought a home in 2006 during the market's peak, you have the highest rate of negative equity in your home. Nationally, some 45-percent of 2006 buyers now have negative equity even if they made a 10-percent down payment.
• If you bought a home in Tampa Bay during 2006, 71.7-percent of those buyers now have a mortgage that is worth more than the home they are paying for.

I think all this stuff is probably true in broad-brush strokes, but I worry about any statistics that come from Zillow. I just don't trust the way they gather data. I've said that before, as regular readers of this blog know.

There was also a story in the St. Petersburg Times about all the vacant homes in the Tampa Bay area and how those homes are putting a strain on area businesses, services and government departments. Apparently phone and cable companies are getting fewer customers signing up for services, utilities are seeing more "low usage" accounts, cities are straining to keep vacant properties safe and free from vandalism, and homes that are near vacant properties are seeing valuation drops approaching 2-percent simply because of proximity to the empty house.

Although it is hard to put an accurate figure on the number of vacancies, the Center For Responsible Lending projects that in Pinellas County 3,675 homes were lost through foreclosure on subprime loans issued in 2005-2006.

The Center For Responsible Lending also reports that 310,826 homes in Pinellas County are losing value due to nearby subprime loan foreclosures and that the average decrease in value due to that proximity is $2,294.

In addition, the Center For Responsible Lending and the St. Pete Times report that Pinellas County has lost $712,899,509 in its tax base from subprime foreclosures during 2005-2006.

I sure hope the Center For Responsible Lending has issued a memo or something to lending officers defining guidelines for responsible lending. Obviously they had not done so during 2005 and 2006. So, this is all their fault.

I mention these things only because Robert Trigaux may want to use them as factoids in his next round-up of crummy news stories for the week. You know, they could be items #1-A or 1-B or something.

One other story caught my eye in Sunday's newspaper. Coyotes. Apparently residents in the Bahama Shores area are saying that wild coyotes are feeding on their pets, especially on cats if they are let loose at night.

For heaven's sake! Coyotes? In an urban area of St. Petersburg, Florida? I think of coyotes in places like the wild west with desert ghost towns -- you know, Arizona and New Mexico. Not St. Petersburg.

Well, wait a minute. It's all starting to make sense now. We have coyotes because of all the vacant houses due to subprime mortgage foreclosures. The vacant houses are like miniature ghost towns from the wild west and they create perfect environs for urban coyotes. So, the urban coyote problem is the direct result of unsound mortgage lending practices from the 2005-2006 housing boom. In typical American finger-pointing fashion today, let's blame today's urban coyote problem on the Center For Responsible Lending. We can then get a $100-million federal taxpayer-funded grant to study the problem, followed by a $200,000 per coyote bounty paid for by the Pinellas County Commission and the St. Petersburg City Council. Of course, they'll create a new department with taxing authority to put yet another tax on property to pay for the bounty and offset any liability resulting from bounty-hunters confusing coyotes with neighborhood dogs. Then ... ah, but this could go on forever.

By the way, I hear people in Old Northeast are reporting Big Foot sightings.

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

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Three Years Later And There's No End In Sight

The great real estate downturn began three years ago, exactly.

In July, 2005, the Absorption Rate (AR) showed its first month of decline after having risen steadily to create mammoth gains in property sales and prices. During July of 2005, the AR for single family homes showed a drop, falling from June's 59.2-percent to July's 51.5-percent. That was when the bubble actually burst for single family residences in Pinellas County.

It had burst a few months earlier for condos, but few really noticed it. The end for condos began in May, 2005 when the AR fell from April's 62.2-percent to May's 51.5-percent.

Since then, things have gone down and stayed there for residential property in Pinellas County.

July's sales and pricing figures prove that there has been little, if any, real improvement during the past 36 months.

Let's begin our monthly analysis as usual with a look at July's AR, which is determined by dividing the number of units sold during the month by the total number of listings in the Multiple Listing Service.

For single family homes, the AR for July was 6.1-percent. That's a drop from June's 7.3-percent. For condos, the July AR was 4.3-percent, down a little from June's 4.5-percent.

Now, when you look at today's AR, go back and consider June 2005's AR of 59.2-percent and you will see how far real estate activity has fallen in the last three years. No wonder so many real estate sales people have left the field, and why so many who remain are struggling just to keep body and soul together.

Single Family Homes

For single family homes, the overall number of properties listed for sale in the MLS stayed about the same as it was in June. In July, there were 8,643 homes listed, while in June the figure stood at 8,617. Not much of a change there.

Sales, however, took a swan dive during July. Overall single family home sales dropped from June's 632 to only 529 in July, that's a drop of over 16-percent in overall sales volume in one month. Pretty discouraging.

The median price of single family homes also took it on the chin in July. The median fell to $180,000 for July '08 as compared to $225,000 for July 'o7. That's a drop of 20-percent. Sellers who fail to factor these kinds of pricing declines into their current asking prices are finding it virtually impossible to locate buyers.

I want to point out something important here so that everybody who reads this story understands the importance of these median pricing figures. Today's median prices are the same kinds of median pricing we saw during the summer and early fall of 2003. Repeat: 2003. Sellers who want to sell MUST come to grips with this pricing fact. Buyers don't care what you paid for the property in 2004 or 2005 or 2006. They are only going to make offers today as if it was 2003. Sellers and agents must price property accordingly or the house is likely going to sit unsold for months on end.

Condominium Facts

Condominium listings were down in July from June, but just a little bit. In June there were 7,293 condos for sale in the MLS, while in July there were 7,276.

The number of condos sold remained about the same month-to-month as well. In June there were 327 condos sold, while in July the number sold stood at 312 -- not much difference.

The median selling price of condos took a real nose dive when you compare the median price of July 2007 to July 2008. In July 2007, the median price was $175,000. In July 2008, it dropped down to only $152,00. That's a drop of 13.1-percent. Ouch.

So, let me make this point about condos: If you're trying to sell a condo, go up to the last things I wrote about single family homes and apply the exact same points to your condo. If you don't bring the prices in line with today's market, you are unlikely to find a buyer.

Well, there you have it. Three full years of this kind of market. Problem is, I can't really see an end to it any time soon. Even the gurus and prognosticators are saying more of the same for about another year -- but how do they really know? This was originally touted as a "market correction", remember that? Then it became a real estate problem. Now, it looks like a recession.

Funny how when problems are underestimated they just keep growing, isn't it.

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

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Word From Another Real Estate Guru. Where Do These People Buy Their Crystal Balls?

Another real estate guru/prognosticator has opened his mouth and told the world that the market is now a mere nine months away from bottoming out. Seems like we've heard that same kind of thing before, doesn't it? I guess if you keep saying it, eventually the prediction will come true and you'll look like a genius.

Now we hear from one Brad Hunter. Hunter is the director of consulting for MetroStudy. MetroStudy is an outfit that tracks new home sales and market conditions, and he was talking about new homes when he made his comments. Hunter's crystal ball says we're now nine months from seeing the bottom of the market. He made this prediction in a talk at the Southeast Building Conference in Orlando recently. I wonder if that's where he bought his crystal ball ... maybe one of the gift shops at Mickey's place.

I hope he's right.

I fear he's wrong.

Here's why.

In order for the market to reach bottom, buyers have to re-enter the market in sufficient numbers to establish a new base-line of prices.

Buyers, you see, are going to define the new market bottom for real estate through their offers on property. When sellers accept those offers on a regular basis, we will know what the bottom of the market is. We can then say that a new market value has been achieved and that the market has "bottomed-out".

You do not need a degree in economics to know that in a free-market society that's the chain of events that needs to take place in order for the market to reach and re-define the bottom.

While there has been some uptick in the number of homes sold during 2008, the big influx of buyers necessary to establish new pricing base-lines has not yet been felt in the market. And there are three important factors stopping it from happening nationally, plus two more important challenges that may keep it from happening in Florida within the next nine months. Here they are ...

1. Buyers are finding it extremely difficult, if not impossible, to sell their existing homes.

2. Buyers are extremely hesitant to buy property at today's prices when they feel prices are going to continue to fall.

3. Buyers are struggling with tightened mortgage lending standards.

In addition, Florida buyers have to face two additional problems.

4. The cost and availability of property insurance.

5. Continuation of questionable property tax policies.

I am going to grant you that items 4 and 5 have had some positive changes in the past year or so, but more work needs to be done to stabilize these matters before buyers once again feel comfortable that insurance and taxes will not drive the cost of home ownership beyond their personal budgets.

I guess you could almost include a sixth problem: the overall U.S. economy. If a true recession comes our way, how many people do you think are going to be interested in buying real estate? I've seen recessions in the past. People are concerned about such basic things as keeping their jobs and buying basic essentials for their families. It can get real ugly real fast, and take a long time for things to get back to normal.

Anyway, be sure to mark you calendar for nine months from today. That's the day the market bottoms out, buyers start flooding real estate offices and model home centers, mortgage brokers start taking applications, title companies become overloaded with closings, home inspectors have to hire appointment secretaries, and sellers can get happy again. Let's see, that would be about the middle of next May, right?

I can hardly wait!

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

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Buyer Update: How To Spot A Seller Who Is Willing To Negotiate A Good Price

Debbie Deeb, one of the best real estate buyer's agents in the Tampa Bay area, spotted this information on Good Morning America recently. Debbie called the info to my attention; I'm sure she will use it when house-hunting for her buyers in the future.

Here's what Debbie found out ...

A fellow named Glenn Kelman of the on-line real estate firm of Redfin, has done some research to determine which sellers are most likely to negotiate a lower price with a buyer. Essentially, Kelman says buyers should look for five things to determine if a seller is willing to negotiate.

1. Look For "Price Reduced" Signs. If a seller has reduced the price once, he is likely to be predisposed to drop it again. Buyers should keep an eye out for a pattern of price lowering on the part of a seller. Just one word of caution: if a seller has just dropped his price, he may not be quite so receptive to an offer that is even lower than his new asking price. As the old joke goes, t-t-t-timing is everything.

2. Look For "Fixer-Uppers". Kelman says that in the real estate world today, there's a heaven and there's a hell. If you are trying to sell a fixer-upper, you are in real estate hell. Buyers are afraid of anything that does not look like it has been well maintained. Fixer-uppers just are not selling. As a consequence, people who are selling a fixer-upper are more concerned with unloading the property than trying to make a big profit. If you're a buyer willing to put in some remodeling work, you might save a lot on a fixer-upper.

3. Look For Homes Owned For 10-Years Or More. I've called this out as one of my buyer criteria for a long time. Someone who has owned a home for 10 or more years probably has a lot of equity. People who have a lot of equity have more room to negotiate than someone who has owned the home for a short time and has little, if any, built-up equity.

4. Look For Homes Owned Less Than 3-Years. These homes are most likely owned by "flippers" who have been caught short in this downturn. They are just trying to get out without owing the bank anything. You can usually get them down to a price that just allows them to break even with the bank.

5. Look For Homes That Have Been On The Market For More Than 90-Days. If somebody has had a house up for sale for over three months, they're getting nervous and will likely jump on a lower price just to get shed of the property.

Good info! Thanks Debbie, and thanks to Glenn Kelman for the research work.

For more information on real estate in the Tampa Bay area, visit my website at www.TheStPeteRealEstateSite.com.

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