Tampa working through foreclosure glut

Real Estate Market Report

Metro Tampa-St. Petersburg saw existing-home sales in September climb 10 percent from a year ago in an extremely tight housing market. Like most of Florida, the Tampa Bay regional market continues to grapple with sagging home prices and a glut of distressed properties.

In Tampa, more than half of homes with mortgages were either underwater or close to being upside down with negative equity in the second quarter of 2011, according to CoreLogic, a real estate research firm.

This report highlights real estate market statistics and trends in the Tampa-St. Petersburg-Clearwater region and includes a chart with detailed market data and commentary from local real estate professionals.

Overview

The median home sales price in the Tampa-St. Petersburg metro area in September dipped 2 percent to $126,900 from a year ago, with home values sinking to the lowest level in a decade, according to Florida Realtors, the statewide real estate trade group. Prices fell despite a double-digit jump in closed transactions from the same period in 2010.

Statewide, the median sales price declined 1 percent to $133,900 in September, the state Realtor group reported.

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Tampa Bay’s sagging prices come amid a 10 percent increase in home sales in September — from 2,152 a year ago to 2,375 in 2011.

Real estate experts attribute the sales upswing to buyers taking advantage of record-low interest rates and stabilizing home prices. An ominous cloud, though, continues to hover over the Tampa housing market. Foreclosure activity remains a significant factor with distressed property sales representing nearly a third of all home sales.

Inventory remains tight. In September, there were 9,981 homes on the active market in region, down 40.3 percent from a year ago, according to the Greater Tampa Association of Realtors. The average number of days on the market rose 19.1 percent to 112 days compared with 94 days the previous year. There was a 5.8 months’ supply of inventory.

Local real estate professionals attribute the low inventory to homeowners holding on because of negative equity in their homes and low consumer confidence over a lackluster economy.

The Tampa Realtors group reported September sales rose 6.5 percent to 1,732 units while the average sales price inched up 0.5 percent to $161,146 year-over-year.

In a separate report, Re/Max said Tampa-area sales rose 9 percent to 4,166 transactions while the median sales price fell 7.9 percent to $110,250 from September 2010. The days on the market rose 26.3 percent to 115 days. The active inventory of 20,846 homes was off 61.4 percent from a year ago.

The data from Re/Max and state and local Realtor associations can differ because of differences in methodology, including housing types and geographic coverage. Despite the different methodologies, there often are parallels between percentage changes over time.

"Our sales seem to be picking up as we clean up the inventory of existing short sales, REOs (sales of real estate owned properties, also known as bank-owned homes) and foreclosures," said James Selvey, president of the Greater Tampa Association of Realtors.

"New-home sales are also picking up with higher prices. This is due to what I believe is a lack of inventory."

Florin Patrascoiu, broker-owner of Re/Max Premier Group, said a dearth of new construction will tighten housing supply in the coming years. "I think we are going to have a shortage of homes in three to four years … especially in the (new homes) segment. Little by little we’re moving inventory. People are back in the market, buying typically $100,000 to $150,000 homes and condos."

Tampa home values are faring worse than the rest of the state and the nation as a whole. The Federal Housing Finance Agency’s Housing Price Index reported seasonally adjusted second-quarter home prices in the Tampa area fell 8.4 percent in the past year, compared with an 8.06 percent drop statewide and a 5.9 percent decrease nationally.

Tampa prices hit new lows this year, and in July were down 6.2 percent year over year, according to the Standard & Poor’s/Case-Shiller home-price index. But analysts said prices have stabilized and showed monthly increases during the spring and early summer.

As one of the largest metropolitan areas in the Southeast, the Tampa Bay region is on Florida’s Gulf Coast and billed as the gateway to the state’s high-technology corridor. It boosts a year-old art museum, aquarium, zoo, Major League Baseball, National Hockey League and National Football League teams and the largest performing arts center south of the Kennedy Center in Washington, D.C.

But like other growth markets from 2000-10, the Tampa area was hit hard by the foreclosure crisis. The region mirrors much of the same housing problems faced across the state.

Economists at the University of Central Florida’s Institute of Economic Competitiveness estimate the massive loss of home equity suffered by homeowners in the state amounts to a $1.1 trillion loss of wealth. "This lost wealth will be an albatross around the necks of Florida’s homeowners for years, if not a decade or more," the institute stated in its April economic forecast.

Last year, one in every 20 homes received foreclosure notices in the Tampa area, which ranked 17th among major metro regions in the U.S., according to RealtyTrac. That was a 3.6 percent increase from 2009 and a 21.1 percent jump from 2008. Indeed, 10 metro areas in Florida ranked in the top 25 in foreclosures in 2010.

"We have a lot of people underwater. Those (homeowners) cannot move right now," Patrascoiu said.

During the second quarter, 47.5 percent, or 314,633 homes with mortgages in the Tampa-St. Petersburg region, were underwater, meaning the borrowers owed more on their mortgages than their homes were worth, according to CoreLogic. Another 4.4 percent, or 29,235 homes with mortgages, were near negative equity.

Overall, Florida ranked third nationally, with a rate of 45.1 percent of homes with mortgages underwater.

However, third-quarter foreclosures in Tampa Bay plunged 53.9 percent year over year, with one in every 149 households receiving a foreclosure notice, RealtyTrac reported.

To illustrate the enormity of the problem, Florida accounted for one in every nine properties with foreclosure filings in the U.S. The state recorded 67,886 foreclosures during the third quarter — the second-highest total among states. Still, Florida’s total foreclosure activity tumbled 57 percent from its level in third-quarter 2010.

In the meantime, the average sales price of bank-owned homes dropped 12.7 percent in the second quarter, to $100,906 from the year-ago period — a 27.3 discount from the sales price of nondistressed properties, according to RealtyTrac.

The distressed-property sales price was up 0.4 percent from the previous quarter. Nationally, the average sales price for bank-owned properties fell 4.7 percent to $164,217 year over year, and dropped 0.6 percent from the previous quarter.

"Most of the distressed inventory is off the market, so things are starting to get back to normal. Our inventory is quite low, but that should help to raise prices," Selvey said.

Tampa’s housing market peaked in 2007, when the median sales price climbed to $208,900, according to Florida Realtors statistics. Since then, prices have slid nearly 40 percent. However, prices have risen 15.4 percent since the start of this year.

"I think we’re somewhere near the bottom. I think we’re turning toward a normalizing market," Patrascoiu said.

Selvey said the state and region are making a push to boost employment payrolls — the state lost more than 800,000 jobs during the recent recession. "Florida is making a concerted effort to acquire more jobs. Tampa being more industrialized will benefit from that effort."

He noted that there is a new container terminal at the Port of Tampa and a major expansion at Tampa International Airport. "These improvements will attract new jobs, which, in turn, will increase demand for homes."

Market data

Tampa-St. Petersburg metropolitan area data
 
Population (2010) 2,823,938
Population growth (2000-10) +17.9%
Total closed sales (2010) 29,435
 % change closed sales (2009-10) +3%
 % change closed sales (Sept. 2011 vs. Sept. 2010) +10%
Sales per person (2010) 1 in 96 people
Median sales price (Sept. 2011) $126.900
% change in media sales price (Sept. 2011 vs. Sept. 2010) -2%
Foreclosure activity rate (Aug. 2011) 1 in 380 units
 % distressed sales (2010) 41.7%
 % homes affordable to median-income households 77.3%
 % unemployment (Aug. 2011, not seasonably adjusted) 11%
Walk Score 51

Sources: U.S. Bureau of Labor Statistics, Greater Tampa Association of Realtors, Florida Realtors, RealtyTrac, Walk Score, National Association of Home Builders/Wells Fargo, U.S. Census Bureau.

Tampa Real Estate Q-and-A

Inman News asked some Tampa-area real estate professionals to comment on the latest market trends in the Greater Tampa-St. Petersburg metro housing market.

Q: What types of properties are selling fastest and slowest in your market area?

Gerard Carney
Vice president
Curry and Carney Land Corp.
"The fastest-selling properties are the foreclosures, short sales and reduced homes — a new category that leads the market, which are the drastically reduced properties. Foreclosures are still the most popular. Banks sell these homes for a lot less. Lower prices are still not making market value (foreclosures are not always the best deal).

"Short sales are a consideration by the bank on giving the mortgage holder a small break and letting them sell the home at a discounted price also. This can be a good deal at times, but many homes are well under the value of their mortgage premium, which means that the banks will not always welcome short-sale offers.

"Reduced homes are homes sold by owners that want to get out from under a mortgage before it is too late, and they lose money or they want out so as to protect other assets they have.

"Prices can be very good and unlike the foreclosures and the short sales, which are both sold as is, the owner of a reduced-price home will usually work with you to fix items found wrong or broken in the inspection phase of the contract."

Florin Patrascoiu
Broker-owner
Re/Max Premier Group
"The lower price ranges — $100,000 to $150,000 — are the fastest-sellers, and the slowest are $500,000 and above. A good amount of the lower-price-range sales are cash- and investor-driven. As always, the higher end is slower due to the limited number of buyers and restrictive financing."

Julia Stander
Assistant manager
Coldwell Banker Residential Real Estate
"The properties selling the fastest in the Tampa market are properties priced under $180,000, with an average of 105 days on the market. The slowest-moving price ranges are homes priced $700,000 and above, with an average time on the market of 230 days.

"There has been pent-up demand for entry-level homes, and with the reduction in prices homes have become more affordable, appealing to the first-time homebuyer. Low interest rates have also played a role.

"For the higher-priced homes, the time on market is a direct result of economic conditions. Less people are moving up to purchase homes, and obtaining jumbo loans has become more of a challenge.

Q: Is anything changing about the demographics of buyers and sellers in your market area?

CARNEY: Tampa has become the home to many smaller- and medium-size businesses as a place to (locate a) headquarters, which means that many junior as well as senior managers have come to live in the Tampa area and the 30-mile radius from Tampa International Airport.

It has meant that new homes in the past few years have been built to suit young executives and their growing families. Many gated communities have been built in the past 10 years, and some continue to be built even through this slow housing market we have at the moment.

Tampa has a few international companies that have come from places like the United Kingdom, South America and Asia. Tampa has a decent bilingual flair that makes most at home with a Cuban heritage in Ybor City (a neighborhood in Tampa). There is a nightlife in the Tampa area, great shopping, wonderful schools and several accredited hospitals. Tampa is close to theme parks, beaches, springs and rivers. You will not be bored. Dog and horse racing and gambling also can be found.

PATRASCOIU: The number of first-time homebuyers is lower than last year (when we had the tax-credit incentive), but the number of investors is on the rise. 

STANDER: We are seeing a greater number of first-time homebuyers in the market, which is a direct result of the improvement in the affordability of homes. We are also starting to see an increase in investor activity, including foreign investment.

According to a Hillsborough property appraiser, we are seeing a lot of transfers to purchasers from Canada. The seller demographic has changed in that there are a greater number of short sales during the last year in our market as a result of declining values. The distressed seller has become more of the market norm, although there are still a number of traditional sales in the market.

Q: What are recent trends with prices, sales and inventory?

CARNEY: For the most part, homes under $400,000 have lost value over the last five years in this market. We can talk about the market as follows: The prices in Tampa have fallen by 30 percent to 40 percent, and there are cases where it has fallen to almost half the value.

Before the fall of this market, there was a lot of inflating of the home prices due to a very large seller’s market. When the mortgage companies crashed and they started flooding the market with homes that were being defaulted on, they start a very rapid decline in home prices.

The prices have leveled off and we see very little in declines today unless you find the occasional owner looking to get out of a home at whatever loss they (must take), but overall the market is no longer slipping.

It is still a bit slow, but it is not what it was a year ago. Buyers have come out of the woodwork and are buying some of the best deals of the century. Now is the time to buy, there is no question about that. What you buy today will in three years’ time have gained at least 25 to 30 percent over the sales price they were purchased at (in my estimation).

There are plenty of homes on the market, and plenty of others waiting on the side to sell as the inventory is depleted.

PATRASCOIU: In the past three months we had an increase in average list price and average sales price. We had 1,732 sales in September compared with 1,627 in 2010. We are at 5.8 months of inventory, which indicates a balanced market.

James Selvey
President
Greater Tampa Association of Realtors

"In January of this year, our Realtors sold 1,447 homes at an average sales price of $134,856. At that time we were working with a listing inventory of 15,952 homes with an average time on the market of 99 days.

"Each month we have seen an increase in the number of sales, and in the last four months we are averaging 2,000 sales a month. We have also noticed a steady increase in the sales price, from $134,856 in January to $158,007 as of Aug. 1."

"The biggest challenge we are facing now is the appraisal. The government has really tightened down on the manner in which the values are determined, and the appraisers are either very conservative or running scared. I hear from many Realtors that the appraisal is coming in 10 to 15 percent below the offer.

"For awhile, we had a problem with a central clearinghouse selecting the appraiser and assigning the job. There were so many complaints of the appraiser not being familiar with the area or the trends in the area that the practice was stopped.

"We still have a slight downward trend in property values, according to the county property appraiser; however, it is leveling off. As the property values begin to stabilize, I feel this will no longer be a problem."

STANDER: We are seeing evidence of price stabilization in the price range under $300,000 and still seeing declining prices in the over-$250,000 price range. This has to do with the fact there is less demand and shrinking inventory in this range, with an average of 4.7 months’ supply. We currently have an average of 21.5 months’ supply — the higher the price, the greater the months’ supply. 

Q: Are you seeing changes in the market share of short sale and REO (real estate owned) properties?

CARNEY: Short sales are such a very misunderstood tool in this industry. The short sale is for the benefit of the mortgage holder. It is the bank’s version of giving the homeowner a break. Your credit still gets damaged by the loss of the home due to short sale, but the time (during which) it hurts your credit is much shorter and allows you to get back on your feet a lot sooner.

The problem with short sales is that they actually clog up the contract with the use of a third party — this being the bank. They are not on the contract sides as either a buyer or a seller, yet they have full control of the contract and will, in fact, add addenda to the contract after everyone has signed and agreed to a selling price.

Short sales are always "as is" contracts and what you see is what you get. There will be nothing done to fix or repair (the home) if you find items wrong when you have the house inspected. Make sure if you buy a short sale that you have the right to inspect the home. You always want to know what you could be getting into.

And you can inspect before making an offer, though you need permission from the listing agent or seller. Foreclosures and bank-inventoried homes are also sold "as is." In both cases they do not have to disclose anything about the home, as they will declare that they have no knowledge of the home.

PATRASCOIU: A more favorable environment created by the banks is for short sales. REOs are entering the market at a slower pace at this time due to court backlogs, robo-signing scandals and other issues.

SELVEY: In Florida there are approximately 450,000 homes in some stage of foreclosure, but the banks and lending institutions are only processing a little over 100,000. Some say it is the cost to foreclose, others say the banks don’t want the expense of having to maintain the property, and others say the banks are holding back, trying to drive up the price. Regardless, the inventory of short sales and REOs has diminished.

STANDER: There appears to be a decline in the number of REO properties that are coming to market and a slight decline in short-sale properties, but short sales still make up a large percentage of the closed transactions.

Q: What worries you most about the current state of the market, and what represents a sign of optimism and opportunity for the real estate market?

CARNEY: The market is moving at this point. We see a few more sales each month and we see builders telling us they have new inventory for sale. I see many states have put together assistance programs for new buyers, and I see there are other programs for people who are buying damaged foreclosures.

You need to ask your Realtor to search high and low for all that is out there. Every dollar you save is $3 earned over the life of the mortgage you will be seeking. Now if you are a person sitting on liquid assets and have been wondering where to invest, here is the place. For $500,000 you can buy eight to 12 units or homes, each with the potential for $750 to $900 per month income.

Top that with the fact that the initial investment to buy these homes will also grow as the equity rises quickly on the returning and healthy housing market. I honestly feel that if you have been waiting for that time to buy, now is that time and I feel the window for that investment is going to shrink very shortly.

PATRASCOIU: There is so much talk about shadow inventory and the pressure it will put on the fragile real estate market and especially on pricing. There is a lot of optimism as we moved from 25 months of inventory in 2008 to 5.8 right now. Florida, including Tampa, is on sale — a once-every-two-decades sale. Great prices, low inventory and unbelievable interest rates.

Florida and Tampa are bucking a national trend in housing and posting faster growth in home sales, with prices remaining relatively stable. Existing-home sales in the Tampa-St. Petersburg-Clearwater area increased 10 percent in September compared to last year — an upward trend … since January. With 2,375 single-family homes trading hands, Tampa outsold all other markets in the state, including Miami, by a wide margin. Miami had 848 sales.

SELVEY: My biggest concern is the availability of mortgage money. The interest rates are fabulous, but to qualify you must have a decent credit score with no late payments. That is difficult to find with the existing economy. The biggest challenge we are facing now is the appraisal.

The government has really tightened down on the manner in which the values are determined, and the appraisers are either very conservative or running scared. I hear from many Realtors that the appraisal is coming in 10 to 15 percent below the offer. For awhile we had a problem with a central clearinghouse selecting the appraiser and assigning the job.

There were so many complaints of the appraiser not being familiar with the area or the trends in the area. We still have a slight downward trend in property values, according to the county property appraiser; however, it is leveling off. As the property values begin to stabilize, I feel this will no longer be a problem.

STANDER: The impact of the current economic environment, if unemployment rises and consumer confidence declines. Another concern is the talk on Capitol Hill regarding the prospect of removing the deductibility of mortgage interest. If Congress votes to eliminate the mortgage interest deductibility, that could have catastrophic consequences in the future of the housing market.

From an optimistic standpoint, there are signs of market stabilization in the Tampa Bay market. Prices are significantly more affordable, combined with low interest rates, (and) we are seeing more entry-level buyers than in years past. The first-time homebuyer market and foreign investment market are going to be the greatest areas for opportunity and growth.

Q: Where are sellers moving to, and where are the buyers moving from in your market area? Does this represent a change?

CARNEY: This is the saddest part of the story: Many sellers and (many) of the foreclosure and short-sale owners are now becoming renters. Many do not want to rent, but they will be renters for at least a few years. That said, you can see now why investing in rental properties in this area will do well. We have a large group of people who were homeowners and can no longer afford to be owners. They still need housing and so they will be renting.

PATRASCOIU: There is no change. It’s the same trend. We are a destination state, but not as many people are relocating here. There is a definite slowdown in the influx of residents moving to Florida, but we are still in positive territory.

STANDER: The economic climate has affected sellers, especially those downsized or who have lost their jobs. Many of these sellers have moved into rentals, which has impacted the rental market as well. Many of the buyers I am seeing are actually coming from apartments — there are not as many geographical moves.

Q: How have you changed your business to mirror the market and to capitalize on market trends?

CARNEY: Every Realtor, broker and agency has had to rebuild their property-management departments, but you do what you have to do to make ends meet. Sales are down and rentals are up.

We also have to look at the renters differently. Many of our renters don’t (have adequate credit to buy a home) anymore — it is tough to do with a foreclosure on your records, so as fair rental agents we have to look at other aspects in order to get a feel of the renter and their ability to pay rents on time.

PATRASCOIU: We adjusted to the market conditions a few years ago. The majority of our associates hold the CDPE (Certified Distress Property Expert) or SFR (Short Sale and Foreclosure Resource) designations so they can properly serve the distressed market. We are encouraging them to engage in the investor market by getting the proper training, like CIAS (Certified Investor Agent Specialist). The investor-driven sales equate to approximately 25 percent of the (total) sales in Tampa.

STANDER: Indeed, I have — my primary focus has been with first-time homebuyers.

Q: What are some overall economic trends you are seeing in your market area that will guide the real estate market?

CARNEY: I see that Realtors have become a little harder as agents. You walk in the door and you tell us you are looking to buy a home. At one time I would grab my keys and run out the door with you and show you a dozen homes before the sun went down.

Now we have to sit still, ask questions, and then convince you to go and get a preapproval from the bank. We want to be sure that you can afford the home and that the bank will finance. Then we have to talk to you about realistic expectations and how much house you really can afford.

We need to look for all the assistance programs that you may qualify for and we try to show you only the houses you really like online. Gas prices have hurt us. It was like a second whammy for us. At $3.50 a gallon, you have to curb your travel and you have to make every mile on the road count. 

PATRASCOIU: The overall economic conditions are slightly improved. The local unemployment rate dropped a little bit to 10.6, homebuilding rises in Tampa Bay to its best level since 2008, foreclosure activity is down at the moment, but it can increase.

One other key component is consumer confidence. I believe we are somewhere at the bottom, and most probably the market will linger there for some time before it goes up. The general consensus is that the worst is behind us.

SELVEY: MacDill Air Force Base, the home of U.S. Central Command, Special Operations Command, plays an important part in the health of the real estate market in the Tampa area.

With approximately 30,000 active military personnel stationed here on a three-yeat tour of duty and one-third being transferred each year, 10,000 relocations makes a big impact on the local market. In addition, MacDill is a magnet for military retirees who like to access the commissary, PX (post exchange), and medical facilities.

STANDER: Unemployment in Hillsborough County has dropped from a high of 12.3 percent in July 2010 to 10.7 percent in August. There is an optimistic outlook that that number will continue to improve for our county as we enter the new year. If this remains the case and interest rates continue to stay low, the market should continue to see improvement and stability.


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