RISMEDIA, May 16, 2007-(MCT)-Who’s going to blink first?
The region’s once-sizzling housing market — which for nearly five years lured investors with double-digit gains, easy credit and 40-year-low interest rates — has simmered to a showdown.
Indeed, some market watchers believe home prices are the object of a high-stakes tug of war between home buyers in Palm Beach County and the Treasure Coast armed with low interest rates, and home sellers who refuse to budge from boom-time home prices despite rising inventory, surging foreclosures and tightened credit standards.
“Even to this day we still have stubborn sellers who aren’t being realistic,” said Mike Larson, a real estate analyst with Weiss Research in Jupiter. “Some won’t accept that the market has changed, and lower their prices.”
The result has been a painful slowdown with a ripple effect that has even local retailers crying foul as they see their sales dip. As the song says, “Something’s gotta give,” and experts are betting that sellers will blink first.
And when they do, they’ll see a buyer’s market.
Meanwhile, Palm Beach County teacher Stephen Luzinski wonders why prices have not already come down more.
“I am still waiting for prices to fall,” said Luzinski, who’s looking to buy his first home.
“I am out in this housing market almost every single day, but there does not seem to be a whole lot of budging by the owners,” he said, eyes wide open. “It seems that most sellers are still looking to double, triple or quadruple what they paid for their house.”
Such seller attitudes are unlikely to last, according to real estate forecasters. Primarily because there are just too many homes on the market.
Nationwide, the number of vacant unsold units in the first quarter of this year set a record, the U.S. Commerce Department said recently, continuing a sharp upward trend that started last year.
David Seiders, chief economist for the National Association of Home Builders, puts the number at an “excess of about 1.4 million.” Swelling inventory caused the National Association of Realtors to create a mini-stir last week when it revised its forecast to predict that existing-home prices would fall this year for the first time since the Great Depression.
The 1% predicted drop — to $219,800 — is not as earth-shaking as it sounds, given that home prices in 38 of the 50 states declined in 2006, local real estate consultant Jack McCabe said.
Local home prices already have started their downward march, Realtors say, though they’re not moving as fast as some would like.
The median price of an existing single-family home in Palm Beach County fell from $388,000 in January to $375,100 in March. In the Treasure Coast, however, prices have barely budged since the first of the year, remaining at a median of $239,700 in March. (April home sales figures come out next week.) The number of unsold homes on the market from Boca Raton to Vero Beach has been steadily rising, surging to a record 24,028 homes for sale in March, according to Illustrated Properties Real Estate.
That’s a 27-month supply at the March sales pace. The same month a year ago, there were 18,178 unsold homes.
Unfortunately, this surge in inventory will be swelled soon by foreclosures, which are reaching record numbers across the nation and locally.
“The biggest problem for single-family medium-priced homes is the beginning of this flood of foreclosures,” Delray Beach developer Frank McKinney said. “If you’re an optimist, it’s a buying opportunity.” Not surprisingly, Realtors agree.
“What billionaire said, ‘If you want to make money, do the opposite of what everyone else is doing’?” asked Realtor Bob Graeve of Illustrated Properties. “If everyone is selling,” he added, “it’s time to buy. If everyone is buying, that’s the time to sell.” Sean Christiansen, a chemical engineer who lives in Orlando, is trying to sell a four-plex in Lake Worth that he bought with his brother four years ago for $228,000.
A former local resident, Christiansen reduced the price once but adamantly refuses to lower the current $499,000 asking price. He had the property appraised, he said.
“We’re waiting until someone sees that value,” he said by telephone from Orlando.
Many Realtors believe the market already has begun its turnaround to more normal appreciation rates.
“My hands-on experience has proved to me that prices have declined 15 percent since July 2005,” Graeve said. “Sales have picked up, inventory is edging down, and price per square foot has declined at least 10 percent in most price ranges.
“I could prove that over and over again,” he added, “neighborhood by neighborhood.” Chappy Adams, Illustrated Properties’ broker/owner, says March was the best month in 14 months for new sales contracts, and April was the second-best in 12 months.
With March and April being strong ‘written’ months,’ ” he said, “the next two to three months should be good ‘closing months.’ Positive things are happening out there.”
The head of one area Realtors association believes prices are falling to a more affordable range, but suggests the process might be as crazy as the boom was.
“The change from a sellers’ market to a buyer’s market is going to make for some strange bedfellows,” said William Cozart, chief executive of the Realtors Association of the Palm Beaches. “A reduction in prices of somewhere between 5 percent and 10 percent will start the pendulum swinging in the right direction.” That would make the median price of an existing home somewhere between $340,000 and $350,000, he said.
That’s still too high for many local buyers. Hamstrung by a subprime mortgage meltdown that has forced lenders to become more stingy with credit, prospective buyers no longer can qualify for loans.
“During the boom, lenders threw caution to the wind, and whatever it took to make a mortgage work got done,” said analyst McCabe, who is managing partner of McCabe Consulting & Research in Deerfield Beach. “It got to the point where anyone who could fog a mirror could get a mortgage.”
That has changed in the wake of what has come to be known as “the subprime mess.”
“Lenders have tightened standards. I am probably losing two buyers because of it,” West Palm Beach Realtor Randy Bianchi said. “We had them all set with a credit score of 702. Then it dropped to 698, and those four little points made a big difference.” The financing disappeared, he said. “The program was no longer available to them.”
“Just four points,” Bianchi said, his voice trailing off in disbelief. “Unbelievable.”
Copyright © 2007, The Palm Beach Post, Fla.
Distributed by McClatchy-Tribune Information Services.