The media outlets are full of real estate news these days, sometimes conflicting. Consider last week....newspaper reports stating
"Housing Starts up 2%"... then a few days later, the
St. Pete Times headline "
Housing Prices Dive 19.6%". Our clients and friends are asking us daily what the future holds for our Tampa market. We'd like to help put recent news into perspective at our local level. Today's e-mail is the first in a series for our clients and friends discussing the trends that will be affecting every Tampa homeowner. Please feel free to share this information with anyone who might find it helpful.
Are we are at the end of the housing crisis? Will prices continue to drop? What's in store for Tampa in the next year and beyond? Can we trust the "experts"...some of whom are paid to put positive or negative spins on the different pieces of market data? Local media outlets report national trends that mean very little at our local level.
Q: Why have our Tampa market values dropped over 30% in the last two years?
A: Simple, the bubble was created by the fact that 40% of the buyers driving up our market near its peak were investors (many of them new investors), and 17-19% of the buyers were sub-prime borrowers, people with below average or poor credit. When rental values and/or the investors' ability to flip the homes at a profit no longer could sustain home asking prices, investors dropped out of the market. With sub-prime mortgages no longer so easily available, another segment of buyers has disappeared. Take away 57-59% of the buyers from any market and prices will drop, and drop quickly. Tampa's home prices outpaced the national average, so like other "hot" markets now experiencing a downturn (Las Vegas, Miami, Phoenix), Tampa is experiencing a more dramatic decline.
Let's take a look at the Greater Tampa Association of Realtors Sales and Inventory Report for April 2008. Note that out of over 20,000 homes on the market, only 1,235 homes closed in April 2008. This is a 6% absorption rate. In other words, only 6 of every 100 active listings are selling. We are encouraged by the increased sales activity this spring, but until this large imbalance of active listings to sold listings falls more into line, prices will continue to drop.
