Florida real estate crash means Tampa Bay homes are too cheap, report says - St. Petersburg Times
June 11, 2009
A new article lines up with what we are seeing on the ground in Tampa with probably some over correction in prices. According to the article:
Tampa Bay area homes are too cheap. You read that right. According to IHS Global Insight, a economic forecasting company based in Lexington, Mass., our real estate is undervalued.
IHS took a measure of our depreciated home prices, population density, household income and historical attractiveness and insists our median home price of about $131,000 is 16.9 percent too low. Three years ago, when a typical home sold for $186,400, IHS deemed us 30 percent overvalued.
You can get the entire article below:
via Florida real estate crash means Tampa Bay homes are too cheap, report says - St. Petersburg Times.
Professional Cash Buyers Are Buying - Are You?
June 2, 2009
As we continue our series of blog posts about the change in real estate markets, we will now show a little known “secret”. What the average Joe is doing, and what the professionals are doing, are 180 degrees apart. Again, we will use Tampa as our example but what we show is happening in many places across the USA.
So What Is Joe Doing?
Referring to the typical home buyer as the “average Joe”, let’s see what is happening. What everybody “knows” in the market is that times are tough and RETAIL prices are dropping. Referring to the figure below, we see that this is true in every submarket in Tampa.
Chart Shows 12 Months Of Data For Various Tampa Submarkets
NOTE: This is RETAIL pricing. Prices paid by investors is RISING.
So, with this happening, Joe still believes now is not a good time to buy. Let’s also look at the number of mortgages being written but let’s go all the way back to 2005 as we started coming off the boom in Tampa. Here is what those charts look like for conventional, FHA, and VA financing.
Clearly, Joe is still on the sidelines.
What Is Sue The Professional Doing?
As mentioned in a previous blog post, there is now BIDDING WARS between professionals when a house goes on the market priced right. Let’s see if we can really QUANTIFY that. One very good measure of professional activity is CASH purchases. Typically pro’s move in with very low (or zero) financing so if we look at the number of cash purchases, it give us some indication as to the direction of pro’s and knowledgeable individuals. We can also verify by being in the market that this is EXACTLY what is really happening.
Referring to the figure below, we see that Sue was not buying in 2005 when Joe was buying everything in sight. We also see that now Sue, the Cash Buyer, is now buying while Joe is bailing. The typical example of the pro’s doing EXACTLY OPPOSITE what most people do.
Just for comparison purposes, let’s now put conventional financing and cash on the same chart.
NOTICE THAT THERE IS NOW MORE CASH BUYS THAN FINANCED!!! If that does not tell you something interesting about the way the pro’s think vs Joe.
The Cash Buying Pro Is Now A Huge Percentage
A natural question to then ask is what percentage of sales is cash now, and in the past. This is shown in the chart below:
From this chart, we can see that cash buyers are now nearly 40% of the Tampa Bay market. If you ever wanted an inside look at what the “pros” are doing in a market, this shows you.
Predictions For The Future
While we don’t have a crystal ball either, let’s see what predictions that we might be able to draw from this information.
- Cash buyers & pro’s are buying everything in sight right now;
- Conventional buyers still see “gloom & doom”;
- Inventory will be absorbed by the professionals given rents versus prices;
- At some point (we predict 6-12 months), Joe will wake up and then realize they are about to miss a golden buying opportunity;
- Once a significant number of Joe’s start to “get it”, then prices begin to rise again as they scramble to buy homes before prices “rise too much”.
The joys of a real estate cycle……. it is just too predictable.
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Florida Existing Homes Sales Up —- Again
March 29, 2009
There is a interesting trend starting to develop in Florida with existing homes sales now up for 6 straight months on a year over year basis.
Existing home sales rose 20 percent last month, with a total of 9,858 homes sold statewide compared to 8,181 homes sold in February 2008, according to FAR. February’s statewide existing home sales were 16.7 percent higher than January’s statewide sales.
You have to realize thought that many, many of these sales are coming from discounted sales. According to the Florida Association of Realtors,
Florida’s median sales price for existing homes last month was $141,900; a year ago, it was $199,300 for a 29 percent decrease. Industry analysts with the National Association of Realtors® (NAR) report a significant downward distortion in the current median price due to many discounted sales, including a large number of foreclosures.
From our perspective however, anything that reduces total inventory on the market is definitely a good sign.
Click this LINK to get a good chart of how each of the Metropolitan Statistical Areas (MSAs) did across the state.
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