It seems like everywhere I go I get asked the same questions "How's the market?" "Are things getting any better?" My answer is the same lately, "Yes, better for us brokers and agents in that activity is up modestly, but worse for all of us in that prices continue to fall." The real question that everyone should ask is "How will we know when the housing market will START to get better, and what should we look for." Thankfully there are some really smart people out there to help us answer this question.
Yesterday the Joint Center for Housing Studies (JCHS) released their annual report "State of the Nation's Housing 2010" detailing comprehensive and well researched reports about the state and the future of the national housing market as we know it today. The National Association of Realtors also released their local markets reports for Gainesville today for the first quarter of 2010. That data matched with JCHS's research can help us figure out where we are and where we are headed.
Some good news in the JCHS report is that the mortgage payment on a median priced home has fallen to a 20 year low. Other good news is that they see no immediate increase in rates, and only tighter lending restrictions stand in the way for home buyers. NAR's report supports this local somewhat. Showing that home affordability local has fallen below our historical average.
With our exorbitantly high local taxes this advantage may be muted as these numbers don't include property taxes. Just in case you missed it last week, the Gainesville Sun finally sounded the bell on this issue, Citing a report from the Florida Department of Revenue that concluded our property taxes are the highest in the state at $23.60 per $1000 of assessed value. The report also discounted the popular argument that our taxes must be that high due to so much of our property being off the tax roll. They cited Leon county with a similar problem, yet taxes there are only $15.60 per $1000. Alachua county is currently moving forward with implementing a new fire assessment tax, raising taxes even further.
Separately the Gainesville Times reported the City of Gainesville is considering an increase in their property tax millage rate.
Back to the JCHS report, they say that unemployment is going to be the key obstacle for a housing market rebound. Laurel gourd with Harvard University writes:
Over the coming decade and once employment stages a convincing comeback, demographic forces should lift currently depressed levels of household growth and spur increased construction and sales. Bolstered by immigrants, the echo-boom generation is already larger than the baby boom generation, and the baby-bust generation (born 1966-1985) is nearly as large. If immigration matches the pace projected by the Census Bureau and headship rates by age and race hold steady, household growth should come close to 15 million from 2010 to 2020. Even if it falls to half the projected pace, household growth should equal the 12.5 million growth from 1995-2005.
Locally, The National Association of Realtors released data that shows unemployment on the rise. Oddly enough, their definition of Gainesville includes Alachua County and Gilchrist County. That probably explains why they list our unemployment a whopping 8.5% from 6.2% one year ago. That's still better then the national average, but higher then the number I previously reported from the Department of Labor and Statistics.
The JCHS Study also addresses Rental Housing in detail. In essence, rents have decreased, vacancies are up, incentives are up, and defaults and late payments from apartment owners are on the rise. I talked to one local apartment owner the other day. He told me that his physical occupancy (percentage of rooms/units/beds occupied) is hovering just below 80%. His economic occupancy (percentage of rents received after incentives versus rent advertised) was below 60%. Those type of vacancy numbers can only continue to put pressure on residential home prices and rents, especially in the struggling condominium market.
The one curious and perhaps concerning exception to this is that the number of affordable rentals, defined as rentals with a monthly rental payment of $400 or less have declined. Primarily due to demolition. Locally there was one affordable property I know of that was demolitioned after it was burned in a fire.
There is some hope moving forward for the rental markets. The rental housing study concludes that the overall population of renters increased 10% from 2004-2009. They primarily cited foreclosures and immigration and they expect this trend to continue for the next decade. Still no help from the rental markets in the near term future to stabilize home prices, when they can't even stabilize rents.
Unfortunately for us foreclosures locally only seem to be worsening. The NAR report says actual foreclosures in Alt A, prime and sub-prime are on the rise in our area, as are foreclosures in process. Foreclosures are not only elevating supply they are now so prevalent that in some cases the only comparable sales an appraiser can use are foreclosure properties.
Local supply is still high and buyers who can get money are finding great bargains, and perhaps proving that this may well be one of the best buying opportunities to hit the gainesville housing market in decades.
Sellers are often frustrated. More so then ever before we are seeing sellers bring money to the closing in order to sell their houses. Multiple offers have been coming in on quality properties, but in the past these offers would bring full price or more. In three multiple offer situations last week, no one offered full list price.
There is no doubt that our housing market will recover. It's just a matter of when, and how transparent will the recovery be. We need some factual signs. The experts agree that when local housing supply starts to decrease, job growth returns, property tax relief, or a decrease in rental vacancies comes we will start to get some price support. Until then prices will likely continue to fall.
Rest assured as soon as any of these indicators start to show a glimmer of hope, I will be happy to tell you all about it. In the meantime sellers need to be ahead of the curve, that means expecting prices to fall further and making sure once a prospect gets in the door they do everything in their power to keep them.
