Tampa suffers worst home price drop of 20 cities

This might sound like old news, but we showed the biggest year-to-year home price drop in August, according to the S&P/Case-Shiller Home Price Index.

The Case-Shiller index measures the Tampa-St. Petersburg-Clearwater metro area against 19 other metros. Here's the list:

Tampa, down 10.1%
Detroit, down 9.3%
San Diego, down 8.3%
Phoenix, down 8%
Miami, down 7.8%
Las Vegas, down 7.6%
Washington, D.C., down 7.2%
Los Angeles, down 5.7%
San Francisco, down 4.2%
Cleveland, down 4.1%
Minneapolis, down 4%
New York, down 3.8%
Boston, down 3.6%
Chicago, down 1.3%
Denver, down 0.4%
Dallas, up 0.5%
Atlanta, up 0.8%
Portland, Ore., up 2.8%
Charlotte, up 5.6%
Seattle, up 5.7%

For all the alarmism contained in the percentage drop, the index actually shows our home prices returning to those in August 2005. That's not exactly a disaster, considering the run-up in prices several years before that. Nevertheless, most experts believe prices need to fall further if we want to whittle down the oversupply of homes on the market.

You gluttons for punishment can download cs_index.xls showing historical home price index in the various metro areas.

Comments

[James]

I've followed this index for a while, since I believe it is a more accurate indicator. It doesn't just add up all of the sales, it looks at resales of identical properties over time. You can also trade CME futures based in the index.

I expect that the mathematically-challenged chief "economist" of NAR will probably spin this as a price increase.

[Fuzzy Bear]

I have also followed this index for some time. We are only at the very beginning of the correction and it is going to take a considerable amount of time for this market to correct.

The 10.1% decline brings Tampa back to 2005 levels, but prices need to decline much further to bring it back in-line with local incomes and affordability. I believe prices need to fall back to 2000 levels perhaps 1998 levels to become affordable again.

This report only underscores how inaccurate the reports from the NAR and local realestate associations have been for the Tampa Bay area. Now is not a good time to purchase a home because prices will fall much further in 2008.

Incomes have not kept pace with the rapid increases we have seen in realestate prices since 2000. In fact, when you look at the average wage earnings for a couple or a single person in Tampa Bay, most would not qualify for a $225,000 mortgage.

From my own perspective, I will not buy in this market until home prices fall much further. The risk of losing money is far greater than waiting in this market. In fact one can go to Atlanta and purchase a three bedroom house for about 50% less than in Tampa. That by itself underscores the affordability issue in Tampa.

I believe the Tampa market will not hit bottom until 2011 and prices will continue to drop much further than what has already been reported. Do the research and you will come to the same conclusion.

[James]

Fuzzy, your analysis is spot on. I knew the market was getting frothy in 2005 when friends who live in Chicago's Lincoln Park would visit and gasp at the higher $/ft2 prices here.

I would love to see the St Pete Times do a story on houses that have been on the market the longest. I've seen a few that are going on 3+ years, and the prices are stuck at about 50% higher than what a buyer would pay. It's comical, but also sad.

In the meantime, I continue to look for a bigger house, but don't know how to approach it. Do you just offer them 40% under the asking price, knowing that they still paid less than that in 2001?

[teach]

Hello...

Maybe someone can answer this. If borrowers think that houses are over-priced, why don't they come in with much lower offers? They aren't even looking right now. I have my house for sale (no I am not in foreclosure--job transer) and we have priced it $15K below the last comp that sold (last month) in our neighborhood. I would love for someone to come, look, make an offer. No one has called.

[Frank]

No ones looking because the free money has dried up. If Florida's unequal property taxes stay, along with insurance costs, you'll be waiting a long time. FL salaries do not warrant anywhere near the prices now. Maybe, at around $80-90/sq ft. Prices will stop falling when they reach 1999 levels. Bank mortgages now require documentation, good credit and money down, something most Floridians can't present.

[James]

teach, here is what I am seeing over and over again as I house hunt:

Home priced at $1M, sitting on the market for months/years.
Check comps. Nothing recent.
Check historical data. Home was purchased in 2001 for $500k.

That was pre-runup in property taxes, pre-runup in insurance rates, pre-runup in interest rates.

Whatever the price of the house is, the ongoing costs are much higher now than when the seller bought it. So what do you offer for the house? Sure, I'd bid $650k (heck, that's a 30% gain), but the seller wants $1M. We are at a stalemate.

Who wins? Me, because I can wait the sellers out in my much cheaper condo while they continue to incur big expenses and hope for a big payout that will never come. However, if I offer $650k the seller's agent will probably not even pass it along to the seller for fear of insulting them. Even buyer's agents don't want to bid too low - it must be some kind of secret Realtor(tm) code...

[Buzzy]

Fuzzy, your name reads like your logic. Places get expensive for a reason. People want to live there. Most of the natives of the most desirable places in the United States could not actually afford to live there if they were starting anew.

In the town of my birth, and where I grew up it was the same situation. At my 20th high school reunion I learned that hardly any of my fellow graduates could actually afford to live in the old home town. I had a lot of luck in my career, and was actually able to buy a modest home for about 20X the nominal price that my parents paid 30 years before. That's progress!

I hear many people (usually with lower incomes) talk about how affordable life is in Western North Carolina or Tennessee, but how many people would live there if price were no object? Personally, I'd prefer California, but Florida is a lot cheaper.