"Steep losses" predicted for Tampa housing market

Oh Boy. We've made a Top 10 list for "markets set for steep losses" We're No. 7, behind Miami, Orlando, Lauderdale and host of other Sunbelt underachievers.

Money magazine predicts our prices will drop 17.1 percent in the next year and won't hit bottom until January 2010.

Money provides no obvious supporting documentation for its analysis, at least on its Web link. It seems to base its prediction largely on the region's foreclosure rate.

Equally confusing is its claim that our median home price is $200,000. February's median single family home price in the Tampa region was $178,900, according to the Florida Association of Realtors.

That would affect the 17.1 percent depreciation prediction, wouldn't it? It would bring our median price to $166,000 in the next year, even though Realtors says we're already more than half way there.

Click here for the gory forecast.

Comments

[k]

...could be in the details, or semantic error ("house" does not equal "home" in the statistical sense, yet many erroneously use the terms interchangeably).

Regardless, I think you omitted the completely rosey part of the "gory" forecast...

"Five year price change: 52.1%"

Given that most here agree that a short-term buying plan makes absolutely no sense, that 5-year prediction should give the normal and sensible homebuyer some confidence.

[Bill]

The CNN/Money forecast is even worse than stated. From the link http://cgi.money.cnn.com/tools/
homepricedata/index.html?market=88FL
it is clear that the -17.6% is the prediction for 2009, another -10.1% is predicted for 2010.

[James Thorner]

I think the 5 year price change is for the LAST 5 years, essentially 2003-08.

[Sam]

Agree, the 5 year price change is the LAST 5 years.

k

[Florida - Paradise Lost]

So, since we all love doing number-crunching here...

Start with a $200,000 home in 2003. After 5 years, 52.1% appreciation,
Price in 2008 (now): $304,000

Forecast loss of 17.6% over the next year,
Price in 2009: $251,000

Forecast loss of 10.1% the following year,
Price in 2010: $225,000

Net appreciation from now till 2010: -26%
(a loss of $79,000 on our sample house - good luck making up for that whopper over the following decade)

Every market is different. Now is a great time to buy.

Down Periscope!

[Tampa Dan]

Those of you who think the market is turning should put your money where your mouth is and cash in your retirement, sell the kids college funds, borrow all you can and buy houses. Don't try and convice me cuz I am not going to lend you money, convince the banks. They listeed to your hype and got BURNED big time. Or are you bottom feeding realtors hoping to make a litle cash off of others misery?
Know this, the era of cheap easy, dumb money is over. Adapt or perish.

[Fuzzy Bear]

Price Per Sq Ft Annual Rate Change (Raw Data Source: Radar Logic):

METRO 2007Q3 2007Q4 2008Q1TD 2007Q2-2008Q1TD
Sacramento, CA -24% -45.0% -31.0% -34.5%
Las Vegas, NV -26% -39.1% -34.4% -33.2%
San Diego, CA -24% -30.5% -29.4% -27.8%
Chicago, IL -41% -20.6% -13.6% -26.9%
Los Angeles, CA -24% -33.0% -21.0% -26.7%
Boston, MA -25% -27.3% -20.7% -24.9%
San Fran, CA -27% -21.4% -26.1% -24.8%
Phoenix, AZ -22% -22.5% -29.8% -24.5%
Miami, FL -26% -20.9% -19.9% -22.5%
Tampa, FL -26% -19.5% -18.9% -21.9%
Minneapolis, MN -13% -24.3% -23.4% -20.1%
San Jose, CA -12% -20.1% -20.8% -17.3%
25-MSA-Composite -21% -22.3% -15.3% -19.9%

[Fuzzy Bear]

Net appreciation from now till 2010: -26%
(a loss of $79,000 on our sample house - good luck making up for that whopper over the following decade)

That is why 45% of those who purchased in 2007 are now upside down! Ouch!

[Fuzzy Bear]

Interesting information on what is in store for our region:

Using a model that ties house prices to disposable incomes and long-term interest rates, analysts at Goldman Sachs reckon that the correction in national house prices is only halfway through.

They expect an 18-20% correction overall, or another 11-13% decline from now. But their models suggest that six states—Arizona, Florida, Virginia, Maryland, California and New Jersey, could see further price declines of 25% or more.

[Fred]

Fuzzy:

Price of my new house: $310,000.
Windfall from my old house (pure profit): $240,000
New loan: $93,000
Total interest paid over life of loan: $104,000.
Total cost of house to me: $197,000.
Value of house after 30 years: assume 1 percent increase per year: $403,000
My net gain after 30 years: $206,000.
Net percentage gain on my $197,000 investment: 104 percent, or about 3.4 percent per year.
Net mortgage payments (inlc. PITI): $1,080

You:
30 years of renting at $1,300/month (not even accounting for inflation or rent hikes): $468,000
Equity: $0
Income from investing the same amount as I put into my house (230K @4.75%): $837,000
Minus taxes: $125,550
Equals: $234,450

So, now we're both in our 60s or 70s. I have a place to live that costs me only taxes, wheras you're stuck with a large rent payment until the day you die.

The bottom line is that housing is an expense moreso than an investment. But if you're smart and savvy and in it for the long term like me, it'll come out OK. Renting is just throwing money away

[Enzo DiLorenzo]

Fred is dead-on right. Part of the idea of buying a home is that one day you'll own it, and when you're old and on a fixed income you'll have a (relatively) affordable place to live.

[Florida - Paradise Lost]

Fred & Enzo,

Yes, in the long run, buying is the best way to go. The taxes alone make it a better deal, and pride of ownership is a good thing.

However, one very important your analysis completely missed: downside risk. Though not as large as it was in 2005-2006, it still presents a huge liability to any buyer in our present market.

If you bought in Tampa right now, the consensus is the value on your property will be worth 26% less by 2010.

With this, if you HAD to sell anytime between now and the next five years (job, family, medical, yet another moronic tax law gets passed...any number of reasons), you'd be throwing away a large sum of money.

You could even face the prospect of bankruptcy and/or foreclosure if you don't have the funds to cover your underwater position.

Renting won't do that - the only downside risk you have is losing your deposit.

It's a gamble either way (renting or buying). But to purchase now, one must be VERY certain that he/she intends to live in the same place for a l-o-n-g spell here in Tampa.

Otherwise, buying at this time is akin to playing a very scary game of russian roulette with your savings, your credit record, and your sanity on the line... Caveat emptor.

Down Periscope!

[k]

"If you bought in Tampa right now, the consensus is the value on your property will be worth 26% less by 2010"

Consensus of what doom-and-gloom forecasters? There are two consistently opposing views here. Many predict bottoming NOW with a rebound to normalcy in 2009 (including growth thereafter). And, there are many with your viewpoint. Both have competing agendas and in my opinion, are too biased to give an objective "prediction". In others words, they won't KNOW until it's "history"....you know, when they can go back and say *they* were right.
Is it smart to buy with a 5-year plan? Nope....not unless you bought for pennies on the dollar. I believe in this regard, there IS a consensus.

[SoldierRenter]

James,

In the link I attached is a very interesting twist on fraud. This might be a story with all the actors: Govt incompetence, knight in shining armor, evil realtors. Anyway...
http://realestateandhousing2.blogspot.com/2008/05/reo-failure-at-fannie-mae.html

[Rachel Sartain]

James & others - unlike the money magazine article, I perfer articles with statistics and historical trends that that set reasonable predictions and analysis about the market.
Did you read this article from WSJ this past week.
http://online.wsj.com/article/SB121003604494869449.html?mod=rss_opinion_main

It gives better insight on the market of past, present and future

[alex]

Very interesting article, Rachel. You know, though, that the "doom and gloomers" will have something to say about this.

[Tino]

Rachel -

I've been getting copies of that article for the past week by my Realtor friends, trying to cheer themselves up. However, that analysis has a tragic flaw: it is only accounting for NEW construction inventories.

The big housing boom of the past decade has resulted in many investors/speculators purchasing multiple properties, and that inventory is conveniently ignored by the author. "Used" inventory is much greater than new inventory, and cannot be ramped up and down as quickly as builders can by turning off the development spigot.

Those additional homes are already in the market and housing prices will continue to fall until supply meets demand.

Real estate 101: In the zip code that I am shopping for a new house in, there are 65 waterfront homes for sale. Also during that time, 6 of those homes have gone into foreclosure and are sitting deserted. There have been only 2 sales of waterfront homes in the past 12 months. Is this a positive or a negative trend for house prices?

Here's a wrong answer: I've had agents (yes, Realtors) tell me with a straight face that the house on the market for 500 days that they are showing is "being sacrificed" for a price 75% above its purchase price 3 years ago.

[Fuzzy Bear]

"If you bought in Tampa right now, the consensus is the value on your property will be worth 26% less by 2010"

I just talked to a person this weekend who had bought in 2007 and are now upside down on their mortgage by more than $40K and the bank closed out their heloc. To make matters worse, this person lost their job and can't find any local work that pays enough to pay their mortgage. The home was put up for sale by owner.

[Fuzzy Bear]

You know, though, that the "doom and gloomers" will have something to say about this.

Were not all doom and gloomers! The facts and numbers are out their to support what I and many others have posted on this blog site.

How can you say the market was fine in 2007 and 2008 and it was a good time to buy when overall home prices dropped in value and continue to drop. That makes no financial sense!

[alex]

Never said "How can you say the market was fine in 2007 and 2008...". I don't think anyone in their right mind would say that. It has been a horrible real estate market. I just said a particular group would have something to say and, I was right.

[Tino]

Have you ever read the bizarre ramblings of Lawrence Yun and David Lereah?

Lereah was hyping his book "Are You Missing the Real Estate Boom?: The Boom Will Not Bust and Why Property Values Will Continue To Climb Through the End of the Decade—And How To Profit From Them" until a few months ago when he finally decided he was wrong and reversed course.

The man (yes, the chief economist for the National Association of Realtors) honestly believed that real estate prices would grow at double digit rates FOREVER. And you wonder why so many people mock them.