Don't go West, young man: Tampa home prices beat California's

The grass is always browner on the other side of the fence. I think it's time to invert that old maxim after studying the latest S&P Case Shiller home price index.

The index shows Tampa area home prices declining 18.5 percent year over year in September. But we're feeling no where near the misery of housing markets out West, or in Miami for that matter.

Take a look at this list of home price losers, culled from Case-Shiller's 20-city index:

1. Phoenix: -31.9 percent
2. Las Vegas: -31.3 percent
3. San Franciso: -29.5 percent
4. Miami: -28.4 percent
5. Los Angeles: -27.6 percent
6. San Diego: -26.3 percent
7. Detroit: -18.6 percent
8. Tampa: -18.5 percent

Nationally, Case-Shiller says prices declined 16.6 percent. So we're not that far from the average. Tampa area housing prices have retreated to what they were in October-November 2004 and are 28 percent below the July 2006 peak, according to the index.

 

We've got a housing trend: Unstable stability

After half a year of crunching numbers, it's safe to say that home sales in the Tampa Bay area have stabilized. October sales were up 11 percent year over year, from 1,814 in October 2007 to 2,021 in October 2008

That's the good news. But you already know the bad news.

About a third of the transactions involved bank-owned or other foreclosure properties. That partly explains the steep decline in the median home sale price the past year. The Tampa price fell from $205,600 to $152,300.

Let's call it "unstable stability". The phenomenon is statewide if you exclude northern Florida markets largely exempt from the early stages of the housing bust in 2005-06, but catching the worst of it now. Thirteen of 20 markets covered by the Florida Association of Realtors reported rising sales in October.

Here's a state chart from the Realtors.

South Florida spared development...for a few years at least

The housing slump and economic downturn have taken the itch off Alico Inc.’s plans to develop much of its 136,000 rural acres in South Florida.

The citrus and cattle behemoth announced this week that it will "maintain its focus on its agriculture operations" and "delay any material effort to expand into income producing real estate."

To solidify its change of focus, Alico replaced president and chief executive Dan Gunter, a development proponent, with Steven M. Smith, Alico’s former head of agricultural operations.

Alico, with land in Collier, Glades, Hendry, Lee and Polk counties, took shape under the leadership of Florida land baron Ben Hill Griffin Jr., until his death one of the world’s richest men.

His descendents planned to cash in much of the land for development until the recent downturn forced them to defer those ambitions. (One of his Griffin's granddaughters is Katherine Harris, former Florida Secretary of State and ex-Congresswoman from Sarasota)

One of the most shocking maps I've seen in recent years was a projection of what South-Central Florida would look like in a couple of decades. Splotches of homes, tens of thousands of them, blanketed what now is orange groves, swamps and cattle pasture. It was all split by a new super highway running somewhere between Fort Myers and Lake Okeechobee.

That all might still happen, but the fast track now looks rutted enough to swallow a wagon wheel.

The best home buying incentive: Low prices

We're blue in the face from repeating this, but housing is one of the most incentivized industries in the country. We've got low interest rates, the mortgage interest deduction, Florida's Save Our Homes law, downpayment assistance for low income buyers, etc. It's not stopping builders from demanding more. Here's a snippet from today's Wall Street Journal Online:

A bustling stock rally ground to a halt Tuesday following new signs that the housing market remains under heavy pressure.

New data from the National Association of Home Builders were particularly worrisome. The organization said on Tuesday that its November index of new, single-family homes fell to an all-time low of 9, down from 14 in October.

"Today's report shows that we are in a crisis situation," said NAHB Chairman Sandy Dunn, a home builder from West Virginia. "If there's any hope of turning this economy around, Congress and the (Bush) Administration need to focus on stabilizing housing."

Ms. Dunn said uncertainty about the economy has driven consumers from the housing market.

"It's going to take some major incentives to bring them back," she said. She argued that Congress should pass new economic stimulus legislation that includes new home-buying incentives.

A bit of bitter humor about housing mess

Here's humorist P.J. O'Rourke's latest take on the housing crisis. Amazingly, I think he sums it up better than most of our hifalutin' analysts:

"For almost three decades we've been trying to teach average Americans to act like "stakeholders" in their economy. They learned. They're crying and whining for government bailouts just like the billionaire stakeholders in banks and investment houses. Aid, I can assure you, will be forthcoming from President Obama.

Then average Americans will learn the wisdom of Ronald Reagan's statement: "The ten most dangerous words in the English language are, 'I'm from the federal government, and I'm here to help.' " Ask a Katrina survivor.

The left has no idea what's going on in the financial crisis. And I honor their confusion. Jim Jerk down the road from me, with all the cars up on blocks in his front yard, falls behind in his mortgage payments, and the economy of Iceland implodes. I'm missing a few pieces of this puzzle myself.

Under constant political pressure, which went almost unresisted by conservatives, a lot of lousy mortgages that would never be repaid were handed out to Jim Jerk and his drinking buddies and all the ex-wives and single mothers with whom Jim and his pals have littered the nation.

Wall Street looked at the worthless paper and thought, "How can we make a buck off this?" The answer was to wrap it in a bow. Take a wide enough variety of lousy mortgages--some from the East, some from the West, some from the cities, some from the suburbs, some from shacks, some from McMansions--bundle them together and put pressure on the bond rating agencies to do fancy risk management math, and you get a "collateralized debt obligation" with a triple-A rating. Good as cash. Until it wasn't.

Or, put another way, Wall Street was pulling the "room full of horse s--" trick. Brokerages were saying, "We're going to sell you a room full of horse s--. And with that much horse s--, you just know there's a pony in there somewhere."

Anyway, it's no use blaming Wall Street. Blaming Wall Street for being greedy is like scolding defensive linemen for being big and aggressive. The people on Wall Street never claimed to be public servants. They took no oath of office. They're in it for the money. We pay them to be in it for the money. We don't want our retirement accounts to get a 2 percent return. (Although that sounds pretty good at the moment.)

What will destroy our country and us is not the financial crisis but the fact that liberals think the free market is some kind of sect or cult, which conservatives have asked Americans to take on faith. That's not what the free market is. The free market is just a measurement, a device to tell us what people are willing to pay for any given thing at any given moment.

The free market is a bathroom scale. You may hate what you see when you step on the scale. "Jeeze, 230 pounds!" But you can't pass a law making yourself weigh 185. Liberals think you can. And voters--all the voters, right up to the tippy-top corner office of Goldman Sachs--think so too."

Here's the whole thing. It's a longer article about the missteps of the Republican/conservative movement. 

Wachovia sues Tampa developer for $175-million

Wachovia Bank is calling its debts on Tampa's Metro Development Group, which went on a Florida lot buying binge last year with borrowed money.

Wachovia has filed a foreclosure lawsuit to recover $175-million it lent Metro to buy 9,000 lots in Florida. Metro, owned by Canadian businessman John Ryan, has been sued a bunch of time this year by banks, contractors and other business associates.

Metro spokesman John Heagney said the company is negotiating with Wachovia to restructure the debt. He called the foreclosure filing "a normal part of the negotiating process."

"They're like a lot of homeowners. These properties are upside down," Heagney said of Metro. "What they're doing is going in and saying, 'We need to restructure. Work with us.'"

Metro accumulated about 30,000 lots the past couple years, wagering that the housing market would recover strongly in 2010. The company scooped up 8,300 home sites from Lennar - including those in Pasco County's Epperson Ranch - and another 1,000 from M/I Homes.

In January, Metro announced a joint venture with D.E. Shaw & Co., a global investment firm. Private investors staked the partners to $250-million to scout land buying opportunities. Shaw isn't a party to the Wachovia lawsuit, Heagney said.

Tampa sales inflate while prices deflate

Hillsborough County sold about 65 more homes in October 2008 than it did in October 2007, more evidence that home sales are flattening after a two year free fall.

The Greater Tampa Association of Realtorsrecorded 1,198 sales last month compared to 1,133 a year earlier.

But that stabilization came at a high cost. The average home sales price in October was $187,344, down 28 percent from the average price of $259,460 in October 2007.

You don't have to search far for a reason. Bank-seized foreclosure houses, which sell for about two-thirds the amount of a conventionally priced home, make up close to a quarter of sales in the Tampa Bay area.

Lending credence to this explanation, GTAR says 322 sales in October - more than a quarter of the monthly total - were "all cash" sales. Investors scooping up cheap homes at auction typically have to pay cash.

Here's a chart: Download gtaroct08.pdf 

The October numbers weren't that hideous. Many predicted the banking crisis would crater the real estate landscape as if it were a 10-kiloton bomb. The sales figures suggest otherwise, though most deals that closed in October were probably arranged in September.    

Housing could be worse in Tampa - just ask Vegas

From today's St. Petersburg Times:

About 28 percent of homes in the Tampa Bay area sold at a loss the past year. And guess what? That's not too shabby.

According to Zillow.com, which keeps tabs on real estate in 163 markets, 30.2 percent of homes nationally sold for less than what the owner paid.

While some markets like Los Angeles (48 percent) and Las Vegas (65 percent) represented a disproportionate percentage of homes sold at a loss, even places like Washington, D.C., (38 percent) and Detroit (53 percent) came off worse than the Tampa Bay area.

The problem was less pronounced in places like Dallas (11 percent), Austin, Texas, (6 percent) and Little Rock, Ark. (15 percent).

Zillow said local home values dropped 16.6 percent in the year ending Sept. 30 to settle at $158,054.

Anyone for explanations why we haven't been so badly hit? I can think of two, one positive, one negative.

The upbeat explanation is that we've already cleared much of our investor-held deadwood. Alas, that doesn't make much sense considering that about a third of local sales are distressed homes either in or moving toward foreclosure.

The downbeat explanation is that we're less realistic about home prices than are sellers in Las Vegas and California. While sellers in those other markets slash prices to attract buyers, we harbor Taj Mahal-like illusions about our homes' real market value.

Of course, maybe Zillow's stats are just plain goofy.  

Builders hoarding cash for tough times

Home builders say they're no longer focused on profit these days - go figure - but are trying to hold enough cash to survive until the turnaround. From today's Wall Street Journal:

Other builders have reported frozen sales in recent weeks as they faced stiff competition from bargained-priced foreclosures. Meantime, deteriorating consumer confidence is leading to home-contract cancellations as high as 80% in some markets.

"Home buyers, to a large extent, in October were on strike," Jeffrey Peterson, chief executive of Standard Pacific Homes of Irvine, Calif., said Tuesday at an investor conference.

Among builders active in the Tampa Bay area, the Journal says Beazer Homes is having a hard time coming up with cash. As we reported before, builders like Lennar and M/I have sold off thousands of lots locally to satisfy the need for cash. 

Federal housing help drop in bucket

Not sure how much the latest government housing plan will help: "U.S. officials unveiled plans to speed up the modification of loans held by Fannie Mae and Freddie Mac. While the plan will undoubtedly help thousands stay in their homes, it’s unlikely to make a major dent in the problems in the housing market."

More here from the Wall Street Journal.