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The cost of living here

As an investment over the past five years, you couldn't have done much better than bay area real estate, where values have skyrocketed.

Published February 15, 2004

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Newlyweds Laura Faulkner and Kent Rodahaver unwittingly became land speculators in 1999 when they bought a small bungalow in St. Petersburg's Historic Kenwood neighborhood for $59,000.

The house was only 1,000 square feet. Two bedrooms, one bath, hardwood floors. They fixed up the bathroom, planted shrubs and painted the walls.

Four years later, they sold it for $134,000.

Faulkner and Rodahaver bought into the most lucrative of economic investments, something that in recent years has gone unmatched nationally and locally. The price of a home in the Tampa Bay area has soared in recent years, far outpacing inflation, the stock market and personal incomes, mushrooming into an economic force that is reshaping the region neighborhood by neighborhood.

Communities that once welcomed middle-income families now cater to a more affluent clientele. Upper-income neighborhoods are further out of reach, and even some of the more modest areas posted gains of 80 percent in the past five years.

A St. Petersburg Times analysis of more than 260,000 single-family home sales between January 1998 and July 2003 found a remarkably uniform layer of prosperity has washed over Pinellas, Hillsborough, Pasco, Hernando and Citrus counties.

The price of a home rose 58 percent in St. Petersburg from 1998 to mid 2003. In Tampa, the price is up 47 percent; in Clearwater it is up 45 percent.

And the gains are apparent whether the neighborhood is affluent or more modest: In Pinellas, Belleair Beach is up 164 percent, and Gulfport is up 85 percent. In Hillsborough, Davis Islands is up 77 percent, Old Seminole Heights is up 54 percent. In Pasco, Gulf Harbors is up 75 percent, Holiday is up 53 percent.

As an economic force in the Tampa Bay area, the home price phenomenon is changing people and places:

- Fresh from their money-doubling experience in Kenwood, Faulkner and Rodahaver bought a 2,200 square foot house in St. Petersburg's Old Northeast neighborhood for $242,000. They're fixing it up and hope to double their money again by next year.

- Dolly and Patrick Duffy owned the perfect house in the perfect neighborhood in South Tampa: a 1,500 square-foot Cape Cod with a pool, fireplace, sunroom and hardwood floors. They sold it for $150,000 in 1998 to move for a job in Houston. But they hated Texas and moved back to South Tampa eight months later to find that $150,000 in their old neighborhood could buy only a plain one-story, concrete block ranch with no pool or fireplace.

- Last year, Deborah Gelerter moved from Ohio with about $120,000 to spend on a house. She tried St. Petersburg and Clearwater before finding a less-than-perfect home in Dunedin.

Tampa Bay's housing market reflects a national trend that experts say has shown the sharpest increase in home values since World War II. The real estate industry estimates that national housing prices typically rise about a percentage point or so above the inflation rate, which in recent years has been at historic lows.

While the local market does not compare to Boston, New York or San Francisco, the Tampa Bay area's reputation for cheap housing has eroded significantly.

In 1998, the median price - the point where half are above and half are below - of a Tampa Bay area home rested near the bottom of the nation's 123 largest metropolitan areas, according to the National Association of Realtors. Through September 2003, the Tampa Bay area's prices, which in that study did not include Citrus County, had climbed to the middle.

What does that mean?

The Tampa Bay area used to compare with Wichita, Kan., on the affordability scale. Now, the typical home in the Tampa Bay area costs about as much as one in Dallas, a city with a million more residents than this area and a median income that's 30 percent higher.

Supply and demand

Several forces, some new, some decades old, are pushing the Tampa Bay area's housing market. It all starts with the big three: location, location, location.

Florida's weather and economic prosperity continue to attract thousands of new residents each year - the Tampa Bay area has grown by 90 people a day since 1998. The state is one of the few that continued to gain jobs during the recent economic slump.

To some extent, experts say, the strong housing market continues to be driven by the roaring prosperity of the 1990s when economic growth helped revitalize downtowns across the country. As urban settings became more attractive, downtown neighborhoods became more valuable. That created a spillover effect that radiated out.

Robert Puentes, senior research manager at the Brookings Institute's Center on Urban and Metropolitan Policy in Washington, said cities across the country have been investing in everything from transit projects to entertainment districts to draw people back downtown.

The housing market noticed.

"These older suburban areas that are just outside of the orbit of the central city, the first ring, have tremendous advantages because of their location, because of the housing stock, because of the design of the houses," Puentes said.

"The market sort of recognized that these areas were well situated to take advantage of the amenities."

The result is a sustained demand for housing that experts say has been strengthened by the lowest mortgage rates in a generation, steeply discounted closing costs and volatility in the stock market.

"These things are all connected," said Ingo Winsor, president of the Local Market Monitor, a national publication that analyzes local real estate trends. "Population flows happen when people think they can find a job, and job growth has been pretty good."

As a consequence, home prices have risen twice as fast as incomes, according to one study, making a home for many the largest position in their investment strategy.

That's how Faulkner and Rodahaver see it.

Faulkner is 30, Rodahaver 35. She works as a recruiter for a Maryland company, and he's a driver with UPS. Their real estate success in Kenwood now has them dreaming of buying, fixing and selling homes for a living before retiring . . . in 10 years.

The cost
of living (here):
Research home prices
by neighborhood
Use the interactive maps located on the pages linked below show the rates at which prices have risen in neighborhoods throughout the 5-county Tampa Bay area:
Pinellas County
Citrus County
Hernando County
Pasco County
Hillsborough County

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Real houses, real prices

So, what does a median price house look like? It depends on the neighborhood. To view representative homes from south Pinellas County, see our photo gallery.

County Appraisers
To research detailed information about individual properties, click below to each county's website.
Citrus appraiser
Citrus database search
Hernando appraiser
Hernando database search
Pasco appraiser
Pinellas appraiser
Pinellas database search
Hillsborough appraiser
Hillsborough database search

The couple bought a four-bedroom, two-bath home in St. Petersburg's popular Old Northeast neighborhood in 2002. They plan to spend up to $50,000 making improvements, but they say by December 2005 the house will be back on the market.

Real estate experts said it might be optimistic for Faulkner and Rodahaver to expect their house to fetch $600,000 by next year, but it's not out of the question.

"If we make it where we'd like to be," Faulkner said, "it would be like hitting the Lotto."

While not quite the lottery, owning a home in recent years has been by far the best investment.

In January 1998, someone with $100,000 to invest would have been thought a fool to ignore a historic run up in stock prices and invest instead in a house in the Tampa Bay area.

In hindsight, the fool bought stock.

By July 2003, that $100,000 invested in a fund that tracks the Dow Jones Industrial Average would have been worth $113,607. The NASDAQ investment would have been worth $100,260. The Standard and Poors 500, the broadest market index, would have been worth $100,255.

But if that $100,000 had been used to buy a home in Ballast Point in Tampa, the owner would have been looking at $186,000. In Homosassa, it would have been $207,000. Dade City, $159,000.

A really lucky investor would have bought a home in the Uptown neighborhood of St. Petersburg adjacent to downtown - or more likely two homes, since houses didn't cost $100,000 in Uptown five years ago. They do now.

In the most striking example of how the spillover effect from an attractive downtown can remake a neighborhood, that $100,000 invested in Uptown in 1998 would have been worth $304,000 in mid 2003. While the return on the Dow would have been 13.6 percent over 51/2 years, the return on the Uptown real estate would have been 204 percent.

Your new neighbors make more money than you

When the Duffy's moved back to South Tampa from Houston in 1998 they didn't need to shop for a neighborhood. They reluctantly left Bayshore Beautiful only eight months before, so when they decided to return to Florida they didn't look anywhere else.

But the neighborhood they returned to was not the neighborhood they left. In their brief absence, home prices continued climbing and they could no longer afford anything as nice as the house they sold.

The Duffys have since stripped the new house down to its concrete block walls, updating everything, adding charm and a 700 square foot second floor. Remodeling is the only way they could have the house they want in Bayshore Beautiful. Patrick is a chemical company manager and Dolly is a part-time paralegal. They have two young children.

"We love it here. . . . 90 percent of the time, we still feel that way," Dolly Duffy said. "Ten percent of the time, we feel out of place.

"We're not millionaires."

Since the Duffys called it home, their old house has sold twice. In 2003, it sold for $304,000, twice what they sold it for in 1998.

"The last five years has been a steady increase with each year surpassing the last," said Nancy Riley, a Realtor with Coldwell Banker in St. Petersburg. "And each one has been a record year."

A house doesn't have to be on the water or behind a gate to have significantly increased in value.

In 1998, the median price of a home in the Crescent Heights area of St. Petersburg was $96,000. Closer to I-275 than the water or downtown, Crescent Heights was a place where a buyer with good credit would have needed a minimum household income of about $31,000 a year, the salary of the average carpet installer.

By July 2003, that median house sold for $185,000, requiring the $60,000 salary of the average civil engineer to obtain a mortgage.

In June 2000, Robert Rogers bought a 1,500-square-foot, three-bedroom, 21/2-bath house in the Euclid-St. Paul area of St. Petersburg for $167,000.

After putting $30,000 into the house, Rogers sold for $220,000 in July 2003.

Rogers wanted to stay in the area, but he couldn't find a house that fit his needs and made sense financially. So he headed out, way out, to Valrico in Hillsborough County.

He bought a newer, bigger house with 2,300 square feet, two more garage spaces, more lawn and more bedrooms and bathrooms. And it cost less.

Now the Valrico market has gone up so much he says he can take a $15,000 home equity loan out on his new house.

"How do you get equity in four or five months?" he asked. "That's crazy."

The price of admission

Rising prices and changing neighborhoods raise questions of affordability. For the poor, the difficult goal of homeownership is harder now. For the middle class, the market is transforming ideas about where to live and what kind of house to buy.

Last winter, Deborah Gelerter moved from Dayton, Ohio, with her furniture, two cats and a clear idea of how much she could pay for a house and what kind of neighborhood she wanted to live in.

It was only after she got here and began house-hunting that she realized how much less she could buy than she expected on her $75,000 annual salary as a legal recruiter. She would drive by a house and look back at her real estate agent in disbelief at the asking price.

"Things that looked like shoeboxes," she said, "were completely out of my budget."

Sixty-four houses later, Gelerter, 36, became a homeowner for the first time. Last February, she paid $121,500 for three bedrooms, two baths and outdated decor in Dunedin Isles.

"It's not the dream home and it's not perfectly finished," she said. "But it was very fair, budget wise."

Home buyers always have faced difficult trade-offs. But as prices have risen, the difference between what people want and what they can afford has grown ever wider.

Some are just searching longer, hoping something affordable comes on the market. Agents say it can be difficult to find a house for someone with a household income near $60,000.

"Young couples, if I can find them a house for $115,000, they think I'm a hero," said St. Petersburg Realtor Diana Spinelli.

For first-time buyers, the gap between dreams and reality can be jarring.

With 15 other first-time home buyers, Eva and Maria Adorno recently attended a class designed to help buyers get their first house. The Adorno sisters - Eva is 35, Maria, 38 - are true novices. They've driven around a few times, and they aren't sure the houses they've seen in Palm Harbor are worth the price. The sisters - both single mothers of two children, both nursing assistants making about $22,000 - dream of owning large homes with wide yards.

"I want something that's mine, that I'm going to be happy every time I walk in," Eva Adorno said. "It may be a struggle for it, but it's mine."

"I just wonder," her sister said,"what I'm going to be able to afford and where."

A larger question is how long this home price tide will keep rising.

Economists say housing prices cannot continue growing faster than incomes, but those diverging trends have been bridged so far by the cheap cost of mortgages. When interest rates begin to climb, experts say the demand for houses will soften.

Winsor, the market analyst, said the Tampa Bay area's solid job growth and longstanding status as a draw for new residents are likely to blunt dramatic changes in the national real estate climate.

At worst, he said, "You're not going to see the same kind of price increases in the next year, or in the next few years, than you have been."

Times researchers Kitty Bennett and John Martin, computer-assisted reporting specialist Connie Humburg and staff writer Ron Matus contributed to this report.

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