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Real estate reality check

The housing market remains hotter than ever in much of Florida, but it appears to be cooling a bit in some cities across the country. This is actually a positive sign, because it brings some sense of reality back to real estate, slows the stampede of families overextending themselves and discourages speculators whose wheeling and dealing can falsely inflate prices beyond the means of middle-income residents.

Prices in Denver for the first quarter of 2005 rose only 3 percent compared to recent annual increases of 17 percent, according to the New York Times. While the softening partly reflects job losses in the area's high-tech and telecommunications industries, other markets also have tapered off. The Commerce Department reported Tuesday that new home construction nationally stayed flat from May to June. Construction of single-family homes dropped by 2.5 percent, but offset by a spike in apartment construction, new housing starts still are answering to record demand, especially in the South.

The trends show any real estate bubble may not burst as quickly and as widely as some fear. Sellers still are making a profit, and price appreciations of 5 percent annually still beat inflation. Some areas of the country, including most of Florida, continue to post double-digit increases. Average home prices in Pinellas, Hillsborough and Pasco climbed to record heights in the past year, the Times' Michael Van Sickler reported, rising between 11 percent and 21 percent. Pasco and Hillsborough also still have plenty of room to grow.

Too many working people are being priced out of the real estate market. Police officers, firefighters, teachers, waiters and others who perform essential functions in Florida's fast-growing, tourist-heavy economy are having a hard time finding affordable homes in neighborhoods close to their jobs.

A cooling off could protect some elderly residents who fear home prices are driving them from their neighborhoods. It may even cause buyers to think hard before taking high-risk loans to purchase a home they cannot afford, or from using home equity as a cash machine to further their consumer spending.

The real estate market in the Tampa Bay area and most of the rest of the state continues to soar, but the news from other parts of the country offers a cautionary note: Prices won't always rise by double-digits every year. And that's not all bad.

[Last modified July 23, 2005, 00:54:16]