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Elevated home prices show no sign of decline

The median home price in the bay area is $215,600, nearly unchanged from July, but 30 percent higher than a year ago.

By SCOTT BARANCIK
Published September 27, 2005

Cheap loans, plentiful jobs and investors eager to pile on profit kept skyrocketing single-family home prices aloft last month.

The median home price in the Tampa Bay area was $215,600 in August, roughly unchanged since July but up 30 percent from August 2004, when the typical home sold for $166,400. The churn rate was brisk, with 4,788 homes changing hands, a 9 percent increase from a year ago. State and national sales figures were similarly strong.

It's the sort of housing market that makes buyers weep, sellers cheer and real estate agents do cartwheels.

Herbert and Vickie Lott are among those cheering.

The Brandon couple bought a three-bedroom, two-bath home with pool for $102,900 in early 1999, after the military relocated them from Hawaii. Now, with retirement in their sights, they're hoping to sell the home, make a bundle and head "up North" - to southern Georgia.

On Monday, Bayside Realty Group agent C.J. Cornett had some good news for the Lotts. She recommended they list their house for $259,700, a 150 percent markup over what they paid six years ago. These days, it takes her less than a month to sell most homes.

"The market's hot," Cornett said.

"I don't see how (prices) can go much higher," said Herbert Lott, 56. "I want to sell before it tops out."

Home sales are booming everywhere. Statewide, the number of existing homes sold in August grew 4 percent, while the median single-family home sold for $246,500, a one-year gain of 31 percent. Price increases ranged from 4 percent in the Gainesville metropolitan area to 44 percent in the Lakeland area.

Nationwide, the number of single-family homes sold in August rose 6.9 percent, while the median price reached $219,400. The 16.2 percent price increase was the biggest, year over year, since July 1979.

The rise in state and U.S. sales follows a two-month dip that had many wondering if the red-hot housing market was cooling off.

"These are tremendous numbers," said Kevin Harris, chief economist at Informa Global Markets in New York. "There is nothing solid in the latest round of existing home sales data to show that we're slowing down."

The housing market has been the main driver of the U.S. economy this decade, accounting for 50 percent of the overall growth and more than half of the private payroll jobs created since 2001, Merrill Lynch said in a report last month. Price appreciation has accounted for 68 percent of all wealth creation during the current economic expansion, according to the Federal Reserve.

Even so, the pace of home prices has slowed in Florida. During the first eight months of 2005, the number of homes sold is up 2.5 percent vs. the same period in 2004. In 2004, however, sales grew 10.7 percent, or more than four times faster, according to the Florida Association of Realtors.

Not all bay area buyers are crying.

Cornett, the Brandon real estate agent, said many of the homebuyers she represents are coming from New York or surrounding areas. They are unphased by the recent increase in bay area housing prices. Local residents pondering a move within the bay area can't afford to be so blase, however. Many are unable to move up a notch in this expensive market. Some are in shock.

"I am," said Cornett, who bought her home 10 years ago. "My house is on an acre. I have a big, beautiful pool. And I couldn't replace it if I wanted to."

It's uncertain how long the current boom in housing prices will continue. Underlying factors like low unemployment, low-interest (and interest-only) loans and the modest performance of the stock market - leading investors to put their money into real estate instead of securities - remain unchanged.

Meanwhile, the housing boom has survived 11 consecutive increases in the prime lending rate, a record spike in fuel prices and the onslaught of Hurricane Katrina, which destroyed much of New Orleans and surrounding areas.

Katrina could goose home prices even higher by raising the costs of construction and sending former residents into adjacent markets, where housing prices would subsequently rise.

"We have some way to go before we get into a range of balance between home buyers and sellers," said David Lereah, chief economist for the National Association of Realtors. "As a result, we will continue to see above-normal home price appreciation for the foreseeable future."

-- Information from Bloomberg Business News and Times wires was used in this report. Scott Barancik can be reached at 727 893-8751 or barancik@sptimes.com

[Last modified September 27, 2005, 11:26:03]