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New homes a hard sell in changing market

Prices are high, and sales have slowed - except in older neighborhoods where bargains can still be found. Many are fixer-uppers.

By BILL COATS
Published May 26, 2006

"We thought it would sell," Neltha Gibson said.

Four potential buyers took a look in the ensuing weeks. Since then, nobody. The Gibsons have dropped the price three times, to $320,000, with little response. One real estate agent told them 85 other houses were for sale in Live Oak Preserve, and new houses are still going up there.

"It's been all in the last six months when everything has died," Jimmy Gibson said.

Down in Tampa Heights, Umesh Shah had an opposite experience. He paid $128,000 two months ago for a fixer-upper, which had an addition of a bathroom and closet half-finished. Shah expected to spruce up the little house and then sell it for a profit. But he listed it immediately, thinking, why not?

He had a contract a day later, for $155,000, from an investor who lived in the neighborhood. "I was really surprised," Shah said. "I was expecting a month or two."

Shah and the Gibsons personify two faces of Hillsborough County's changing home market.

In middle-class suburbs like the Gibsons', the torrid pace of home sales during the past two years has hit the brakes. New Tampa experienced 48 percent fewer sales of existing homes in the first three months of this year compared to the same period last year. In the fourth quarter of last year, 384 homeowners sold their houses there. During the following three months, only 162 did.

Sales of existing houses declined 17 percent in Hillsborough County as a whole. North of Tampa, sales dropped in all but the oldest neighborhoods.

But there, with lower home prices, the boom barreled on. Houses sold briskly in Sulphur Springs, Seminole Heights, Ybor City and the University of South Florida area.

Analyst Tony Polito suggests the distinction may stem from the supply of new houses. January through March, builders in Hillsborough poured 3,100 slabs for new houses, the most ever, according to Polito, the local director of Metrostudy, a market research and consulting firm on housing. Those new houses are competing with sellers of older homes in places like Westchase and Tampa Palms.

But they're too expensive to affect the home market in the older neighborhoods. Instead, the rising costs of land and construction are pricing home builders out of houses cheaper than $200,000. Over the past year, builders in the five-county Tampa Bay area have started only a third the number of new houses priced below $200,000 that they did two years earlier, Polito said.

"It's hard to find a house in the $200,000s," said Realtor Betty Kennedy, who has been finding houses here for 30 years. If you want a house for $125,000, she said, "It's going to be old, and it's going to need work."

'Still in denial'

Prices remain lofty nearly everywhere. In the Westchase and Eagles area, despite a first-quarter sales volume that was 37 percent lower, prices were 28 percent higher.

But experts expect more home-sellers to follow the lead of the Gibsons, triggering widespread discounting.

"A lot of sellers are still in denial about the value of their house," said Shah, who should know. Shah owns a franchise of Dallas-based HomeVestors, which sports the motto, "We buy ugly houses." When people call the ugly-house number in Hillsborough, every fourth call comes to Shah's office. HomeVestors vows to pay less than market value, but to make the sale quickly and simply.

Shah has heard from many people lately who stretched themselves financially to buy a home. Now, with mortgage rates a full percentage point higher than a year before, people with adjustable-rate mortgages are seeing their house payments ratchet higher.

Also stretched are investors, who poured into the market last year as tales of quick-flip profits spread. If those in the $250,000 to $600,000 range haven't cashed out already, they may be selling their investment houses in a glut.

The Greater Tampa Association of Realtors counted 21,316 existing houses listed for sale during the first four months of this year, more than double the number from the same period last year.

"People with dollar signs in their eyeballs came into the market," Kennedy said. "They won't be around long."

"Only the serious ones are involved now," said Shah. "I think a lot of investors went away."

Similarly, the hot market drew many new real estate agents into the business, which is now getting tougher.

"There's a lot of agents that were pretty successful last year that are struggling this year," said Vince Arcuri, an agent from Lutz.

"What we're in now is a normal market," Arcuri said. "This is what I've seen for 16 years."

"The last 5½ years have been just crazy," Kennedy said.

Grandkids' jacuzzi

It all started with interest rates so low that David Scott, a University of Central Florida finance professor and analyst for the Florida Association of Realtors, calls it an "interest-rate bubble that occurs once in two generations."

That made homes suddenly affordable for an unprecedented number of renters, and gave existing homeowners the ability to trade up to newer, larger houses. Job and population growth in Florida, particularly Tampa Bay, increased demand further. Meanwhile, Hillsborough County began running out of buildable land. The construction industry - thanks to hurricanes - began running out of materials.

As prices climbed, speculators realized you could buy a house and profitably flip it in a few months. They moved in, supercharging demand for homes.

"You could sell your house in a week," said Jimmy Gibson.

He and his wife, Neltha, simply wanted to stay near their three grandchildren, who were ages 2 to 6 and living in south Pinellas County. When the Gibsons' son moved with the grandchildren to New Tampa's Live Oak Preserve, the grandparents ordered a smaller house around the block. Selling their house in Seminole was a snap.

The Gibsons viewed their home in Live Oak Preserve as the last one. They blessed it with upgrades in the lighting, countertops, sinks and insulation. They ordered a full jacuzzi in the master bath.

"The grandkids love this," Neltha Gibson said. "You should see them in here with all the bubbles."

Total cost: $258,000. They arrived last May.

By fall, another move was in the works. The Gibsons' son, a pharmacist, began planning a transfer to a new pharmacy his corporation was opening in Spring Hill, Tenn., home of a huge Saturn factory.

"I cried," Neltha said. "I couldn't believe it."

"We hadn't even finished decorating," said her husband. Since January, they have tried a succession of real estate agents.

The Gibsons can afford to wait. Even at $320,000, their house would bring a one-year profit of $62,000.

"We're about the cheapest in the neighborhood in this model," Jimmy said.

Last week, their agent lined up a prospect. The Gibsons stashed away every toy. Then came the phone call.

"They'd looked at so many houses,'' Jimmy said, "they finally called and said, 'we're too tired.' "

Bill Coats can be reached at 813 269-5309 or coats@sptimes.com.

[Last modified May 25, 2006, 16:09:38]