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Home glut brings price cut

With an average of nine homes for sale for every buyer in the Tampa Bay area, incentives alone are failing to move the market.

By JAMES THORNER
Published August 8, 2006

	[Times photos: M.N. Golden]
	Estelle Scalice looks at a model home in the Tierra del Sol subdivision with her daughter Deborah Gonzalez of Tampa. She and her husband own a townhouse in Tampa, but say the market is to their advantage as they look to buy.
	KB Home has cut prices $10,000 across the board in this Pasco subdivision, Tierra del Sol. Buyers who signed contracts can rewrite them.

Home sellers have wooed buyers by offering free trips to California and $9,000 bonuses. They've advertised cut-rate financing and promised to cover buyers' closing costs.

But coming off an unusually weak summer sales season, many Tampa Bay area home sellers are confronting a market reality they've dreaded: They'll have to cut prices.

The price declines aren't the ear-shattering pops predicted by housing bubble gloom-and-doomers - the Tampa Bay area's low unemployment and popularity with retirees works against that scenario.

But with an average of nine homes on the market for every buyer - the biggest supply and demand imbalance in years - prices are suffering.

In Pinellas County, sales prices of single-family homes dipped from $252,000 in June 2005 to $238,000 in June 2006, a decline of 5.5 percent. The market hasn't given back so much since the 1990s.

Across-the-board declines have yet to show up in statistics for Hillsborough and Pasco counties, but "price reduced" on "For Sale" signs have become as common as mildew on mailboxes.

Another sign of deflation emerged in the condominium category. Regionally, condo prices dipped about 3 percent from May to June, from $178,000 to $172,000.

"There's no doubt the prices aren't going up, and in most cases they've fallen, slowly or substantially," said Jim Knetsch, owner of RE/MAX Realty Associates Inc. in Carrollwood.

Builders have resisted outright price cuts, but KB Home, the nation's fifth largest, was among the first to break ranks by slicing prices $10,000 across the board in one of its Pasco subdivisions, Tierra del Sol. Buyers who signed contracts at the previous higher price are allowed to rewrite their contracts at the lower price.

KB Home's Cara Kane said the company spurns the incentives used by other builders as "temporary discounts."

"With our lower prices we've been seeing good traffic. Some of the other builders might not be," Kane said.

Overall in the Tampa Bay area, new home sales prices dipped slightly from $315,000 in the first quarter of this year to $314,000 in the second quarter, according to the housing tracking firm Metrostudy.

"We're still seeing select inventory price reductions," Metrostudy's Tony Polito said. "As for outright declines, we have seen few of those."

It's no mystery what's pressuring prices: Home listings have exploded as sales have softened. Many listings are from investors who bought during the boom and fueled what builders viewed as a freakish market last year.

Total listings in Pinellas, Hillsborough and Pasco have hovered around 35,000 as monthly sales struggle to break 4,000. A year ago listings stood about 9,000, roughly 6,000 of which sold.

Places like Meadow Pointe in Pasco and Live Oak Preserve in New Tampa sport a surplus of listings that are dampening prices. Meadow Pointe's roll of unsold homes has grown about tenfold from about 30 to 300 from year to year.

In his neck of the woods near the Pinellas-Pasco line, Trinity Realtor Bob Memoli said prices have declined roughly 5 percent from last year's peak. In waterfront neighborhoods such as Gulf Harbors in New Port Richey, declines can exceed 10 percent.

"The customers are not wanting to accept that, 'My neighbor sold his house last year and got $380,000 for it, and now you're telling me I can only get $350,000.' It's an education process," Memoli said.

The price cuts are nailing some investors who entered late in the game. They face the prospect of breaking even on their homes - or worse. Many have turned to renting as a desperate expedient.

"We're getting calls, 'We can't sell them. Please lease them,' " said central Pasco Realtor Pam Koenig, who pulled listings for 130 properties chasing renters in Land O'Lakes alone.

Among the more optimistic real estate watchers is Mike Mayo, a spokesman for the Pinellas Realtor Organization. He points out that Pinellas condos rose in value the past year despite a glut of units.

"You don't want to create a panic. We've got enough to deal with what's going on with the property insurance market," Mayo said. "We're not seeing the bubble bursting."

Still, Realtors like Knetsch think the market has yet to hit bottom. With the current glut, those who want their home noticed slice the price. Polito predicts supply and demand won't return to rough balance until mid 2007. With that equilibrium could come a resurgence in prices again.

"Every time this year we thought the market might have found its footing, it was a dead-cat bounce and the market fell further," Knetsch said.

James Thorner can be reached at (813) 226-3313 or thorner@sptimes.com.

[Last modified August 8, 2006, 02:47:19]