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Even a Realtor will tell you: Glut is huge

The "staggering" home inventory erases hope of a recovery in 2007.

By James Thorner, Times Staff Writer
Published April 6, 2007

Home-for-sale signs lined a street in the Apollo Beach's Mirabay development in November.
	[Times photo: Bill Serne]

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When the flood of fresh home listings stopped rising last fall, the Tampa Bay housing market appeared poised for a recovery.

Welcome to the recovery that wasn't.

So many for-sale homes continue to bloat the area real estate market - nearly 41,000 - that sales as a share of total home listings are at their lowest point in recent memory.

Realtors call it "absorption" and it's easy to calculate: Just divide total monthly sales by the total number of homes on the market.

In February, it was 5.4 percent. In other words, about one home of every 20 on the market found buyers. In hard numbers that's 2,225 out of 40,896 single-family homes and condominiums.

Two years ago, during the peak of the last boom market, absorption was running beyond 50 percent, meaning half the homes on the listings sold in a given month.

Realtors, usually a confident lot, are making few attempts to sugarcoat the recent numbers. They've pored through historical data and have yet to find a worse absorption rate.

"It's pretty huge, pretty staggering," said Ann Guiberson, president of the Pinellas Realtor Organization, which represents about 7,200 agents and brokers.

At the current pace of sales, the supply of homes on the market in Pinellas, Pasco and Hillsborough counties stands at 18 months. Realtors haven't seen such an out-of-whack proportion of buyers to sellers in years.

What's it all mean? For starters, home values will likely stagnate or fall this year, a far cry from the bidding wars of 2005. Although the Florida Association of Realtors reports that Tampa area home prices fell 2 percent in the past year to a median of $213,300, declines have exceeded 10 percent in many neighborhoods.

Most sellers will have to yield on price further if they hope to sell quickly, or at least offer concessions such as paying buyers' closing costs, Realtors say.

Stephen Johnston, chief executive of Tampa realty company Home Discovery, began 2006 with the assumption that the slump would last through about mid 2007. In light of the latest numbers, he has lowered his expectations.

"I'm saying there's a good 18 months left before it will even remotely shift to a seller's market," Johnston said Thursday.

Pinellas suffers the most with an absorption rate of 4.6 percent in February. Of its 18,242 home listings, more than a third are condos. Expensive coast properties move slowly, not just from high prices but from punishing taxes and insurance.

"A lot of the high-end stuff is extremely soft," Guiberson said. "$500,000, $600,000, $700,000: That's just not what the average worker in Pinellas can afford."

Pasco's absorption rate is better than Pinellas' but not by much. Hillsborough comes off the best, with about one in 15 homes selling.

But Carlos Fuentes, a Lutz Realtor who presides this year over the Greater Tampa Association of Realtors, said buyers haven't turned out as expected this year.

He blames the standoff mostly on sellers fixated on reaping top dollar for houses that have depreciated.

"The buyers are on the sidelines waiting for the blood to continue to rise," Fuentes said.

Supply and demand became unbalanced when investors turbocharged new home construction in 2004 and 2005, then dumped the properties on the market in 2006 and 2007.

About a quarter of homes bought in the boom were "non-owner-occupied," a strong clue investors were making the purchase, the National Association of Realtors said in a Tampa area market study last year.

Adding to a sense of alarm is the hidden home inventory that swells the market further. It includes by-owner sales, most new construction and condo conversions, and bank foreclosures.

Other danger signs abound: About 36 percent of Tampa area home buyers used adjustable-rate mortgages in early 2006 and 11 percent with weaker credit took out subprime loans carrying interest at least 3 percentage points higher than market rates.

The fear is that investors who took out riskier loans in expectation of quick sales could default as properties wallow on the market.

All in all, it's buyers and their agents who benefit from seller desperation. A sign of the times: Johnston's agents received e-mails from an area condo converter offering a 12 percent commission, quadruple an agent's normal cut.

"Don't list unless you're serious," Johnston said by way of advice. "Serious sellers need to be at the right price. If there are 10 homes on your street, you have to have the lowest cost and the best features."

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

[Last modified April 5, 2007, 23:16:43]