The risk of a drop in local home prices is far less than the U.S. average, data show.
Jerry W. Jackson
Sentinel Staff Writer
April 14, 2006
Don't worry about that real-estate bubble bursting just yet -- at least not in Metro Orlando. But homeowners in Tampa, Fort Lauderdale and Miami might be in for a rough time.
The latest national rankings show that nearly all of the country's 50 biggest metro areas face a greater risk of declining values than they did three months ago.
According to the PMI Mortgage Insurance Co.'s most recent market-risk index, the four-county metro area -- Orange, Seminole, Osceola and Lake -- has a 16 percent chance of a decline in home prices during the next two years -- well below the 28.7 percent U.S. average.
"We're still very healthy, in this market," said Sue Trover, broker for All Star Vacation Homes in Kissimmee. Trover, a 21-year veteran of residential real-estate sales, said the Orlando area has advantages over many other parts of the country -- from steady tourism to ongoing population growth.
The news wasn't as good for Tampa, Miami and Fort Lauderdale, which are among the 25 riskiest metro areas, according to PMI's second-quarter rankings.
Fort Lauderdale's metro area is the 17th-riskiest area in the nation, with a 42.3 percent chance of a price decline in the next two years.
Miami came in at 21st, with a 32.7 percent chance, and Tampa-St. Petersburg was 22nd, with a 29.4 percent chance.
Fourteen of the 50 largest metro areas in the country have a 50 percent or greater risk of home-price declines within the next two years.
Although Metro Orlando's risk rating was good, some area brokers say the region's fast-rising inventory of homes for sale is cause for concern. Asking prices are dropping, and many homes are staying on the market for months -- with few offers.
Denis Le Marchant-Smith, owner of Hightower Realty in Kissimmee, said he has seen prices for vacation homes in Central Florida drop about 10 percent in the past year, since he opened his company. "It was a bit of a shock," he said.
Le Marchant-Smith predicts that prices could drop another 10 percent in the coming year before stabilizing.
"I'm a bit more encouraged in just the last few days, in fact. I've sold a couple of homes, and I am getting a few more calls and e-mails. A lot of homes have simply been unrealistically priced."
Home-price appreciation has slowed in recent months in nearly half the metro areas surveyed by PMI. Company experts said the continued strength of the national and local economies suggests that, in the absence of an unexpected economic shock, the once red-hot housing market will continue to cool gradually.
The PMI risk index takes into account variables such as housing prices, labor statistics, housing affordability as measured by local household incomes, home-price appreciation and the costs of conventional mortgages.
Rates on 30-year mortgages climbed this week to their highest point in nearly four years -- a development that could further dampen housing activity.
Freddie Mac, the mortgage company, reported Thursday that rates on 30-year, fixed-rate mortgages averaged 6.49 percent for the week ended April 13. That was up from 6.43 percent last week and was the highest since mid-July 2002.
One segment of the nation's housing markets that could lead a price decline: second homes. Vacation-home and investment-home sales set records in 2005, accounting for four of every 10 residential transactions, according to the National Association of Realtors.
There were 3.34 million second-home sales during the year, up 16 percent. About 1.02 million of those were vacation homes, a 16.9 percent increase.
The Orlando Regional Realtor Association does not break out vacation- or second-home sales in its statistics.
"A home is a home, as far as we're concerned," spokesman Kevin Fritz said.
Baby boomers are driving the demand for vacation homes, and sales of those should remain strong, said David Lereah, chief economist of the National Association of Realtors. But the pure "investment-home" market will probably decline this year, he said, because of higher interest rates.
Though there is overlap in the two categories, there are differences between pure vacation-home buyers and second-home investors in terms of how they are defined nationally. About 72 percent of "vacation-home" buyers purchase their properties for vacations or as a "family retreat," NAR said, while about 90 percent of "investment-home" buyers purchase to generate rental income or to diversify their assets.
But in the Metro Orlando market, the national definitions do not fit, said Steve Trover, who oversees All Star Vacation Homes, the rental-property management and marketing arm affiliated with All Star Vacation Home Realty, run by his wife, Sue.
About "99 percent" of vacation-home buyers in the Osceola County/Walt Disney World area also rent out their properties, Trover said. That generates a whole new set of prospects for further sales.
"Our renters often become our buyers," he said.
Jerry W. Jackson can be reached at jwjackson@orlandosentinel.com or 407-420-5721.
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