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Tampa Bay area home sales fall 5.4 percent in May
Wednesday, June 9, 2010 - Will Florida's miniboom in home sales end now that the
punch bowl of tax credits has been taken away?
At least one early barometer indicates that's already happening.
Tampa Bay area home sales fell 5.4 percent in May compared with April, and home
prices fell 3.1 percent, according to a preliminary report from Home Encounter. The
Tampa real estate company dissects Multiple Listing Service (MLS) data on bay area
home closings and releases results before the official numbers from the National
Association of Realtors.
A May drop would reverse a surge in home sales that's been fueled partly by cheap
foreclosures and partly by a federal home buyer tax credit that expired April 30.
Existing home sales in the Tampa metro area have risen steadily every month this
year and by April, sales were up 27 percent over a year ago.
Home Encounter president Peter Murphy said a reversal is troubling because May is
usually an up month.
"The typical pattern in Florida is that home sales increase from February through
July, then start to decline into the fall and winter," Murphy said. "This is the first
time since we've been tracking the data that we've seen sales decline during the
busy home-buying season."
Not all Realtors are buying the argument that we'll see a summer slowdown.
"I'm a little bit surprised to hear there's any drop," said Nancy Riley, a longtime
broker with Coldwell Banker Residential Real Estate in St. Petersburg.
"We've got a lot of international buyers now. I'm doing a lot of cash deals. … I
know our pendings (listed) on the board are still much higher than they have been
over the past year."
To Murphy, however, the latest MLS numbers paired with a drop in pending sales is
the first "empirical evidence" that the housing meltdown, which slashed home
prices in the bay area by 46 percent since 2006, is still very much with us.
And the slump will hang around if Stan Humphries, chief economist for real estate
tracker Zillow.com, is right.
Humphries' forecast: Home prices in many Florida markets are inching slightly
lower and won't bottom out until 2011, compared with much of the country
bottoming out by September. From there, he sees prices in Florida staying flat for
three to five years as the state works through a high inventory of foreclosed homes
and pending foreclosures.
"We think there might be more than 1 million foreclosed properties in Florida
shielded by the banks right now and another 5 million either in the foreclosure
(process) or seriously delinquent," Humphries said.
In recent months, there was some speculation prices might start to gradually
recover given the surge in home sales.
Like Murphy, Humphries linked the jump in sales directly to the tax credit.
Under the program, the government offered buyers who hadn't owned a home for
three years a tax credit of 10 percent of the purchase price, up to $8,000. There also
was a credit of up to $6,500 for buyers who already owned a home and decided to
move. In order to qualify for a tax credit, home buyers had to have a contract in
hand by April 30, but the sale did not have to be finalized until June 30.
The tax credit was controversial early on, criticized by some as a market
manipulator that could trigger a double dip in home sales after it expired.
Humphries contended the first tax credit last year brought in new buyers, perhaps
accounting for as much as 20 percent of home sales. This time, he said, it just
convinced some who were buying anyway to expedite their purchase.
Based on anecdotal MLS reports from various markets, "I think nationwide we're
going to see a big pullback and sharply-reduced sales in the July and August time
frame," he said.
Even as the tax credit program comes to a close, however, another twist could await
many who rushed to qualify.
More than half of the pending home sales in April were on "short sale" deals in
which a lender accepted less than the total amount due on the mortgage. Typically,
short sales take a longer time to close than a traditional deal.
Murphy said that in May the average short sale took 103 days to close from the time
the contract was written. Under that timetable, many of the pending short sales
from April won't close quickly enough for home buyers to make the June 30 tax
credit deadline.
"Many buyers — and Realtors — do not fully understand that it takes an average of
103 days to close a short sale, and many of them will be sorely disappointed when
they get to the end of this month and still haven't closed on their home, thereby
losing their tax credit," Murphy said.
On that point, Riley, the St. Petersburg Realtor, is in agreement. "The banks are
dragging their feet on a lot of these deals," she said. "It looks like a lot of the short
sales are not going to make it."