Pinellas County Florida Real Estate Market Update

Current real estate sale and rental market conditions for the Pinellas County Florida cities of Clearwater, Belleair, Belleair Bluffs, Dunedin, Largo, Seminole, St. Petersburg, Pinellas Park, Palm Harbor, Ozona, Safety Harbor, Crystal Beach, and all beach cities.

Monday, October 22, 2007

Glenn M. Humphreys
Licensed Salesperson/Investment Specialist
Professional Real Estate Management & Investment Services Inc.

Home Sales Stagnant…Still

In the year since my last market update sales market conditions have gone from bad to worse. Listing volume is still at four times the normal level. The crashing of the sub-prime mortgage industry has only exacerbated the situation since sub-prime borrowers made up approximately 15% of the buyers market. There are 7,000 to 9,000 foreclosures predicted in Pinellas County by the end of this year, which will only add to the already high inventory levels.

The bottom line is, if you don't have to sell right now don't even try. If you bought a condo or single family home with the intention of flipping it last year or the year before and it still hasn't sold, rent it for a year or two until the market finishes adjusting and the people who have to sell have their fire sales and move on.

Buyers Market???

In an effort to increase sales everyone from the National Association of Realtors right on down to the local board of Realtors are trying to convince potential buyers that this is an opportunity and that we are officially in a buyers market. With both median and mean home values down and an ever-increasing supply of inventory I still see this as a transitional market which will not bottom out until the end of next year or early 2009 at best. Let's face it, between 2001 and 2005 property values doubled while incomes and wages locally did not increase at all. It was investors driving the market and when they stopped buying the whole market stopped. With rental values at an all time low covering as little as 50% of actual costs don't expect investors to pick the market back up again any time soon.

What does this mean for the homebuyer or investor? Well, for a relocating person or family it may be wise to consider renting for a year while the market continues to adjust. If you absolutely have to buy right now, there is a home for sale on every street, negotiate. Investors should consider staying liquid for the time being while we monitor the local market conditions. There will no doubt be opportunities in the near future, but unless something comes up that is an obvious deal now is not the time to invest. We may also see an emerging pre-foreclosure market in the coming year as we see Arm's adjusting upward.

Rental Market Conditions

Last year we saw the emergence of what I call "accidental landlords", those who bought properties to flip and got caught when the market turned and subsequently brought their properties to the rental market. The trickle has now turned into a flood. A huge percentage of the homes for sale now have a "For Rent" rider on the sign or are simply for rent and off of the sales market now entirely. This flood of rental inventory has caused rental values to decline. We are actually seeing properties lease for less than what they did just two years ago. Qualified tenants have choices right now and they know it. This is most evident in the condominium market that is plagued by overpriced condo conversions, although we are even seeing it in the single-family home market where historically we see the most rental demand.

The good news is that with the decline of the sub-prime mortgage industry and now the disappearance of the "alt A" loan market (stated income, no income verification loans) we should see rental values increase when some of this excess inventory dwindles. During the sales boom lenders were approving just about anyone for a home loan and turned a lot of our tenant prospects into homebuyers. With lenders now going back to more traditional lending guidelines we should see an increase in the tenant base.

Until these market conditions change however, look for rental values to stay suppressed and days on the market to increase. If you own rental property and have good tenants, get them to renew. Although tax and insurance costs have increased, this is not the time to hit your tenants up for dramatic increases in rent. If you go vacant price your property competitively. Qualified tenants have many choices and they know it.