TBO.com - TBO is Tampa Bay Online

Northeast Housing Downturn Hurts Southwest Florida

ADVERTISEMENT

By AARON KESSLER

Sarasota Herald-Tribune

Published: July 27, 2008

SARASOTA - Two factors promise to loom large this summer in real estate: a shift in where buyers are coming from and the health of those markets.

As Southwest Florida tries to steady itself from the housing downturn, its tradition as a destination almost solely for Midwesterners is changing. New sources of people - and money - are rising in prominence, especially from the Northeast. The most recent U.S. Census data show sizable migrations from outlying New York City; the Washington, D.C., suburbs in northern Virginia; the Boston area; and Pennsylvania.

That means Manatee, Sarasota and Charlotte counties are more reliant than in the past on markets suffering some of the same ravages of the post-boom fallout. But it also means the region is still funneling prospective buyers from areas that never experienced the boom or the subsequent trouble.

"We're seeing more of that mix, going away from the traditional Midwesterners," said Tony Polito, Sarasota-Bradenton director for the housing analysis firm Metrostudy. "We're getting a lot more from the Atlantic Northeast."

It is not that the Midwest has totally lost interest: Cook County, Ill. - Chicago - still tops the list as a source for new transplants.

How those markets are now performing varies widely. The housing crisis has many buyers nervous and thus staying on the fence, but the worst of the drops have been regionally based, with markets that had seen spectacular appreciation in prices now plummeting - California, Arizona, Nevada and, of course, Florida itself. They are places now marked by rampant foreclosures on sales driven by the speculator and easy-money phenomena of the boom years.

But many parts of the country that never experienced a boom are not seeing much of a bust, says Susan Wachter, professor of real estate and finance at the University of Pennsylvania's Wharton School.

"Chicago, for instance - there has been almost no impact whatsoever," Wachter said. "And in Philadelphia, prices are even up a little in certain areas."

Pricing Back In Line

Bob Lambert, with Michael Saunders & Co.'s mortgage division, recently moved to Sarasota from northwest Indiana, near Chicago.

"Chicago and Indiana have been fairly stable," Lambert said. "One thing that's very different in that part of the Midwest is the average time to sell has always been around 100 days. So if you go up from 100 to 120 in an area, it's not good, but it's not like what we experienced in Sarasota, where things went from getting multiple offers to you can't sell anything."

Many of Lambert's Midwestern clients are now actually more apt to buy here for one simple reason: they can afford to.

"The Sarasota market just got out of balance with the Midwest," he said.

"We're talking about even people like family doctors in Indiana and Chicago, with good incomes and jobs, they were getting priced out because things were appreciating so fast down here."

A physician in South Bend, Ind., making $200,000 per year, for example, can now sell his spacious home and buy something for about the same price in Sarasota. During the boom, Sarasota area houses that had gone for $500,000 had shot up toward $1 million.

Another client, this one in Pennsylvania, had been eyeing a beachfront dwelling in Sarasota for years, one that was unaffordable during the boom.

Now he is putting his house on the market and is planning to buy a condo on the Gulf.

Disparities

But not all northern markets are faring so well.

The Boston region is down, spilling its problems over into Rhode Island and New Hampshire. Manhattan is very strong, but the suburbs of New York are seeing a decline that is affecting parts of New Jersey and Connecticut.

Foreclosure numbers help illustrate some of the disparity seen across different northern markets.

Foreclosures in the first six months of 2008 increased nearly 300 percent in the Washington, D.C., area compared with a year ago, California-based RealtyTrac Inc. reports. The Boston area saw foreclosures rise 95 percent while New York City was up 38 percent.

Chicago, as Wharton's Wachter noted, is doing better. It only saw a 15 percent increase in foreclosures while Philadelphia only ticked up about 4 percent.

As buyers in the struggling markets try to sell, the effects trickle down to Southwest Florida.

"It can definitely hold up everything," says Klaus Lang, a Michael Saunders agent who has a client from New Jersey who wants to buy a beachfront house on Casey Key.

But the man already has two beach houses - in New Jersey. One is on the market for about $7 million, and the other for $3 million. He needs to unload at least one to afford his purchase on Casey Key.

"They have gotten zero activity up there," Lang said. "No showings at all; there's nothing happening."

By far, the worst performer in the Northeast has to be the Washington, D.C., metro area, Wachter said.

"D.C. is the only area in the Atlantic Northeast that is near a Miami level," Wachter said. "People are not selling around D.C. right now without a financial hit."

Lambert is glad to be dealing with the Midwest.

"Washington is just terrible right now," he said. "In many ways, it's very similar to Sarasota. They're a market that went up double digits per year and outpriced themselves."

Now, like in Southwest Florida, things are running in reverse.

"It's a buyer's market now," said Jill Landsman, communications director for the Northern Virginia Association of Realtors. "Buyers have a lot to choose from and sellers have had to adjust their expectations. They have to make their price competitive."

The average sale price in June for a home in the northern Virginia region was about $488,000. That is down about 14 percent from June 2007, when the price stood at roughly $570,000. Housing sales themselves have been picking up in 2008, though they are still down compared with last year - this June about 1,900 homes were sold in the area, versus about 2,000 in June 2007.

The typical house spent about 83 days on the market, up from 65 last year.

Many areas are struggling. The outer suburbs, which gave rise to the term "exurbs" in the last election, are being hit particularly hard.

Loudoun County, a good hour or more west of Washington, saw some of the most explosive growth during the boom years, and is now in a serious downturn.

"There were a lot of mortgage practices out there that were not in the best interest of the purchaser," Landsman said. "Now lenders are no longer writing subprime loans. But areas where they did are dealing with the aftermath."

Foreclosures and short sales have proliferated in Loudoun, as well as Prince William County, south of Washington and the leader statewide in foreclosures. Prices there nose-dived from an average of $402,000 a year ago to just under $272,000.

The falling prices do have an upside: "People who were completely priced out of the region in recent years can now finally start to afford a home," Landsman said.

The faster the metro D.C. recovery, the better things are likely to be for Southwest Florida residents looking to sell a place in the sun.

In the meantime, those who hail from places that never got carried away in the first place are likely to be smiling all the way to the bank.

Share this:

Loading Comments...

Email Print

ADVERTISEMENT