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7 Years' Bad Luck For Homeowners?

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By SHANNON BEHNKEN

sbehnken@tampatrib.com

Published: November 8, 2008

Updated: 11/08/2008 12:13 am

ORLANDO - Up to 60 percent of homes selling in Florida's hardest-hit markets are distressed properties, and consumers who bought at the height of the market will have to wait up to seven years before values rise to their original prices, a top industry economist said Friday.

The National Association of Realtors, meeting for its annual conference in Orlando, also released its pending sales report for the nation showing continuing sluggishness from August to September.

Meanwhile, Realtors at the conference also are pushing for a government buy-down of mortgage rates to coax buyers off the fence.

"When this market stabilizes, economic recovery will follow," Lawrence Yun, chief economist for the association, said Friday. "We need to get buyers in the market to absorb this inventory."

Nearly 23,000 real estate agents converged on Orlando for this week's convention of the industry's largest trade organization. They came looking for insight into the economy and advice on how to weather the continued downturn.

Many of the agents complain that would-be buyers are now having trouble getting qualified for loans or are kept out of the market by higher interest rates.

Yun said he hopes the new U.S. administration will make housing a major part of the next economic stimulus package. His group also wants the government to offer a mortgage-interest buydown program that would lower interest rates by 1 percent.

He said he would like to see mortgage rates as low as 4.5 percent, but a 1 percent drop would be a good start. Mortgage rates currently hover around 6.5 percent.

Of course, he said, some buyers are holding back on making home purchases because they don't want to miss out on incentives the government may offer later. This proposal may cause some buyers to wait even longer, he said, and that's why the government needs to act fast, he said.

The buyback program Yun proposes would be offered for one year, and all buyers of primary homes would be eligible. Once approved, the mortgage discount would last for the life of the loan.

Yun said the pending sales index, released Friday, was more evidence that the government needs to intervene.

"There are times when government needs to step in, in order to preserve the free-market system," he said.

The pending home sales index monitors contracts to purchase homes nationwide and shows a 4.6 percent decline from a month ago. However, the yearly change was a 1.6 percent gain, the second month in a row the index has showed yearly gains.

"The month-to-month weakening in pending home sales is understandable," Yun said. "But because the index remains above year-ago levels, it means we're still in a broad period of stabilization."

Selling conditions are mixed across the country, he said, but some states, including Florida, are seeing more buyers get off the fence and purchase. He named Tampa and Orlando as markets that are seeing sales improvement.

This is despite a rise in unemployment in the state. Yun pointed to the large number of foreclosed and distressed properties in the state. Those properties are selling cheaper than others and are tempting buyers back into the market.

In fact, Yun said, nearly 60 percent of the sales in Florida are distressed homes. That's even higher in some markets and in some neighborhoods with clusters of distressed homes, he said.

The bad news is that prices are still falling. Prices in 2008 are falling by the largest amounts since the Great Depression, he said.

Although the lower prices will help the real estate market improve by lowering unsold inventory, distressed homes will also continue to push down prices. Especially, he said, in neighborhoods hit hard by the foreclosure crisis.

Reporter Shannon Behnken can be reached at (813) 259-7804.

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