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Housing Slump Luring New Wave Of Buyers

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BY ZAC ANDERSON

Sarasota Herald-Tribune

Published: March 18, 2009

NORTH PORT - Steven Wagner is ready to be a Floridian and this city's glut of foreclosures is making it possible.

The Canadian visited here a year ago, was stunned by the prices and came back in November to pay $35,000 for a two-bedroom, 1973 house in foreclosure. He plans a visit to North Port soon with six friends who, he hopes, will also buy homes.

"Anyone looking to retire can afford this," he said. "It's an unbelievable time."

Low prices are attracting what could be the next wave of middle-class retirees from places like Canada, New York and Ohio -- many of them too young to retire but wanting to get in on a good deal -- and providing affordable homes for the workers needed to support them.

Wagner, from Tillsonburg, Ontario, still has to sell his house in Canada before moving to Florida.

"But for $35,000 you can't beat it," said the 58-year-old former factory worker, who is retired with a pension. "It's cheaper than a nice SUV. It's almost a gift."

Foreclosures and short sales are driving home prices to levels not seen since the 1980s in North Port and other overbuilt areas, returning the city to its roots as a place where retirees can afford a second home for the winter or live full time. Many of them had been pushed out of the market as Southwest Florida's real estate skyrocketed, along with property taxes and homeowners' insurance.

Besides retirees, first-time homebuyers and investors are grabbing the best deals, driving home sales and leading some experts to call the drastic market correction a painful but necessary step for the region's long-term economic future.

The pain from the real estate decline has been significant, with heart-wrenching stories of families and retirees who bought at the wrong time losing their homes to foreclosure or suffering steep losses from their investment.

And there is real concern of an over-correction in prices that could put more people at risk of foreclosure because their mortgage exceeds their home's value, said Wayne Archer, a business professor at the University of Florida and director of the Kelley A. Bergstrom Center for Real Estate Studies.

Yet Archer also says, "The correction was inevitable and probably is healthy in that it's making Florida more affordable."

Without a price adjustment, 19-year-old Holly Milliken and her husband Salamon might never have afforded a Florida home.

The couple, living off Salamon's $10-an-hour income from a road construction job, are preparing to move into a six-year-old, three-bedroom North Port house purchased by Habitat for Humanity for $66,000 after a bank foreclosure.

The house sold for $190,000 in 2006.

"It's a dream," Milliken said, as she fixed up the house with a group of Habitat volunteers.

Realtors say that homeowners and many banks have finally accepted the greatly diminished home values as foreclosures mount. Sarasota County had about 8,500 foreclosure filings in 2008.

Banks are leading the charge, slapping foreclosed homes with rock-bottom prices to get them off their books.

The deals are eye-popping, especially in North Port, where rampant speculation and homebuilding during the real estate boom have been followed by one of the highest foreclosure rates in the country. Three-bedroom homes just a few years old can be bought for less than $75,000.

Older homes are going for less than $50,000 -- prices not seen since the 1980s.

Prices are so low in North Port that Habitat for Humanity -- which has no labor costs because it relies on volunteers -- has stopped building houses in the city because it is more expensive than buying practically new homes.

The cost of building materials alone typically runs around $100,000 for a three-bedroom Habitat home. But Habitat recently purchased three, three-bedroom homes in North Port, all built after 2001. Habitat paid $76,000 for one, $66,000 for another and $57,600 for the third -- a combined total less than a single house would have cost a few years ago.

"We can't build houses this cheaply," said Michael Sollitto, who is supervising some renovations on the homes. "It's astounding, really."

Real estate agents report a brisk business in the cheapest homes, and they do not expect prices to rise soon with hundreds more foreclosures in the pipeline.

"Every homeowner is at risk who got a mortgage in the last six or seven years, when prices really started to rise," said North Port real estate agent Paula Brill of Casa del Sol Realty. "They see how much value their home has lost and decide to just walk away.

"They'll never make up the difference" between what they paid and the current value, she said.

The flurry of distressed buys has yet to show up in area real estate sales statistics, but there has been an uptick in pending sales. Sales figures reflect closings, which typically occur 30 to 90 days after sales contracts are written, so they are a lagging indicator.

January sales in the Sarasota-Bradenton market were up 4 percent, while those in Charlotte County-North Port were flat.

Pending sales, meanwhile, have been rising. The Sarasota Association of Realtors, for example, reported that pending sales in its market were 683 in January, up 32 percent from the 516 reported in January 2008.

Brill said many families are "just one paycheck away" from foreclosure and "because of the job losses and the economy the foreclosures won't stop."

But North Port historically appealed to blue-collar retirees or snowbirds looking for a low-cost second home, and appears poised to fill that niche again.

"To me that's the one bright spot in this whole disaster," Archer said. "If the prices are attracting more retirees, and more people are moving to Florida, that's a good thing, because there was real concern during the boom that Florida priced itself out of the retirement market."

Mary Jane Hayes, with Century 21 Sunbelt Realty in North Port, who has sold houses in the city since 1979, said the downturn reminds her of her early days in North Port real estate when the market was almost entirely snowbirds.

"It's full circle really," Hayes said. "It's a lot like it was in the 1980s when I started and it was mostly retirees buying houses."

The buyers' market has kept Brill busy with customers such as Brandy Law, her mother, Sharon Law, and Sharon's sister, Sheryl Dew.

All three were looking to buy houses in North Port last month. Brandy Law, who has a secure job as a nurse, never thought about buying a house during the boom. "Now I can actually afford it," she said.

Sharon Law and Dew live in Ohio and plan to retire from government jobs with good pensions in two years.

The women have yet to buy anything though, partly because there are so many choices.

"We're really shopping around for the best deal and the best location," Brandy Law said after walking through a three-bedroom 2007 home priced at $90,000.

Law has time to look. Experts predict another 10,000 foreclosure filings in Sarasota County in 2009.

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