An historic volume of foreclosures and short sales have dramatically impacted the supply of an already high level of inventory of unsold existing homes and continue to drive down prices. Credit standards have moved from the loosest requirements in history to some of the toughest, with many lenders now requiring 25 to 30 percent down payments due to the distressed nature of the market.
Factors negatively influencing housing prices:
- Historically high level of inventory of unsold new and existing homes
- Renting is now cheaper across the board compared with purchasing,
- End-user investors have fled the market.
- Sentiment and cheap finance for second and investment homes disappeared.
- New homes and condos are often amongst the most distressed which further reduces prices of existing homes.
- Negative Wealth Effect caused by the stock market collapse and decline in residential and commercial real estate have adversely affected many investors and high-end home-buyers.
- Recent research suggests almost 30% of homeowners in Florida are suffering from
negative equity, particularly effecting people that bought their homes in 2005-2007.
- There is some anecdotal evidence that buyers have adopted a wait and see attitude
until a bottom of the market is established.
There are however some positive signs in the housing market;
- Affordability is at a recent high.
- While the average house price in Florida is at or around 2003 levels; there are opportunities in the market at significantly cheaper levels.
- There is increasing talk of a bottom in the market by the media (although many feel
that a second large wave of foreclosures will push prices lower still.)
- After several years of waiting on the sidelines, institutional and entrepreneurial buyers are starting to make some large scale value transactions.
- We are enjoying a 37 year low in 30 year fixed rate conforming loans.
- Housing starts in 2008 numbered 50,000 which is less than 20% of the peak 2005 levels. This suggests the construction pipeline is coming to an end.
- The Federal Government Tax break is inducing some first time buyers into the market.