Why the Real Estate Downturn?

Why the downturn in theTampa real estate market in Tampa? I can tell you many reasons.

First and foremost, I have to blame the press.

The real estate market in Tampa was so hot. An agent could list a home and it would be sold the same day. Home values were going up like crazy. To price a house an agent would do the comparables and then add on about $20,000 and it would sell!! People were knocking on my door trying to buy my house. It was crazy. Investors were jumping in because you could buy a house and it would be worth thousands more by closing.

The local newspaper started running stories about "The real estate bubble" that was going to burst. I ignored them and went right on working away. More and more stories about the "real estate bubble" came out.

People got nervous. The market slowed down in late 2005. By April of 2006 the market had come to a screaching halt!

I wondered at that time how one day everyone was frantic to buy property and then all of a sudden no one was buying at all.

I have sold real estate for a very long time. (More than 25 years) I can feel the pulse of the real estate market. I have learned one thing for sure, and that is that there is a "buying mood" to real estate. When the market is good everyone jumps in. When it is bad there is no changing it.

Even this last week our local paper is still running negative stories about real estate. They run them almost daily. This last week alone they ran stories about agents who were doing so well and now are eating meatloat.

They ran a story recently called... "Tiptoe carefully on lenders' graveyards" and it reports on an incident in which Jody, who owns Southern Title Services in Seminole, found herself in the position of having to make good on checks issued by her company when Homebanc bellied-up. Jody had just closed a $500,000 home and had issued closing checks totalling $416,000 based on an OK from Homebanc. As the closing agent, she had to make good on those checks even though Homebanc wouldn't. Hopefully, all will turn out okay for the Tutts. But this is another case of the newspaper keying on something bad that happened in the world of real estate. Why not write an article about all the people who were served well by their lender, agent, title company, insurance company and all others who have a hand in closing a sale? But no, that's not news -- it would make for dull reading.

There is no reason for Tampa's market to be slower than other markets in Florida. I attribute this to our press.

There are other reasons for our market to be so slow. Real estate taxes have become a problem. We don't pay state income tax here in Florida. That is what draws so many to the area. We don't have personal property tax on our cars and boats. Eleven years ago a measure was adopted that was called "Save our Homes." The idea was that if you lived permanently in your home you should have a homestead exemption of $25,000 or more depending on your situation. The other part of it was that your taxes could only go up by 3% per year. Now that is the part that has caused so much trouble.

It seems that they did not think about the fact that home values would go up and that would create great inequities in taxes. Now eleven years later, two homes next to each other that were exactly alike had far different taxes. Some people had very low taxes and the neighbor who was new to the area had extremely high taxes. Because some were so low the newcomers had to pay even higher amounts so there would be enough tax money available.

People began to squalk about their taxes. The newspaper had more news and lots of articles about how high our taxes are were on the front page. People were nervous!! If they moved they would have to pay higher taxes and they could not move.

The Florida legislature decided to put it up to the voters in January to make a change. In my opinion, they needed to get rid of "Save our Homes." Taxes should be equal to all. But they were concerned about upsetting all of the voters who currently were benefitting from "Save Our Homes", and so they decided to let each homeowner decide for himself whether to take the new and larger homestead exemption or keep "Save our Homes." The citizens will vote on this at the end of January.

Things have changed since I wrote the paragraph above. It seems a judge has decided that the amendment before the voters in January is too confusing. Now the legislature has called another special session to change the amendment and make it easier to understand. (My personal opinion is that it was not going to pass and they knew it. They knew they had to make some changes to get it passed. They may have to keep Save Our Homes to get it through.)

Another reason that our market is slower is that our insurance rates have gone up. We live in a glorious area with perfect weather all winter long but we do have hurricanes. The cost of insurance is higher here but at Tampa Bay Golf and Country Club it is not as high because it is farther inland and the homes are well built.

Another very important factor in the downturn is the number of investors who jumped in to the market. Because investors were buying homes and hoping to resell them for profits there was an "artificial market." More homes were for sale twice. Many investors got caught. They bought homes at the peak of the frenzy and could not sell them. This is a very important factor at Tampa Bay Golf and Country Club. Many homes were built new in 2005 and owned by investors. Lots of those homes are still for sale or have gone back to the bank or are rented. This has created an oversupply of homes available.

A wise buyer can look at this and see that it won't last. It is not like it was so long ago in Texas and Oklahoma when they lost so much of the oil industry. Our factors are temporary. The economy is good and that is why the forecast is for a V shaped recovery. That means a market that goes down and then goes right back up again. Our weather will always draw people to Florida. That is why I think it is the perfect time to be a buyer.