As house sellers remain dug in, buyers wait for price fallout
By LINDA RAWLS

08/26/07

After 14 months, Pam Crosby finally blinked.

The former morning news anchor for WJNO radio put her Lake Worth home on the market on June 9, 2006.

"I had been told for the past two years I could get all this money for it, and then I went to have it appraised, and it appraised high - $260,000 to $280,000," she said. "Then the bottom fell out."

Despite being listed with a widely respected Realtor, the two-bedroom, one-bath house was shown only five times in 14 months, she said. There were no offers.

Buyers and sellers of Palm Beach County's pricey real estate have eyed each other for more than a year across a growing inventory of homes for sale. Buyers balk at paying boom-time prices, while too many sellers still sit on the sidelines, seemingly waiting for those prices to return.

They may be waiting for a while. In some cases, months, even years.

The supply of single-family homes and condominium units for sale in Palm Beach County's Multiple Listing Service reached 32 months' worth in June in the $200,000-$299,999 price range, according to Illustrated Properties Real Estate.

That means it would take nearly three years to sell the 3,973 homes listed in that price range at the June sales pace - without adding another home to the list.

The bleak story was the same in nearly every price range: too much inventory and too few sales, according to Illustrated Properties' figures.

In the $300,000-$499,999 range, which has included the county's median price since the boom times, sales declined 73 percent from June 2006 to June of this year. And although inventory was down 5 percent, it still would take 37 months to burn off the supply.

That picture isn't expected to get much prettier Monday, when the national and Florida Realtor associations release existing home-sales figures for July.

In fact, the National Association of Realtors lowered its 2007 forecast this month for existing and new-home sales for the eighth time this year, even before the recent stock market turmoil - triggered by the credit crunch and a record number of foreclosures that bode ill for the economy.

The same areas that were the hottest during the five-year boom that ended in late 2005, including Palm Beach County and the Treasure Coast, are taking it hardest on the chin during this bust.

For example, in July, debt-burdened homeowners in the region defaulted on their mortgages at more than triple the pace of July 2006. In Palm Beach County, 1,142 homeowners lost their bid for the American dream - or their investment flip - compared with 370 foreclosures in the same month a year ago, the Palm Beach County clerk's office said.

It was worse in St. Lucie County, where 429 homeowners got foreclosure notices last month - nearly five times as many as in July 2006, when 90 were filed, according to the clerk's office.

Many sellers standing firm

Crosby is seeing this turmoil firsthand. After getting nary a nibble on her home for more than a year, she lowered her asking price from the original $260,000 to $156,000. Instead of renewing the listing with her Realtor, though, she decided to sell the 800-square-foot house herself, a challenging task for an out-of-town owner. She says a property manager friend will help.

"There are a lot of homes in the neighborhood for sale," said Mike Calhoun, president of the Mango Groves Neighborhood Association. "Between the insurance and taxes, a lot of people are bailing."

If Crosby can't sell the house, she said, she'll rent it.

But many local sellers remain adamant they won't lower their asking prices. After all, they saw what their neighbors got for their house - why should they settle for less?

Some sellers even took their homes off the market rather than lower the price.

"My sellers are sticking to their guns in pricing," said Douglas Rill, president of Century 21 America's Choice.

How are sales?

"Slow," he said.

"One client - a famous guy, but I can't tell you who he is - thinks, 'Well, it will sell now or it will sell next year,' " Rill said. "But he really can't hold out because he has a $1 million mortgage. He moved to North Carolina, so he's going to lose his homestead.

"When that sticker shock comes up and his taxes are $75,000 instead of $7,500, then I think in November or December when the tax bill comes, price is going to matter. When it's costing him $15,000 a month, it's going to matter."

The good news, Rill said, is that this is the time to buy a home, especially if you have less than perfect credit or are self-employed.

"Get preapproved now," said Jim Sahnger of Palm Beach Financial Network in Sewall's Point. "You don't want to get an offer on your home, only to find out you can't qualify for a mortgage to buy your next home."

Mortgage rates will remain fairly steady during the next several months, said Mike Larson, a real estate analyst with Weiss Research in Jupiter.

"Lenders are raising rates on some kinds of mortgages to reflect the fact they are riskier," Larson said. "That's the opposite of what happened during the boom, when lenders priced higher-risk loans very aggressively."

More price drops likely

That was then. Now sellers who have stuck it out have seen "days on market" - the time it takes to sell a house - nearly double in just 14 months, according to Illustrated Properties. In June, houses listed with the MLS in Palm Beach County sold in an average of 142 days, up from an average of 86 days in April 2006.

With the myriad problems besetting the housing market - from the subprime mortgage meltdown to fleeing speculators who left a trail of unsold "investments" that they finally dumped into the MLS - most housing forecasts are looking well into 2009 before the market recovers.

Meanwhile, most analysts agree that prices must drop. Jan Hatzius, senior economist for Goldman Sachs in New York, thinks Florida homes are overvalued by 40 percent. Florida's record home-price appreciation since 2000 makes it "the epicenter of the U.S. housing bust," he told the St. Petersburg Times.

Not all analysts agree with Hatzius, of course.

Sean Snaith, director of the University of Central Florida's Institute for Economic Competitiveness - and the expert Realtors love to quote - thinks a 10 percent to 15 percent price decline is the worst-case scenario.

But there's no shortage of buyers, according to a Palm Beach Post reader who commented on an Aug. 16 story about local home sales.

"There are plenty of buyers! The problem is they cannot afford to pay those unrealistic prices," wrote the reader who identified himself on PalmBeachPost.com's YourPost only as Mike.

Suzanne Cabrera, head of the Housing Leadership Council of Palm Beach County, says this year's study of local housing, not yet released, will show "we haven't made too much progress."

The average starting salary in Palm Beach County is around $35,000, Cabrera said, which means housing needs to be in the range of $100,000 to $150,000.

"There's a perception that if home prices drop, there's no more problem," Cabrera said, "but it's still an issue for the average wage earner in Palm Beach County."

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