Forecast: Orlando home prices to soften after sharp run-up
A house that was listed for sale in January.
A house that was listed for sale in January. (George Skene, Orlando Sentinel )
August 1, 2013|By Mary Shanklin and Paul Owers, Orlando Sentinel and (Fort Lauderdale) Sun-Sentinel
Orlando is unlikely to see its recent home-price gains continue in the months ahead, according to a new national forecast.
The real estate analytics firm Corelogic Inc. said Thursday that home prices in Metropolitan Orlando are expected to decline 1.6 percent from first quarter of this year through the same quarter of next year — even as prices nationwide increase more than 6 percent.
“I think the primary factor is the foreclosure inventory, and Orlando and Fort Lauderdale have very large inventories of foreclosed properties,” said David Stiff, chief economist for the Corelogic Case-Shiller Indexes. His current forecast doesn’t extend beyond spring 2014, but he added that he doesn’t expect either market to experience a long-term downturn.
A softening of those housing markets now is understandable, considering that in recent months almost half of all existing-home sales in both have been cash deals made by investors. Prices have been rising the past year and a half, and are up more than 20 percent in the past year.
“You and I both know that’s not sustainable,” said Sean Snaith, an economics professor at the University of Central Florida.
Investors have helped reduce inventory and drive up prices in selected markets such as Metro Orlando and South Florida, but whether they continue to invest in single-family homes depends on sales prices and rental rates, Snaith added.
He said the main question now is: How do such markets transition from sales heavily affected by investor-buyers to purchases made mostly by conventional homeowners? Getting mortgages has remained a challenge for many ordinary home buyers who had to otherwise stretch their credit during and after the Great Recession.
“This is the adjustment to the housing market that could be a little jerky, because of these creditrestrictions,” Snaith said. The country doesn’t want to return to the days when “a pencil and a pulse would get you a mortgage,” he added, but buyers should be able to qualify for mortgages with less-than-perfect credit.
Orlando real estate broker, Myra Johnson of MJ Real Estate Inc., said home prices have been so volatile in Central Florida that they are difficult to predict. But it is understandable that the area’s housing stock could be in for a price decline, she added, at least until owner-occupants once again dominate the market.
“Tied to a price decline is the fact we have all these vacant houses out there,” said Johnson, who specializes in first-time buyers. “The best cure is to get our neighborhoods back to where owner-occupants live there.”
Not everyone expects home prices to sag in the Orlando area or South Florida.
Jack McCabe, a Deerfield Beach-based housing consultant, described the Corelogic report as “off target.” He and other analysts expect recent home-price growth to slow in the months ahead — but not decline. Home values historically appreciate at an average rate of 3 percent to 4 percent a year, though South Florida’s median prices have increased by more than 20 percent as investors rush to buy a shrinking supply of available homes.
“Homeowners, I think, will continue to see values increase over the next 12 months,” McCabe said, “but don’t expect these sky-high rates.”