After years of surplus supply and thousands of short sales and foreclosures following the real estate fallout, is the light at the end of the residential real estate tunnel finally visible for Central Florida? In short, yes and no.
Area experts say that although affordability is high and sales are expected to rise, home sales are still being held back due to the restrictive loan underwriting standards, as well as the steady levels of low appraisals that result in contract cancellations. “Some buyers are still finding it too difficult to obtain a mortgage,” says Mike McGraw, vice president of communications and marketing for the Orlando Regional Realtor Association (ORRA). “For those fortunate enough to qualify for financing, monthly mortgage payments as a percent of income have been at record lows, however.”
Distressed property sales (those that are bank-owned or short sales) still made up more than 60 percent of sales in the area in May because of their lower price point when compared to a normal sale. Still, normal sales have risen for the fourth month in a row, making up 37.47 percent of all sales in May.
“The lower median price of foreclosures and short sales does continue to negatively influence the overall median price,” says McGraw. Statistics show that home prices in Orlando have been stabilizing, and normal homes have been increasing in price, a good sign for a troubled market. “The higher selling prices of ‘normal’ homes are helping to boost Orlando’s overall median price, which in May increased 4.76 percent to $110,000 from the $105,000 posted in April,” he says. In fact, the overall median price has increased each month since January 2011.
With the number of sales in Orlando and a decrease in the number of new listings, the inventory of homes available for purchase has again fallen in Orlando. Inventory declined by 511 homes, or 4.45 percent, during the month of May and now rests at 10,969. “Year to date, overall inventory is down 31.28 percent from this time last year,” says McGraw. He also notes that single family home inventory is down 24.99 percent and condo inventory is down 55.10 percent. Many of the homes in the lower price ranges have seen the greatest increase in sales. These types of homes are most popular with investors, cash buyers and first-time homebuyers.
So, what does it all mean? If you can qualify for a loan, now is a good time to purchase a home thanks to low prices and a sizable supply. “Our market indicators are pointing toward the existence of pent-up demand, which is caused in part by the current difficulties in securing a mortgage,” says McGraw. “Lenders and bank regulators need to be mindful of the historically low default rates among mortgage borrowers of the past two years. We simply have to get back to sound, common-sense lending standards to provide mortgages to creditworthy borrowers who are buying homes well within their means.”
The bottom line, according to industry leaders, is that recovery is here – it’s just not coming fast, or uniformly, for that matter. “Although housing affordability conditions are extremely favorable and pent-up demand exists in the market, slow job growth and ongoing credit constraints will lead to an uneven recovery,” says McGraw.
Article by Corey Gehrold