ORLANDO — Homebuyers frustrated at rising prices and too few homes on the market should see some relief next year, as fewer purchases by investors and other powerful forces push Florida into a buyer’s market again, a state housing economist said Tuesday.
That said, Florida’s housing market should keep recovering in 2014, Florida Realtors chief economist John Tuccillo said Tuesday. The number of homes changing hands next year still should grow by 10 percent even if things slow a bit from today, he said.
Florida Realtors, the state’s Realtors trade group, met in Orlando Tuesday for an economic summit on where the housing market is and where it’s headed.
Housing has been so hot in 2013 that it has sparked talk of a bubble, but no one on Tuesday gave those bubble fears any credibility. Looking at national trends, Frank Nothaft, an economist for housing finance giant Freddie Mac, said homes are still well below their peaks in the mid-2000s.
For example, a home that sold for $400,000 in 2006 fell to just $200,000 during the crash. It has since rebounded by a strong 25 percent, but it’s still worth only $250,000.
“So, to me, I don’t see a bubble,” Nothaft said. “Prices are still really, really low.”
More locally, Florida’s housing market is in flux, economists said. Investors helped send prices up 20 percent year-over-year, as they snapped up every available home they could under $200,000 and some even above that level. Last January, more than 50 percent of all sales of existing single-family homes went to all-cash buyers, Florida Realtors figures show. It’s assumed that a majority of them were investors.
That has subsided some, and in recent months cash sales accounted for around 42 percent of all sales. As investors slow down, more modest homes in the $100,000 and $150,000 range should hit the market again, Tuccillo said.
Meantime, rising housing prices have helped thousands of Floridians to climb out from being “underwater” on their mortgages, or owing more on their mortgage than their homes are worth. That’s good news overall and it will let them list their homes for sale for the first time in a long time.
It does mean, however, that housing prices will taper off as more homes hit the market, Tuccillo said.
The biggest challenge to Florida’s real estate market in 2014 will be a lack of loans from lenders, economists said. Mortgage rates might climb to 5 percent by the end of next year from about 4.5 percent today, Nothaft predicted, but that’s still historically low and shouldn’t scare off buyers.
But lenders are so confused about coming changes from the Dodd-Frank Wall Street Reform and Consumer Protection act, which has new rules on home lending, that they’re restricting loans. Some 60 percent of Dodd-Frank’s regulations are delayed, so banks don’t know how much money they’ll be able to loan to customers and how much they’ll have to keep in reserve.
They’d rather park their money in safe investments such as the money market, Tuccillo said.
Overall, Florida’s housing market looks positive for 2014, because the state is creating jobs again. That should help housing values rise by about 5 percent next year, which is about the historical average, Tuccillo said.
Still, all the uncertainty from the Affordable Care Act, the Dodd-Frank regulations and the slowdown of investors mean finding buyers won’t be as easy as it was in 2013.
“We’re gradually moving towards a buyer’s market,” Tuccillo said.