After years of free-falling prices and stagnant demand, Florida's housing market is poised to grow — and the Tampa metro area is better positioned for a turnaround than the state's other large metropolitan areas.
The excess supply of housing inventory is dwindling in the Tampa-St. Petersburg-Clearwater area, and it now costs about the same to buy as it does to rent a home here, said Chris Lafakis, who follows Florida for Moody's Economy.com
That's a tipping point for the market; buying is more appealing because it offers the prospect of return on the investment that renters cannot get. And Miami, for example, hasn't reached this point: Buying a home there is still 20 percent more expensive than renting one.
"We finally have good news for Tampa," Lafakis said. "Housing prices are too cheap compared to the income people have."
But the outlook isn't completely rosy. Uncertainty has many potential buyers still too leery to jump back in the market and move forward.
Foreclosures and distressed sales still are weighing down home prices and making it difficult for builders to compete. Even so, buyers are taking advantage of historically low interest rates and are starting to snap up new homes.
Prices haven't begun to rise yet but are finally near the bottom, Lafakis said.
Moody's forecasts prices will drop 4.6 percent more in the Tampa area and bottom in the third quarter of this year. Compare that with the 8.6 percent drop Moody's predicts for Florida during the same period.
The Tampa metro area currently has six months of excess supply. That means it would take six months to sell all the homes for sale now if the current sales pace stayed the same.
Builders are starting to pick up construction. They have different strategies, but many, such as Lennar and D.R. Horton, have acquired vacant lots cheaply in the past year and are developing subdivisions that were halted during the downturn.
This is especially true in south Hillsborough County.
Housing in Tampa is 70 percent more affordable than it has been historically, according to Moody's.
"Housing demand is way too low given the interest rates and income growth," Lafakis said.
So why aren't more people buying? The answer boils down to fear, Lafakis said.
"Many consumers experienced very traumatic house price declines, so it's understandable that many would be apprehensive to buy a home," he said.
Also, many who might want to buy still are trapped in "underwater" homes.
Nearly half of Tampa Bay's homeowners with mortgages owe more than their homes are worth. That makes it very difficult for them to sell their homes and buy other others.
Refinancing at lower rates is difficult, too. Lenders have been reluctant to work with these underwater buyers.
President Obama has announced a plan designed to help underwater owners refinance.
To qualify, an applicant would have to be up to date on payments for the past six months, record a credit score of at least 580, and be no more than 40 percent underwater on the loan.
That means a homeowner with a house worth $100,000 couldn't owe more than $140,000 on the mortgage.
The plan could save homeowners up to $3,000 a year on mortgage payments.
Shawn Miller, a Tampa mortgage broker, calls it a win-win.
The money homeowners save will go back into the fragile economy, Miller said, and these buyers will be less likely to abandon their underwater homes to foreclosure.
"They're going to be more inclined to stay in the home longer, take better care of it," Miller said. "At least they won't be upside down and at a higher rate. They'll just be upside down."
But passage of Obama's plan is not certain, with some critics calling it a ploy by the president to garner votes in the 5 presidential election.
Meanwhile, Lafakis, from Moody's, says homeowners and buyers in Tampa can feel a lot better about the market — no matter how Congress deals with refinancing.
When prices bottom later in the year, he said, the area's median sales price will be around $127,110.
That's painful for those who bought during the boom years, when the median was double that amount.
But get this: When we finally hit that bottom, prices will do something they haven't done in years in Tampa — rise.
"Prices won't go up like they did during the boom," Lafakis said. "But they will go up."