Home Buying in Orlando>Question Details

Matthew, Real Estate Pro in 32757

Why is no one buying?

Asked by Matthew, 32757 Thu Jun 5, 2008

I am a Realtor in Central Florida. There are so many bargain homes out there that can be had at 50-60 cents on the dollar. I cannot imagine why Investors especially are not purchasing. I realize many got burnt in 05-06, but that belays the point of value in the market place. I see magnificent homes that are priced so incredibly low, that it boggles my mind. The North Eastern states have not taken a hit like us, so they can sell there homes much easier and move down here.

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Who Knows? I can see an increase in potential buyers here in the South. Aventura, Bal Harbour, Golden Beach, Sunny Isles Beach, South Beach, Miami Beach and in general South East Florida. We have some amazing opportunities here too; maybe not 50% less than 2005/2006 but certainly great values and pepole ARE buying!
0 votes Thank Flag Link Thu Jun 5, 2008
I must have missed the letter from the National Association of Realtors asking me to post this question on bulletin boards. Seems like Matthew and some of the others did get it. See, for instance, this current thread on Trulia: http://www.trulia.com/voices/General_Area/Why_are_so_many_pe…

Since my fellow Realtors are all posting this question, I'll re-post my answer as to why people aren't buying:

I'm a Realtor, and I'll admit I'm baffled by the comments by most of my fellow Realtors. Read Betty's comments [on the original thread]: They're real world. That's why many aren't buying. Read Jess' comments [on the original thread]: Those are your buyers, and those are the criteria they're using.

To answer another poster's question/comment: Are the prices really good? No. They're better than they were two years ago. But just because a house sold for $515,000 two years ago doesn't make it a bargain today at $325,000. Just because a townhouse sold two years ago for $280,000 doesn't make it a bargain today at $140,000. Those are real world examples from Northern Virginia today (Annandale and Woodbridge, for those who know the area). The $325,000 property is still a dump, just 2 years older and more battered than at the peak of the bubble. The $140,000 townhouse is one of more than 2 dozen properties for sale, virtually all short sales and foreclosures, where the going price now is $95,000-$110,000. So: Cheaper, yes. A bargain: No.

And let's knock down this complaining about the media. Granted, they like to sensationalize. But the media aren't the cause of the foreclosures and short sales. The media didn't pull Wall Street's strings to come up with all the "clever" financing that led to the lending debacle. The media weren't out showing $500,000 properties to janitors, gardeners, and maids who--hardworking as they are--were earning the minimum wage. The media weren't lending billions of dollars to file clerks who used stated income loans to get $500,000 mortgages. The media weren't pushing 100% financing with firsts and seconds at 12% or 14% to people, telling them that there'd be no problem refinancing in a few months.

Meanwhile, let's look at the broader picture. The media aren't behind unemployment jumping half a percent just this past month. The media aren't behind $4 a gallon gasoline and $5 a gallon diesel. The media didn't get us into Iraq and the trillions of dollars that's costing us. The media aren't behind the multiple airline failures. The media aren't behind the shortages in our supermarkets of rice and corn and the huge increases in bread and milk prices.

So let's stop blaming the media. Today's potential real estate buyers know better.

Sure, if buyers wait too long, the market will shift upward. So what? I've run comps for a couple of people on properties in Northern Virginia. (Woodbridge area) Prices are dropping there by $8,000-$10,000 a month. They have been since last fall. Consider the typical buyer's analysis: I wait 6 months to buy. Worst case scenario: Prices decline another $60,000. Best case scenario. Prices flatten out over the next couple of months, then begin rising (though not at $10,000 a month). So best case: Prices in 6 months might be $10,000-$20,000 higher than today. Hmmm. Let's see. Downside risk of $60,000. Upside risk of $20,000. Most likely scenario: Prices will be lower by another $20,000 or so. Buyers may not have all the facts that Realtors have, but they're not that dumb. If they wait, prices likely will go lower...maybe much lower. And if they're wrong, they're still buying near the bottom.

Interest rates? Yes, they may go up a bit. But they'll still be just fine in 6 months. It sue doesn't look like the economy is going to get so overheated in the next few months that the Fed is going to slam on the brakes.

Buyers and sellers aren't snoozing. Far from it.

Frankly, there are other good Realtors out there with similar perspectives on the economy. But it's not politically correct to voice them. So that's why most of the comments to this and similar postings from Realtors are likely to be along the lines of the question: "It's a great time to buy." For some, it is. For the large majority of the population, the future isn't as rosy.

As for Matthew's comments that the Northeastern states haven't taken hits like Florida, it's true that all markets are local. Still, my examples above are indicators that we have taken hits. I can show you condos (Shadowood in Reston, for those curious) that sold at the top of the bubble for $300,000 that are now on the market for $130,000. Or areas in Prince Georges County in Maryland. Or areas in Loudoun County in Virginia.

Would one of you Realtors PLEASE send me that NAR memo?
5 votes Thank Flag Link Sat Jun 7, 2008
Don Tepper, Real Estate Pro in Fairfax, VA
Perhaps the buyers are trying to decide whether to fill the gas tank or use the money for a down payment?

LOL :)

Century21 Beaverton, OR
4 votes Thank Flag Link Thu Jun 5, 2008
No games. I do the best I can pricing home at a marketable price. Actually I refuse many more listings than I take because the clients mind-set is in last years pricing mode. I always suggest a 16% price reduction over what the client belives his home is worth.Not being a Realtor I think has colored your perception of what is actually going on in th market. Yes homes are selling if they are priced accuratley. It is not easy to tell a prospective client that he needs to reduce his asking price by 75K. Recentley I visited a client whose home was listed for 699k, but I advised him that nothing in his developement sold in the past 6 months for more than 499K. They are emotionally attched to their homes and will l not accept the loss in value; so what happens, it sits on the market for over a year. I always preface my visit with If you don't have to sell now for what the market is dictating wait, if you can, otherwise it is a waste of their time and my marketing dollars. I hope this makes some sense to you
2 votes Thank Flag Link Mon Jun 23, 2008
"I see magnificent homes that are priced so incredibly low, that it boggles my mind"

LOL get ready for some more mind boggling. No bottom in sight. 10-20% more in declines coming. And you wonder why people aren't buying.
2 votes Thank Flag Link Thu Jun 5, 2008
Makes a lot of sense Matthew. Good post...much better than "being provacative."

Judging from your last post, you obviously understand your market; and it's always best when RE agents give sellers and buyers straight talk.

We have a few agents in this area that could take a cue from you and be honest with sellers and buyers.

Good Luck sir.

1 vote Thank Flag Link Mon Jun 23, 2008
As a RE Pro you should know that people are having a hard time getting money, foreclosure ratios are consistent if not increasing, and most savy buyers (that have financing) understand that next spring will see a flood of bank owned properties due to the current cycle.

Furthermore, what appears to be a fair valuation is relative. I suggest looking at growth rates from 1993-2000 and then take that ratio and overlay that percentage through 2000 to the present and you will be able to make reasonable projections of fair valuations. When the valuations are fair, buyers with resources will make offers.

sellers, appraisers, and a lot of seller agents haven't gotten the memo yet...to their own detriment.
1 vote Thank Flag Link Fri Jun 20, 2008
Today's investor is tomorrow's underwater seller. Sure, they look like positive cash flow today...a mirage.
1 vote Thank Flag Link Wed Jun 18, 2008
If anyone has read todays article in the Orlando Sentinel , for the last 3 months the current standing inventory of new homes has dropped each month to a ratio not seen since 2006. Also resale sales have been going up steadily also for the last 3 months. Now that is some positive press.
1 vote Thank Flag Link Tue Jun 10, 2008
I think one of the major reasons people aren't buying is the media has convinced everyone that there is no money available for mortgages. So even if they wanted to buy, they fear no being able to get financing. Also, with the price of basic necessities rising daily, gas and milk at $4 a gallon, many young families don't have the resources especially in Central Florida which is so heavily dependent on service industry jobs. We need some positive reinforcement from the news media telling people it's a great time to buy.
1 vote Thank Flag Link Sat Jun 7, 2008
define 50-60 cents on the dollar? from the high yes from (TMV) market value no. agreed there were many investors who got burned but they were all very new to investing and really didn't understand what the market was doing. i am an investor and got lucky not to be burned and looking back it is easy to say "how could everyone not see it coming".

Matthew i think you will agree with the tremendous amount of inventory out in the market today there are some phenomenal deals to be had and there are magnificent homes for sale that are 50 cents or more below (high time levels). however the real estate market in orlando has father to go before we see a true bottom. when that day happens we will see a number of significant sales simply because "no one wants to be the first sheep in the pen".

until that time comes i would appreciate if you wouldn't give away the best kept secrets in florida and let me pick and choose the best real estate in Orlando when i want to choose it.

Portfolio Investor
1 vote Thank Flag Link Sat Jun 7, 2008
I hear a lot about buyers who are unable to get financing, but I have not experienced this as an obstacle in our market. Yes, there are more stringent underwriting rules, and there should be. The buyer pool is smaller as a result.

I do not have buyers who want to buy, but cannot. I have capable buyers, with prequal in hand, or pre-approval subject only to property appraisal, who choose not to buy.

They choose not to buy because they suspect the market may go down, or they are afraid to make a mistake. Sometimes, too many choices and too much info leads to a state of paralysis.

Our buyers are afraid to make a mistake, but they really want to buy. When their confidence is restored, they will buy.
1 vote Thank Flag Link Thu Jun 5, 2008
Deborah Madey, Real Estate Pro in Red Bank, NJ
I think people are waiting to see if the interest rates will come down further, what other homes may come on the market, will home prices dip even lower, what is going to happen with oil prices and even who is going to win the election. Unfortunately it is a time for many people to “wait and see”. It really is a great time to buy. We will be talking about this market for years to come!
1 vote Thank Flag Link Thu Jun 5, 2008
I am a Realtor in Maine and there are a lot of great deals out there. I don't think people are buying mostly because of the negative media. They talk about real estate nationally, and it is not the same in every region. Maine is a great place to buy real estate.
1 vote Thank Flag Link Thu Jun 5, 2008
Media pressure is driving this issue.
The Media is all over this issue and I think many home buyers are fence sitting. I also think it is letting up a bit. We have seen some modest increases in closings and a decrease in expired properties.
0 votes Thank Flag Link Wed Jun 25, 2008
Well thank you young man that is much appreciated-Matthew
0 votes Thank Flag Link Mon Jun 23, 2008
Matthew, you think that by "being provacative" you can make the fundamentals better?

I suggest you get your clients to lower their prices and quit playing games on the internet.
0 votes Thank Flag Link Fri Jun 20, 2008
If you are considering a purchase then take 15 minutes and review the attached study. It details why people are buying/not buying and what to expect in the future. Long story short, better to buy in Central Florida than SW Florida because folks will always want to see Mickey..(maybe fewer but still a lot) Better to buy within 60 miles of a major airport. This economist believes we will see better times sooner than some other parts of the state but we still have some rough times before us.

As for the folks trying to time the market, it does not work in stocks nor does it work in homes. A good deal is a good no matter what. Base your decision on fundamentals -- positive cash flow and location, location, location. This applies to both SFR and multi-family homes. If you can buy a SFR with positive cash flow and wait out the market, then now is a great time to consider a purchase.

If you need help with a financial analysis model on a property, please give me a call. We can evaluate it based on fundamentals and make a solid decision instead of letting the media noise paralyze you.

Rick 407-421-3002
0 votes Thank Flag Link Fri Jun 20, 2008
Bob, C is a bank and all banks no matter how big are being hit now with the housing problem. You should stick to Large cap growth in the Consumer Staples area. I do not think prices in this area(Orlando) are going much lowre, maybe 6% so I would go out there and make some ofers that you are comfortable with.
0 votes Thank Flag Link Wed Jun 18, 2008
I am a first time home buyer in orlando area and I have pre-approved loan. I want to wait out till the bottom is reached. Ideally would like to buy the house when prices are on the way up.
I did not burn myself with housing but got burnt with stocks, I thought Citi (C) was a steal at $35, it went to a low of $17.99
At $35 it was 40% from the peak and I also thought that it was at a "Mind bogling" price.
I do not want to make the same mistake again, with a house.

Gas price is also a major hurdle, along with inflation. I dont know how much I can afford to pay for mortgage. My expense is already up 20% - 30% from last year.

My descision to buy a house will depend on the economic indication (gas , inflation etc), and not on the price of the house.
0 votes Thank Flag Link Wed Jun 18, 2008
I was just in Orlando and I found inventory to be huge but the list prices to still be high, albeit lower than the peak bubble pricing. Perhaps offers are expected to be 15-20% lower so list prices are left high. I plan to buy because I have to, but the negative economic issues brought up in the media (which are important) should be considered by buyers as much as the positive suggestions by others. If one is sure they will remain in a particular area for many years, the risk is lower. Our home in the Northeast has taken a hit as a few 'panic' sellers in our neighborhood made big price reductions recently (20%) as inventory is building here too. I hope I can make up for some of the loss on the sale during my purchase in Orlando. Another big problem is that mortgages (super jumbo) are currently much harder to get and down payment requirements really rein in the upper limits for a purchase.
0 votes Thank Flag Link Thu Jun 5, 2008
Soon you will see a huge group of investors from China going to come to buy in Florida as it is the best way to digest huge amount of money kept in China governement and help millions in Sichuan earth quake to relocate to a nice new home ...

Call your Senator for help on this. Why donate millions tents to China? Why not invite Chinese government to invest millions of condos in Florida and relocate people lost home in Sichuan?

Then we will have trade "balanced", and "sub prime issue resolved", and of course, we also help millions lost home in Sichuan earthquake...
0 votes Thank Flag Link Thu Jun 5, 2008
I think the negative media that typically only talks about the down markets has everyone in a panic mode. I think a lot of people are on the fence waiting to see if we are truly at the bottom of the market. In my area of Southwest Washington we are at the bottom, with sellers being realistic about prices, but still not a lot of buyer activity. There are amazing deals to be had nonetheless.
Web Reference: http://www.loriecarroll.net
0 votes Thank Flag Link Thu Jun 5, 2008
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