Tampa Bay area real estate update

Homes in the Tampa Bay area are now selling for the same prices as ten years ago. August continued the slow downward price slide to $89 per square foot. That is 7% lower than last August and 4% lower than July. An average home lost $13,000 of its sale price. The number of homes sold increased by 2% but the total number of listings decreased by 1.5%.

The price decline in the greater Tampa area has been relentless. July home prices were down 3.6% from a year ago. June saw a 2.52% decline. Prices for May were 4.74% lower. The statistics remain very similar whether distressed property sales are included or excluded. Nearly 50% of all existing home sales in the area are now distressed properties. The Tampa area has seen slightly smaller price declines than Florida as a whole and prices have leveled off when averaged nationally.

Pinellas County was hardest hit in the Tampa Bay area for August. Sales of single family homes decreased by 8.1% for the month. Sales price lost almost 5% compared to the previous year. Average home price for Pinellas dropped to $135,000. While condominium sales in Pinellas were up 8.1% for August the median sale price of a condo lost 17.2% compared to a year ago.

Budget and staffing cuts within the Pinellas County, Florida government are affecting real estate and real estate investors. Starting October 4, the Pinellas County foreclosure auction will go on-line, replacing the current live daily auctions at the Clearwater and Saint Petersburg courthouses. The monthly tax deed sales will follow on October 20. Moving these auctions on-line will ease pressure on staff in the Clerk of the Court’s office. Pressure has not let up this year as foreclosures in Pinellas County continue to roll in at the rate of 1,000 per month, only very slightly below the rate for 2009.

In Clearwater, the City Council members have voted to purchase an entire city block in the East Gateway neighborhood. The decision was unanimous. The $1.675-million purchase will be funded by a $1.9-million loan from Clearwater’s Central Insurance Fund. Immediate plans are to put the purchase in a land bank. The city will decide what to do with the property at a later time. Involved is 2.2 acres of land with buildings including two motels, a restaurant, two duplexes and a single family home. This is a high crime area bordered by Cleveland Street, Grove Street, Betty Lane and Lincoln Avenue.

Tampa Bay Real Estate Update

New foreclosure filings slowed slightly in July in the Tampa Bay area. There were 6,031 new filings. It is definitely a buyer’s market. Prices continue to slowly erode and have not yet reached a bottom. Florida existing home sales dropped 14% compared to July 2009, but condo sales were up 11% on a median price barely above $87,000.

In Tampa, The Towers of Channelside have received Fannie Mae approval. Almost three quarters of the 257 luxury residential condominiums have been sold along with four of the five retail units at street level. Marketing and sales are handled by JMC Realty Inc. The development consists of two 28-story towers in the downtown Channel district. Fannie Mae approval should make for quicker qualifications and closings on the remaining units.

An informal drive-around survey of Clearwater, Largo and northern St. Petersburg shows no slackening of real estate investor activity as revealed by bandit signs. Prices continue to decrease on these properties as well.

Real estate investors are still doing well

I have spoken with a couple of other real estate investors working in the Tampa Bay area the past few days. Needing advice on a rehab, I was able to ask someone that has specialized in that area of investing for a long time. A meeting with another investor and friend to catch up on a few shared deals led to looking at several houses in Tampa and dinner.

The rehab specialist works mostly in Pinellas county. He has not had any problems finding distressed houses for good prices. Buyers for the updated houses have not been a problem, either. This investor likes to do “complete” rehabs, replacing all kitchen appliances and cabinets, bathroom fixtures and tile and all floor coverings as well as any windows, doors, etc… that are not in good repair. He likes to sell “the nicest house on the block”, no matter what it looked like when he bought it. Most of the work is done by the investor himself.

The other investor works mostly in Hillsborough county and used to mostly wholesale properties. He has transitioned into rehabbing most properties during the past six months, seeing it as a way to make the same amount of profit while buying and selling half as many houses. He also sees no shortage of good deals on rough houses or buyers for the repaired homes. The plan for these properties, though, is to do the least possible work to make the house presentable to a buyer and keep the selling price in line with short-sales in the area. All of the repair work is hired out.

Both of these investors noted that good labor is available at bargain prices now. The virtual halt of new home construction has left a large and idle pool of skilled workers looking for a job. This will not last forever but is helping real estate investors now.

The two investors also noted fewer properties on the market. Buyer demand has increased and they thought the flood of new foreclosures into the market had slowed slightly. Realtors I spoke with have noted this smaller inventory, too.

Recent Happenings

There is a lot happening on the real estate scene in the Tampa Bay area. The residential and commercial markets continue to evolve and there is an undercurrent of life just going on. I am going to touch briefly on a list of items that have caught my eye over the past few days.

Commercial real estate shows signs both good and bad. Two large new projects are moving ahead in Clearwater that will replace years-old eyesores with new senior housing, upscale apartments and retail and restaurant space. The Tampa East Industrial Park had one tenant renew their lease for 100,000 square feet of space. But Tampa area hotels saw average daily rates and revenue per room rates drop much more sharply than the state or national rate. I am seeing more empty retail space in Pinelllas county strip malls every time I go out.

Residential single family home sale numbers are strong, mostly on foreclosed properties priced at $125,000 and less being snatched up by first-time home buyers taking advantage of the $8,000 tax credit and the bargain prices. On the down side, Tampa Bay’s average home price continues to drop more quickly than state or national rates and foreclosure rates remain the highest in the nation. More bad news recently came from FEMA, which refused Florida’s request for federal emergency money to deal with high rates of toxic Chinese drywall in all 67 counties.

For investors the low prices and foreclosures make finding good properties easier than it has ever been before. The low prices and foreclosures also mean that profit margins are very thin. But even with depressed rental rates it is not difficult to find properties with good positive cash-flow. The near stand-still in new construction starts means a lot of unemployed construction workers which translates to a discount labor pool for rehab investors. The still dropping prices mean that properties must be turned around quickly or bought at huge discounts, though.

For anyone involved in real estate, adaptability is absolutely necessary. Many of the old game plans no longer work very well and there are opportunities that did not even exist a few years ago.