For maybe the first time ever, sales of foreclosed homes in the Tampa Bay area have exceeded traditional sales.
With thousands more foreclosures in the pipeline, home prices will continue to fall.
Peter Murphy, president of Tampa's Home Encounter, a full-service real estate firm, expects the median sales price to drop another 25 percent before hitting bottom in the bay area. Foreclosures and short sales, he said, will drive the market in 2011.
"Until the banks are no longer the biggest players, conventional sales will decline more," he said. "There's nothing to deter it. There is no way competition can stop that from happening."
During the first two months of 2010, Tampa Bay recorded 1,154 foreclosure sales and 3,089 conventional sales. During the same period this year, foreclosure sales numbered 2,619 compared with 2,532 conventional sales, according to Multiple Listing Service (MLS) data dissected for the St. Petersburg Times by Home Encounter.
"I have never seen foreclosure sales higher than conventional loans," said Poul Hornsleth of R.W. Caldwell Realty in Gulfport, a 38-year Realtor and former member of the Florida Real Estate Commission.
The picture grows worse if you add 1,098 short sales — when a bank takes less than what is owed on a home — to foreclosure sales in January and February. Such "distressed sales'' represent almost 60 percent of total sales.
Distressed sales first topped half the market in August. Since then, the median price of conventional home sales has fallen from $158,000 to $130,500. The median prices of foreclosure sales fell to $60,000 during that time; short sales dropped to $103,000.
The median sales price of all Tampa Bay homes in June 2006 — the height of the real estate boom — was $239,600.
Still, said Craig Beggins, owner of Century 21 Beggins Enterprises in Apollo Beach: "A sale is a sale. We're clearing the inventory. The fact that we're selling the homes is a good thing."
His agents closed 100 deals in January, 157 in February and 160 in March. Beggins said falling prices have greatly cut into agents' commissions, but he would rather be selling cheaper homes than none at all.
"It's stimulating the economy," he added. "The houses are priced right."
The dramatic rise in foreclosure sales this year raises the question, why didn't they increase years ago, when the foreclosure crisis exploded?
Mark Vitner, a senior economist with Wells Fargo, who closely follows Florida real estate, pointed to several reasons.
First, while banks foreclosed on a lot of homes, they put relatively few of them on the market immediately. That's because the economy was so weak, the legality of many foreclosures was questioned and selling homes at a loss would have hurt their then-fragile bottom lines.
Now, "cash buyers have also shown up,'' Vitner said, and "banks are in a healthier position to take the hits.''
He expects foreclosure sales to climb and prices to hit bottom between June and October.
Homes in foreclosure and those in the shadow inventory — mortgages 90 days late and nearing foreclosure or homes already seized by a lender but not listed for sale — will flood the market in the next year.
But, real estate agents warn, there are potential pitfalls even in a buyers' market. While bank-owned homes are cheaper, they tend to pose higher risks than those offered for conventional sale.
The lower prices for the former often results from months or years of neglect or from former owners or vandals pilfering appliances, cabinets and lighting and plumbing fixtures.
Homes needing repair typically don't qualify for conventional financing.
Many buyers want to view distressed properties but often switch to conventional sales after realizing they don't have the cash for repairs or can't get financing to pay for them, said Leslie Griffin, managing broker at Prudential Tropical Realty in South Tampa.
Although banks can take months to accept offers on short sales, they act within weeks on foreclosures, she said.
"The banks aren't going to take a low-ball offer," Griffin said. "It becomes a sticky wicket. You have to take it as it is."
Price and location are still two of the biggest factors in home sales. Conventional sales tend to fall in newer areas; foreclosures typically dominate older neighborhoods.
In Hillsborough County, for example, the highest rate of distressed sales, 45 percent, is in the Drew Park area, an older neighborhood near Tampa International Airport.
The lowest rate is in well-kept Sun City Center, a retirement community in southern Hillsborough. There, of the 771 sales in 2010, only 7 percent were either foreclosure or short sales. The average selling price of the distressed properties, $142,843, is close to the conventional price of $145,952.
"You don't often find foreclosures in pristine neighborhoods," Murphy said. "When one comes on the market, it is snapped up right away."
Bonnie Waytowich jumped at the chance to buy a foreclosure.
She recently bought a home in Palm Harbor — even after the former owners trashed the inside — because the $65,000 price fit her budget.
It didn't matter that it was bank-owned, she said, because it was in the area where she wanted to live.
"I could look at it and see what it could be," Waytowich said. "I was looking for a house."
Despite the grim numbers, conventional sales will rise as the job market improves, said University of Central Florida economist Sean Snaith.
"For every sale, you need a buyer at the other end," he said, "but . . . you need a job to get a mortgage."
Mark Puente can be reached at firstname.lastname@example.org. Follow him at Twitter at twitter.com/markapuente.