Tampa Bay home prices are still overvalued and probably won't bottom out until early to mid 2010, according to economists who addressed a National Association of Home Builders conference on Wednesday.
Continued high unemployment, competition from foreclosure homes and rising mortgage rates could depress prices heading into next year.
Tampa Bay's median home price, which has stood for most of this year near $140,000, could drop 10 percent more, according to Mark Zandi, economist with Moody's Economy.com. As of August, Tampa Bay home prices had fallen 40 percent from their peak in mid 2006.
"We're still in this very negative kind of cycle that needs to be broken," Zandi said.
Tampa Bay homes, when measured against local income and rental rates, are priced too high, Zandi said. It could be worse. Much of the Washington, D.C.-to-Boston corridor was rated "significantly overvalued," as opposed to Tampa's rating of "overvalued." Zandi said housing in Sarasota and Orlando, where incomes are higher relative to home prices, is "undervalued."
The news didn't surprise Tampa Bay builders who gathered to watch the conference Wednesday. Eric Isenbergh, owner of townhome builder Davison Homes, said he will remain pessimistic until he sees improvement in the region's 11.7 percent jobless rate. Isenbergh ceased building in 2007 and isn't ready to restart the business yet.
"Without labor and jobs coming back, the housing market's not coming back," Isenbergh said. "There won't be a good measurable upturn until 2010."
Many forces continue to weigh down the housing market. Foreclosures, which plateaued in the summer as the government poured money into modifying mortgages, are expected to surge again next year. More than a third of the newly modified mortgages are expected to default again, adding to the foreclosure pool.
And a "jobless recovery" next year will keep home sales tame, said Mark Vitner, an economist with Wells Fargo bank. Even if the economy grows, Vitner said, employers won't rush out to hire people.
Vitner predicted a further 4.5 percent home price decline, but cautioned that regional home price reports ignore neighborhood variations. He noted that in Tampa Bay, where overall home values are down 40 percent, some communities are seeing 20 percent declines, and others are seeing 60 percent declines.
"Housing is very, very local," Vitner said.
To help stem the predicted home price slide, Zandi urged the government to extend and expand the $8,000 first-time home buyer tax credit.
Though politically unpopular, widening eligibility to include real estate investors could help mop up excess foreclosure homes on the market, Zandi said.