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Tampa Bay real estate still threatened by rising rates, Florida unemployment

After three years being stuck on this housing slide, we're all feeling frayed in the seat of our pants. Enough of this chute. When can we scale the ladder again?

Unfortunately for Tampa Bay real estate, the lift of improving home sales must overcome the gravity of a lousy economy. As we enter mid-year, the housing market remains unsettled:

• Mortgage rates had dropped into the 4 percent range in April and sparked a miniboom of refinancings and purchases. But this week, rates reached seven-month highs on the realization that government spending has been undisciplined. To attract Chinese investors to buy U.S. government bonds, Washington prematurely pushed up interest rates.

The rate growth ricocheted into the mortgage market when we Floridians could least afford it. Throughout the Tampa Bay area, home purchases dependent on bottom-scraping rates became less attractive when mortgages approached 5.5 percent. Further tightening could push rates above 6 percent by next year. The difference between 4.5 percent and 6.5 percent can be a couple of hundred bucks on your monthly house payment.

• For nine months straight, home sales in the Tampa Bay area have risen year over year. Tampa Realtors reported this week that sales in May were the highest in almost two years. Encouraging? You bet. But almost half of all the sales involve foreclosure homes.

Many of the buyers are investors, not end users. They plan to rent the homes at a profit. That's awoken the fear that a resurgent housing market will produce a flood of new listings as investors try to unload their properties. It's known in some circles as "hidden inventory," but opinions are mixed on how harmful such a glut would be.

• Bay area home prices haven't risen this year, but they've done the next best thing: They've flattened at a median sales price of about $130,000. That's about three times the pay of an average Tampa wage earner. Most economists predict an L-shaped home price recovery. In other words, once prices flatten, they'll stay deflated for a couple of years. Even when home values start rising again, the increase might be largely illusory if inflation gobbles our gains. Domestic migration into Florida has almost stopped, but don't expect that to last. Retirees and job hunters will trickle back when the recession ebbs. Home sales should benefit.

• Foreclosures just won't go away. They rise and fall a bit each month in the Tampa Bay area, but show impressive increases from the same months in 2008. In our region, between 9 percent and 12 percent of homeowners are at least 90 days late on their house payments. In the past year, lenders have taken action against 65,000 delinquent local property owners. That's way too high.

Government subsidies will help hold off the foreclosure hounds, but there's no stimulus like solid private sector jobs.

Rising mortgage rates and high unemployment: Let's hope that one-two punch isn't enough to knock our wobbly market back off its feet. We've been laid out on the mat long enough.

James Thorner can be reached at [email protected] or (813) 226-3313. Read his blog at blogs.tampabay.com/realestate.

Tampa Bay real estate still threatened by rising rates, Florida unemployment 06/11/09 [Last modified: Thursday, June 11, 2009 7:45pm]
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