The Florida housing market is booming. Is a crash ahead?

Economists and Realtors weigh in on how today’s real estate climate is different — and similar — to before the Great Recession.
Realtor Carol Hasbrouck poses for a photo at a home she recently sold in the Allendale neighborhood, Wednesday, Feb. 24, 2021 in St. Petersburg. The house went under contract less than three days after she formally listed it, a quick turnaround that has become typical in today's market.
Realtor Carol Hasbrouck poses for a photo at a home she recently sold in the Allendale neighborhood, Wednesday, Feb. 24, 2021 in St. Petersburg. The house went under contract less than three days after she formally listed it, a quick turnaround that has become typical in today's market. [ MARTHA ASENCIO RHINE | Times ]
Published Feb. 25, 2021|Updated June 17, 2021

Carol Hasbrouck knows more than a little bit about why the housing market failed during the Great Recession — at the time, she was a loan officer who had a front row seat to the irresponsible lending tactics that would later have disastrous consequences.

In the frenzied house-buying years before the crash, she remembers hearing of loans given to people one day after they finalized a bankruptcy, or the negative amortization loans where borrowers would pay less than the amount due on their interest, and sink further into debt every month.

“There was just a lot of nonsense going on,” said Hasbrouck, who’s now a St. Petersburg-based Realtor with Charles Rutenberg Realty.

When the coronavirus pandemic first cast its pall over the United States last spring, home sales slowed down in Tampa Bay and beyond. But since the summer, the market has roared back white-hot, and some local Realtors say they are getting multiple offers for each new listing, resulting in many sales above the asking price. And prices have continued to rapidly climb.

The market’s sustained, gravity-defying bounce-back — while much of the rest of the economy remains in a pandemic recession — has caused some to question whether it’s headed for another bust.

Despite the rapid sales, Hasbrouck said the current boom still does not bear many similarities to the lead-up to crisis in 2007, because there isn’t the same proliferation of risky mortgages.

“I don’t think this is anything like that,” she said. “I believe this is a matter of pure economics — demand and supply.”

From a statistics standpoint, it’s not hard to find some comparisons between the current market and the pre-Great Recession bubble.

Len Kiefer, deputy chief economist for lending giant Freddie Mac, noted how, by some measurements, the national house price growth in 2020 was higher than it was in the mid-2000s. The S&P CoreLogic Case-Shiller Indices, a national house price measurement tool, found that Tampa metro area’s prices grew by a whopping 10.7 percent last year.

Earlier this month, Florida Realtors released numbers for January that found the median sales price for a single-family home in Pinellas was $309,450 — compared to $265,000 in January 2020. Hillsborough’s median sales price was $297,500 last month; Pasco’s was $265,000; and Hernando’s was $210,500.

Kiefer said it’s only natural, with numbers like that, for people to wonder if the housing market is in for another tumble. But he said he doesn’t think so.

“We don’t know that, but the research we’ve done makes us think it’s probably not going to be a repeat,” he said. “There are a lot of ways it’s different, despite some similar statistics.”

This time around, the booming demand is fueled by millennials coming of homebuying age — egged on by record-low interest rates — combined with baby boomers living longer, Kiefer said. Contrast that to the lead-up to the Great Recession, when huge numbers of investors were trying to make quick money through rapid appreciation, he added.

“The hallmark of the bubble is speculative behavior, where the expectation of future price growth is driving the current price growth,” Kiefer said. “That’s definitely not what’s happening now ... it’s that people need housing.”

Still, one of the largest remaining questions is whether, at some point, there will be a rush of foreclosures.

According to new analysis from real estate data firm Black Knight, the national mortgage delinquency rate has seen steady improvements since the onset of the pandemic. But about 2.1 million homeowners remained 90 or more days past due on their mortgages at the end of January — which is five times pre-pandemic levels.

At the current rate of improvement, 1.8 million mortgages would still be considered seriously delinquent at the end of June, Black Knight said. That is when foreclosure moratoriums on government-backed loans are set to expire, though the Biden Administration has also announced up to six months of mortgage payment forbearance after that.

Economists said they’re optimistic that the inventory-starved housing market could absorb some distressed properties, but that doesn’t lessen the impact for those homeowners going through tough times.

“How does this end for people at the low end, who haven’t had jobs, ... (their) payments have been delayed? It’s really unclear,” said Scott Brown, chief economist at Raymond James. “I think it’s going to be bumpy for a lot of households, but generally positive overall.”

Rachel Sartain Tenpenny, CEO and managing broker of Keller Williams Realty St. Petersburg, Gulf Beaches and Seminole, said that with prices rising as high as they are, homeowners who can no longer afford their payments likely have plenty of equity to avoid foreclosure.

“All they’d have to do is let their ego down and sell their home,” she said.

The lack of supply, combined with stricter lending requirements than pre-Great Recession days, have shored up the market, Sartain added.

“There’s still a lot of protections that are going to prevent us in the short term from seeing anything like we saw 12 years ago,” she said.

So when will the breakneck price increases slow down? And could prices decrease?

That could depend on external factors, such as how drastically the economy bounces back following the wide distribution of the coronavirus vaccines. Additionally, if vaccine distribution causes a big rebound in consumer spending, that could cause interest rates to quickly tick back up, which would significantly affect the housing market, Kiefer said.

For now, though, the inventory shortage remains a key concern, especially for Florida, where lots of out-of-state residents have been moving during the pandemic.

“Unfortunately, looking at the math ... even with the increases in construction, we’re still running below just what we need to tread water,” Kiefer said, noting that the construction slowdown post-Great Recession is a major culprit for today’s shortages. “I anticipate pressure to be even higher in 2021 than 2020.”

Ann Rogers, a St. Petersburg broker associate at Foresite Residential Real Estate, is one Realtor who remained skeptical of the market’s boom for the past six months. Until recently, she felt uneasy similarities between the current real estate environment and 2006, when she watched people stand in line to buy condos that hadn’t even been constructed yet.

But in the past few weeks, with so little inventory to sell, she said calls from buyers have slowed down — because there’s so little to show them.

“I have a buyer willing to buy up to $1.2 million, but we can’t find anything,” she said. “There just aren’t any properties coming up new from $500,000 to $1.2 million.”

She’s advising some of her buyers — especially those looking for homes under $400,000 — to wait, in case distressed properties do emerge later in the year.

“I think there will be a noticeable shift ... but there’s also plenty of investors willing to scarf them up,” she said. “So that’s the question: How long will they be on the market?”