The long drop may be over.
The great home price decline that began on the Gulf Coast more than four years ago finally shows signs of ending.
In the Sarasota-Bradenton market, the median price for single-family homes hit a low of $144,000 in February 2009. Since then, it has bounced around, creeping as high as $167,400.
Some skeptics warn that more bad news lurks, thanks to an expected flood of foreclosures and a paucity of bank lending.
But a growing number of market watchers see signs the price decline has ended.
· The number of for-sale properties continues to push toward a more healthy level. In the Sarasota market, there was a 10.6-month inventory last month -- the amount of time it would take to sell every home on the market at the current rate of sales -- down from 11.5 months in January. Six months is considered equilibrium between buyers and sellers.
· The lower end of the market -- homes selling for $200,000 or less -- has stabilized. Thanks to strong investor demand, there have been bidding wars for homes in that range. For the 12 months ended Jan. 31, the median price for low-end homes in Sarasota has risen no higher than $110,000 and fallen no lower than $99,000.
· The top of the market -- homes that sell for $500,000 and above -- may still face turmoil. More people than realized bought luxury homes they could not afford, says Jack McCabe, the real estate consultant who correctly called the top of the market in 2005. Those houses will be sold at deep discounts during the next two years, he predicts.
Still, all those bargains at the high end will help raise median prices.
"The sheer fact that more transactions will take place in the upper range will have the net effect of dragging up the median," McCabe said.
At low end: stability
Jeff Twigg, who spends his days driving the region checking out properties for sale through courthouse auctions, says there is considerably more competition among bidders these days -- so much so that he and his partner are passing on opportunities because they think competitors are bidding too much.
Eric Greenstein, an agent at Tarpon Coast Realty, says similar activity is affecting the short sale market, made up of sellers who owe more to banks than their properties are now worth.
"Six months ago, the market was still dipping," Greenstein said. "When a buyer made an offer on a property and the bank would come back six months later to accept, the end user would say, 'Forget it,' because values would be lower at that point. Now the banks are countering with higher offers and buyers are accepting because the price pendulum is swinging in the opposite direction."
Others market watchers, including Matt Augustyniak, the president of Manatee County's Horizon Realty, say a new wave of foreclosures may be avoided because of new federal rules governing short sales and the expansion of the Obama administration's mortgage-aid plan announced last week.
"The new rules will force banks to respond to short sale offers within 10 days," Augustyniak said. "They don't have to accept, but they have to come back with a number they would be willing to accept, and that might speed short sales and eliminate some foreclosures."
Because bank foreclosures usually sell for 20 percent less than short sales, overall prices will trend higher if the pace of short sales accelerates, he said.
At high end: uncertainty
Sales at the upper end of the market haven't yet picked up. Sales in the $500,000-and-above range actually fell by 30 percent in Sarasota and Manatee counties during the 12 months ended Jan. 31, compared with the same period a year earlier, statistics generated by TrendGraphix show.
It is also taking longer for luxury homes to sell -- 194 days on average in Sarasota County during the 12 months ended Jan. 31 compared with 171 days during the same period a year earlier. In Manatee County, it took 205 days to sell a home in the $500,000 and above range, compared with 156 days the year before.
"Days on the market only increase if properties are listed too high," said Hannerle Moore, a luxury agent with Michael Saunders & Co. "Many high-end sellers are still hoping for a return to 2005 prices and that's many, many, many years away. As I tell my clients, you can either be like the lady across the street who has had her house on the market for 936 days or you can price your property to sell."
For McCabe's theory about the median price to play out, more luxury homes must come to market during the next two years at much lower prices, and buyers have to snap them up with the same gusto being displayed at the low end.
National statistics show that adjustable-rate jumbo mortgages that high-end buyers obtained during the boom years from 2004 through 2007 are starting to reset, which should lead to more foreclosures, said Gordon Hester, who runs a high-end mortgage brokerage on Siesta Key.
"Banks are going to have more of these problems. They are bigger problems and they will want to get out of them as soon as they can," Hester said. "That will mean a huge fall in prices."
That has already happened in a small way in Sarasota County, court records show. Eleven of 129 properties that sold for more than $1 million during the 12 months ended Feb. 28 were foreclosure sales of unimproved homes. During the same period a year earlier, just one of the 151 sales was a foreclosure.
Prices of the 11 unimproved homes that were seized and sold by banks were 27 percent lower than the owners originally paid. The previous 12 months, high-end foreclosed homes sold for only 13 percent less than the owners originally paid.
The big question among market watchers is whether there is enough demand for high-end properties, even at greatly reduced prices.
"Those homes will be sold at a range where credit is still tight and there would have to be a lot of cash buyers, and I'm not sure that will be the case," said Sean Snaith, a University of Central Florida economist.
"It is not as if we haven't had foreclosures at the high end yet. That end has had foreclosures as well and we haven't seen the median go up."
Northern buyers return?
Add in the fact that it is still difficult for home buyers to get bank loans, and you have a recipe for a weak market heavily dependent on cash buyers.
But McCabe -- who predicts that prices will gradually move higher for two years before rising at a more normal 4 percent to 6 percent a year -- thinks there is plenty of pent-up demand.
Northern buyers who were priced out of the market during the boom have been waiting to buy ever since, he said.
When prices drop by 50 percent or more, those buyers will act quickly.
"They will see incredible opportunities toward the end of the year to pick up $2 million properties for under $1 million," he said.
