It's a great time to buy

From Today's Orlando Sentinel:

It's a great time to buy: Homes more affordable than ever

By Mary Shanklin
11:00 p.m. EDT, May 10, 2010

Central Florida home prices are so low that buyers earning the median household income can now afford two mid-priced houses.

While prices have been cut in half during the past three years - from a peak of $250,000 in mid-2007 to $110,000 in March - wages have not dropped off at all, reports show. While those freefalling prices have left 48 percent of Florida's mortgage holders underwater on their home loans, about 11,000 Orlando-area buyers have benefited in the past five months by purchasing during record levels of affordability, which is measured by comparing prices and wages.

Freelance artist Richard Minino, who bought a three-bedroom house last month in Orlando's Audubon Park neighborhood, said that, while his wages have held steady for years, the dramatic price drops made a big difference in what he could afford.

"I'm just extremely glad I waited to buy, because the house I just bought is twice the size of what I could have afforded in 2007, and it's in a way better area, too," said Minino, who had been renting for years.

During Orlando's real-estate price peak in 2007, the area was less affordable than three-fourths of the more than 200 cities studied in a joint report by the National Association of Home Builders and Wells Fargo & Co. By last summer, though, that situation had basically reversed itself, two years into the tumble, and by the end of last year Orlando was generally in the middle of the pack for housing affordability.

Rajia Ackley, broker for Coldwell Banker's Ackley Realty in Kissimmee, said sales prices for homes handled by her agency have dropped from $200,000 two years ago to $121,000 last year and $94,000 most recently. The company's sales volume, meanwhile, was up 46 percent last year to $170 million compared with the previous year, she said, thanks to a rush of buyers that's 60 percent investors and 40 percent local buyers.

"Buyers are taking advantage of the market," she said Friday. "On each property we've listed, we've had from two to 47 multiple offers, and most buyers are paying more than the list price."

Yet affordability has remained high, allowing wage earners to stretch their housing dollars further than anytime in at least 15 years, because lagging consumer confidence and difficulties in obtaining mortgages are holding back many buyers, said Rose Quint, a research executive with the National Association of Home Builders.

"With this level of affordability you would have expected that home sales would have gone through the roof, but there are no loans, no consumer confidence," Quint said. "People are reluctant to buy a house because they are afraid they're going to lose their jobs - they're afraid their 401(k)s are in the tank."

But the biggest factor behind the area's high affordability readings, according to University of Central Florida finance professor Stan Smith, is the high number of distress sales. And those foreclosures and "short" sales not only define the market, he said, they hide the fact that many of the properties involved require additional cash after the sale to bring them up to current standards.

Another reason house shoppers may be reluctant to take advantage of their unprecedented buying power: Living in a region with a 12 percent unemployment rate, many of them have wiped out their savings and have no down payment, Smith added.

Melina Duggal, senior principal in Orlando for real estate adviser Robert Charles Lesser & Co., said prices likely will increase and affordability likely will lessen now that the federal tax credit - primarily for first-time home buyers - has disappeared. The number of distress sales also will likely decline, and that will push up median prices more.

"As the state becomes more affordable, it brings more growth, which has been highly linked to our economy," she said. "Chances are we're not going to stay super-affordable forever."