Superhot housing market settling down

Brought to you by

Article published Jan 29, 2006

Superhot housing market settling down
A stable sales pace would benefit buyers

By Jennifer Portman
DEMOCRAT SENIOR WRITER

Tallahassee real estate experts have this to say to homeowners accustomed to getting huge checks at closing: Those days are over.

That's not to say money won't still be made. Many just don't think it will be at the same stunning pace.

"I think we are heading toward more sustainable, reasonable appreciation," said Steven Louchheim, executive director of the Tallahassee Board of Realtors. "Six- to 10-percent appreciation, that's healthy."

For the last few years, the prices of homes in town have been increasing at unprecedented rates. In 2003, prices went up 13.7 percent; in 2004 prices climbed 13.2 percent and last year they surged 14.7 percent, according to the board's market trends and research committee.

And while those increases have been great for sellers, it can't go on forever.

"The market can't sustain double-digit appreciation," said appraiser Matt Ryan.

That's not to say any bubbles are expected to burst. Things are simply expected to get back to normal.

"I don't think anybody is going to lose a lot of money, but they might not make as much money in as a short a period of time," said Jackie Wilson, executive director of the Tallahassee Builders Association.

While sellers may rue those words, a slowdown in escalating home prices would be welcome news for buyers.

For people like first-time home buyer Steve Dillion, a 34-year-old accountant and city native, the soaring asking prices have made it tough to become a homeowner in his hometown.

Last year, a new house in Leon County sold for an average of $260,000 and resale homes went for an average of $225,000 - well above the $140,000 Dillion is prepared to pay.

"If you look at the square-footage prices, it's crazy. I'm like, 'What in the world?' " said Dillion, who recently began his search and will likely end up in a townhome. "Things are a little bit weird right now, but I think they are getting back to normal."

Buyers also could catch a break if, as some say, the pace of home sales cools.

"As days on the market increases, then the pendulum swings a little bit," Louchheim said. "When a seller knows that in a week they will get five or six offers they are in the drivers' seat. . . . I think it's also healthy when it takes a bit longer to sell your house."

Recently, the pace of sales has been dizzying. Last year, closed sales were up 19 percent over 2004.

"It's been nothing short of phenomenal," said Ryan, who owns Timberlane Appraisal. "I thought it would slow down in the last quarter of 2005. I was grossly mistaken. We were as busy between the week of Christmas and New Year's as we are in July, August."

But he, too, thinks those days are over.

"Last year is as busy as we're going to see it," Ryan said.

Don Pickett, chairman of the local Board of Realtors market trends and research committee, said higher-end homes will feel the shift most profoundly.

"Where the prices are going to fall are in the upper-end properties," Pickett said. "Over $700,000 are slow on the market and some of them will have to come down on their prices."

More affordable homes below $250,000 will remain a hot commodity because there aren't enough to go around, Pickett said. He expects home prices under $400,000 will see appreciation of about 10 percent.

Overall, the Tallahassee market will remain stable, says Pickett and others, in large part because the area is landlocked by plantations, federal forest land and the St. Joe Co., limiting opportunities for new construction. Interest rates also have remained low.

"It's like Key West. Key West is surrounded by water, Tallahassee is surrounded by large property owners," Pickett said. "What we have to do is make do with what we have."

Happiness, however, can be found - with enough patience and determination.

Barbara MacArthur and her husband, Rick, relocated to Tallahassee in 2000 and by necessity quickly purchased a home without knowing too much about the area. The location and schools were good, but MacArthur soon found herself craving more of a neighborhood feel.

So, on Sundays when she went to the grocery store she started exploring.

"What I did was prowl," said the chief nursing officer at Tallahassee Memorial Hospital.

This year, she finally found her spot in Highgrove, off Thomasville Road. The family downsized from a 4,200-square-foot house to one with 3,100 square feet. She has not regretted the decision.

"The whole thing worked," she said, "I believe if you look, there is still quite a variety of houses available. Patience paid off."