What Bubble? Florida's Vacation Home Market Defies Predictions of Falling Prices
The latest figures show selling prices of vacation homes in Central Florida have not fallen during the last twelve months. Buyers are coming back, and we are seeing the first signs of a return towards a normal market. The predictions of the 'Housing Bubble' advocates don't hold up to scrutiny.
Orlando, FL (PRWEB) May 10, 2006 -- For the first time this year there are unmistakable signs of a return towards normality in the Central Florida vacation home market. Hightower Realty (http://www.hightower-realty.com) has been looking since the beginning of the year for an improvement in the weak market that followed the frantic sellers market of the previous two years. Until recently there was little cause for optimism, but now everything is starting to change. Agents throughout the area are reporting more requests to show homes for sale. Offers are starting to come in for some of the more realistically priced homes. And over-priced homes are disappearing from the market or being reduced in price down to more sensible levels.
Despite earlier predictions, it is becoming clear that selling prices for vacation homes have held up remarkably well throughout the recent strong buyers market, disproving the alarmist predictions of the 'bubble burst' advocates. The latest statistics show that recent market problems have had nothing to do with values, and everything to do with the absence of buyers.
Many reports over the last year have talked about the housing bubble bursting in the Central Florida market and in particular in the market for vacation homes. In our view there never was a bubble to burst.
It is true that average market prices had risen by over 25% a year for more than two years, and so it was tempting to think of this as an overshoot of true sustainable values, which would be followed by a major downwards correction. We believe that the rising price period was actually the correction, from unrealistically low values four years ago to values which now more closely conform to the national picture.
There has been a lot of confusion about how home values have changed over the last year. We have ourselves quoted a drop in market price of 10% from last summer’s peak, but it is important to realize that the statistics that we used to calculate this drop relate to asking price, not to actual price achieved. For the first three months of 2006 there were so few actual sales closed that it wasn't possible to derive any meaningful statistics on actual selling price changes.
Now that we have more data to work with, it is clear that the drop in listing price was largely irrelevant, as it simply reflected a decreasing number of sellers who clung to last year's belief that you can ask anything you like and probably get it. When we look at actual sales prices it is a remarkable fact that in the case of the Central Florida vacation home market there has been no reduction in home values over the last year.
Although this is counter-intuitive, the most recent numbers released in Hightower Realty's Market Report for May (http://www.hightower-realty.com/market-report-may-2006.htm) clearly show this to be the case. The statistics show the average selling price (not the listing price) of a typical 4-bed pool home on a representative sample of five of the larger vacation home communities spread through the region:
2005, January to June: $322,000
2005, July to December: $344,000
2006, January to April: $345,000
Hightower Realty anticipates a slow return to a balanced market over the rest of this year, which will probably continue into 2007 before there is any substantial increase in value of residential homes, either primary homes or vacation homes, in Central Florida. On the other hand, we don't expect any fall in values over that period either, and it is likely that the available inventory will begin to stabilize over the next three or four months and then start to fall back again to a more typical level.
Buyers will come back to the market in increasing numbers, but this time round they will be genuine buyers, not short-term speculators. Few buyers will write a contract on a new home or a re-sale property now in the hope of taking a quick profit. This will keep the market activity well below what we were seeing a year or two ago, but in the longer term this can only be a good thing for the market, and for buyers and sellers alike.
One effect of the slow return to a more balanced market will be that the substantial discounts currently offered by developers of some of the new vacation home communities like Citrus Gardens (http://www.hightower-realty.com/citrus-gardens.htm) and Cane Island Resort (http://www.hightower-realty.com/cane-island.htm) are likely to disappear over the next few months, with pricing returning towards the levels set when the projects were first announced last summer.
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