Look at this quote from a Sarasota Herald Tribune story: “Pettit bought the 996-square-foot house in 1990 for $70,000 and is hoping to sell it for $469,000.” Sarasota’s Hartland Park, where this little home is located, is the kind of well-kept, modest neighborhood where cops, teachers, nurses, and other middle-class workers like to live and raise their children. And if houses there sold for $150,000 or $200,000, most new buyers would probably be middle-class workers. But at $469,000 — or even at the $387,000 price the article says was Pettit’s most recent offer — no one with a normal, work-derived income can afford to move there.

According to local real estate experts, the number of “for sale” listings around here has tripled in the last year, while the number of sales per month has dropped by half. Meanwhile, 30 year mortgage rates for people with decent credit have gone from around 5.75% in 2004 to over 6.6%, and may hit 7% by the end of the year.

Housing prices in the Sarasota/Bradenton area are going down. Some say the median housing price here has dropped by $40,000, $50,000 or even $60,000 since last summer. It’s hard to get exact figures since in many cases the “price” hasn’t gone down, but buyers’ incentives have risen. My wife likes to get into the car and cruise “for sale” houses now and then, and all the new $300,000+ developments seem to be offering rebates, plasma TVs or other goodies if you’ll only — please, please, please — buy today. These incentives don’t show as lower prices in legal records, but in reality they mean the seller gets a lower net amount from each sale.

My advice to anyone planning to move here is to delay your home purchase. Rent a place for the time being. There are plenty of investors around here who bought houses for way too much a year or two ago, and are happy to have some of their overhead covered by rent — and don’t be afraid to negotiate rent if the asking price is $1200 per month or more, because credit-worthy renters in that price range are not easy to come by in this part of the world.

Once you’re here, in your rental house, keep your eyes open for real estate auctions and other desperation sales. You’re going to see plenty of them in this area over the next year or two. Look at a lot of normally-listed and “for sale by owner” houses, too, and don’t be afraid to offer less than the asking price if you see one you like. I don’t mean $5000 or $10,000 less than the asking price, but 20% or 30% less. Many sellers here bought their “$300,000″ or “$400,000″ houses 10, 20 or 30 years ago for well under $100,000. Sooner or later you’ll run into one who needs to cash out immediately and is willing to sacrifice some profit to get the deal closed fast.

Basic advice: Get pre-qualified for a mortgage. That is, talk to some mortgage brokers and banks, and make sure your own finances and financing arrangements are in order so that you can move fast when you light on a place you like that the owner is willing to sell at a semi-rational price in return for a quick deal.

More advice: Whatever the current homeowner insurance cost estimate is on any house you look at, double it when you calculate your monthly housing costs, because the Florida homeowners’ insurance situation is a major mess — and getting messier every year. And make sure you get a tax estimate from the county tax appraiser instead of looking at what the seller has been paying. If he or she actually lives in the place you’re buying, the property taxes are based on the previous sale price plus a maximum increase of 3% per year. You, though, will start over, with your taxes reflecting the home’s new — much higher — valuation.

At some point there will be a perfect buyer’s moment here, when housing prices have gone down enough (probably 30% to 50% lower than current levels) to make buying a home financially attractive, but interest rates haven’t gone up enough to put “affordable” homes out of your reach.

I cannot predict when that moment will be, but I strongly suggest buying between now and 2008, because once Bush and the other Republicans are out of office, we will need to start paying back the debts they have run up. That is going to mean massive inflation, which will lead to much higher mortgage interest rates than we have now.

I remember when, during the Reagan financial debacle, mortgage rates hit 18%. The same thing could easily happen again. And if it does, you want to be safe and snug in a house with a fixed-rate mortage at single-digit interest, not renting from a landlord who will jack your rent 15% (or more) every year “to keep up with inflation.”

This entry was posted on Friday, May 26th, 2006 at 9:20 am and is filed under Bradenton/local, Business. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.