One of the great problems faced by Manatee County over the past few years has been real estate speculation. Price runups of close to 30% per year have made it nearly impossible for working citizens to buy houses, and the condomization of mid-market apartment complexes has made rentals scarcer and more expensive. But, if this Herald-Tribune article is telling the truth, it looks like the tide is turning. Finally.

Three times as many properties for sale as there were at this time last year!

Sales volume (number of units sold) down by 23.1%!

These are not happy numbers if you’re a real estate salesperson or a real estate speculator, but for the rest of us they’re a reason to dance with joy.

Every product has a “price point” above which sales fall off because customers won’t (or can’t) pay that much. In Manatee County, that price point for real estate may be somewhere between last January’s median house price of $255,000 and this January’s median house price of $326,000.

The median condominium price here has gone down 6.6% in the last year, from $180,000 to $168,200.

One major “skew” in housing price figures that is rarely mentioned in newspaper real estate articles is that ever-more-deluxe new houses and condoms on the market tend to drive the median price figure upward even if prices on older homes don’t go up much — or at all. Since virtually all new houses for sale in Manatee County have asking prices over $300,000, while not many years ago $200,000 was considered near-mansion money around here, I suspect that new housing price insanity accounts for a majority of the recent increases in reported housing prices hereabouts.

Another factor I’ve sensed but haven’t had time to research properly is huge increases in “bottom of the barrel” house prices. In 2001 or 2002 you could buy shacky little houses in undesirable Bradenton or Palmetto (or even Sarasota) neighborhoods for as little as $45,000, and you could score a run-down one-bedroom or two-bedroom house trailer, including land, for as little as $25,000. Investors have since snapped up most of the cheap houses and either fixed them up and raised rents or rented them to our growing horde of illegal immigrants at inflated prices without fixing them up. And because cheap houses are now hard to come by, house trailer prices have also gone up — if they include land, that is. Due to recent problems with mobile homes on rented land, I don’t think many sane people are still willing to spend much for one sitting on a lot a speculator can (and likely will) sell out from under them.

What happens next?

Manatee County real estaters are starting to sound like stockbrokers sounded when the dot-com boom turned into the dot-com crash. Some selected quotes and paraphrases from here and there:

“It’s just a slowdown in the rate of increase. The market is still strong.”

(From November 2005) “Things will pick up in December and January when the Winter people get here.”

(From January 2006) “Things will pick up at the end of Spring, when families think about moving.”

“There may be a few temporary price adjustments, but this is still a great time to buy.”

“This area is just catching up to other parts of Florida, so real estate here is still a great value.”

“No matter what, real estate is your best investment. Real estate never goes down; they aren’t making any more of it, you know.”

“Real estate prices here are softening temporarily only because the newspapers and TV say they’re going down. If the media would stop focusing on bad news, prices would go back up.”

The reality here is that — at least according to those dastardly media gloom-sayers — somewhere between 30% and 40% of all housing sales in Manatee County over the last two years have been to investors, not people who wanted a house to live in.

My wife and I first noticed the huge percentage of investors in the local real estate market in 2004. We’ve seen little change since then, at least in our neighborhood. We are still the only actual homeowners who have bought on our block since 2004. All other sales here in the last two years have been to speculators. The one ray of hope is that some of them are finally starting to fix up their properties a little, at least on the outside, because the city is jamming them hard about (visible) housing code violations.

Now that the real estate market is “slowing down” (or collapsing, depending on how you want to look at it), we’re seeing a new crop of “for sale” signs sprouting in nearby front yards. Some of the prices seem a little steep to us, but I suspect that sellers might be amenable to offers significantly below their asking prices because some of those homes have been on the market for a good while. And with the city cracking down on code violations, combined with big property tax increases on homes not occupied by their owners (”homesteaded” in Florida parlance), rental property ownership here is gradually becoming a less desirable investment.

Another thing that could drastically reduce housing prices in Bradenton’s more modest neighborhoods would be immigration law enforcement. I estimate that as many as 1/3 of our neighbors are illegal immigrants. Remove them from the rental market, and most of our worst local slumlords would be forced to sell.

So if it seems like I’m saying, “Wait to buy because prices are coming down,” I am. Sort of. Bradenton’s Village of the Arts is still a great place to be, and houses here will continue to command premium prices because this is one of very few places in Florida where you can legally run a retail business — an art gallery, a bookstore, a pottery studio or a cafe, for example — out of your home. If you have a little money (like from selling your New York or New England home for an inflated price) and always dreamed of owning a small arts-oriented business, $300,000 is probably not unreasonable for a place in the “developed” section of the Village (North of 13th Avenue). And there are less-expensive places — between $120,000 and $250,000 — still available in the newer, less-known “South” section between 13th Avenue and 17th Avenue that have not yet been converted into businesses but easily could be converted with a little imagination. With a little patience you can still get a decent place here for a not-outrageous price.

And outside the Village of the Arts, in other central Bradenton neighborhoods near Tamiami Trail, there are deals galore if you are willing to do some fix-up work and don’t mind being a bit of an urban pioneer. You can expect to pay between $100,000 and $200,000 for places that may not be great but are liveable (with some work) if you are a sharp buyer.

The trick to buying property in Manatee County right now is to stay calm instead of getting caught up in a “buy today because I won’t be able to afford to buy tomorrow” mentality. Remember, with three times as many properties on the market as there were a year ago (and fewer sales), this is no longer a seller’s market. Some of the speculators who got interest-only mortgages or played other financial tricks based on the idea that real estate prices here would keep going up, up, up are starting to get desparate. And real estate salespeople are hungry to make deals now, which means they are going to lean on sellers harder than they used to.

So don’t be afraid to look at Manatee County as a place to live. Don’t buy a brand-new house right now; there are more permits for new houses being issued than new houses being sold, so that market is going to get flooded — and prices will come down as soon as builders realize that most people don’t really need (and can’t afford) a 3500 square foot, $500,000 McMansion but would be happy with a 1500 or 2000 square foot place for $200,000 or $250,000.

Instead of a new house, look at older ones — or at ones that are fairly new but were bought by speculators who are now in trouble.

And, more than anything, don’t rush! We’re over the housing price peak and heading back toward reality. If you don’t get “this” house today, an even nicer one will come along tomorrow or next week — and it may be an even better value than the first one you liked.

This entry was posted on Thursday, February 9th, 2006 at 6:04 am and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.