Peter K. Murphy, 30, is the founder of Home Encounter LLC, a Tampa-based real estate brokerage and research firm, and the author of the monthly Home Encounter's Residential Real Estate Report. His firm sometimes analyzes the Orlando market. He spoke recently with Sentinel staff writer Mary Shanklin.
CFB: You report that ordinary residential values are rising, even while values fall on bank-owned houses. How do those two things reconcile?
6 percent from January. Banks are trying to clear property off their books as soon as possible, and bank-owned prices reflect that. ... The rest of the market is profit driven, and that's what is edging up prices.
CFB: Aren't appraisers using bank-sold houses for comparables?
They are. The appraisers are using those essentially to determine the value of real estate. Forty-seven percent of all sales in
Orlando are distressed; in some places, those can represent the only sale on which values are determined. Banks require that you use sales within the last six months, so your relatively nice home is being compared to bank-owned properties that sold for 53 cents on the dollar.
CFB: How does the Orlando market compare with Tampa's?
They were really similar at the turn of the year. [But then] Orlando trended a little higher in foreclosures than the Tampa Bay area, primarily because there was so much new construction. We had such a boom of development in the Orlando area than in the Tampa Bay area, and that led to a higher rate of foreclosure. Orlando had about 10 percent more distress sales by volume than Tampa.
CFB: Will Orlando take longer to recover than Tampa?
Yes, unless there is some institutional activity in the condo market. You can have an institutional buyer come in and buy those. In the Tampa Bay area, we tend to see single-family buyers.
CFB: You report that about one-third of sales in the Tampa area in June were distress, but nationally the numbers are more like half, and Florida has one of the highest rates in the country. So how can you cite only a third for the Tampa area?
What we saw in June was really an anomaly. People are theorizing that banks are holding properties off the market so they may be able to keep the prices from declining further. We really have a glut of foreclosed properties sitting on the sidelines that have not been released. Banks are waiting on the market to recover.
CFB: Your report cited month-to-month comparisons of sales, but isn't it more common to report year-over-year numbers?
It is definitely more common, but when we get these kinds of periods, with a really busy season and a lot of activity, it's not so bad to look month to month. We usually weigh year-to-year over month-to-month, but these days it's hard to say one way of looking at it is better than another.
CFB: Who is buying homes?
Everyone keeps saying that first-time homebuyers are the ones driving today's market, but sales data is not convincing. Forty-one percent of sales through the end of May were cash transactions — in all likelihood, these are investor buyers or repeat buyers taking advantage of bargains on the market. ... So it's a reasonable conclusion that investors are still driving the local market.
CFB: When will the market turn?
We do not feel like we've seen the turn. As bank prices continue to fall and conventional prices continue to rise, contrary economic forces are at play here. We really expect it to be about another 12 months before we see a real bottom in prices. Our regression analysis shows July 2010 — prices will stop dropping at that point. That, of course, could be thrown into the wind if the Federal Reserve majorly impacts interest rates with monetary policy. We are looking at another 12 months before we really hit rock bottom.
Mary Shanklin can be reached at firstname.lastname@example.org or 407-420-5538.