January 19, 2008

View from Florida, 2007 (Part IV)

(c) copyright View from Silicon Valley, 2008.  All rights reserved.



Our annual Florida visit is not complete without a tour --or three-- of local real estate developments and the local "spin."  The third stop on our 2007 real estate tour was the same small suburb midway between Altamonte Springs, which used to be the northern edge of metro-Orlando, and Daytona Beach.

In, "View From Florida (Part III, RE Guts Game)" (http://www.viewfromsiliconvalley.com/id290.html) we observed the median family income for this suburb is only $36K (vs. $64K in Oviedo or $76K in San Jose) with 13%+ of families living below the poverty line.  Even so, we pulled fliers on 10 houses averaging a cool $473K (13x the local median income) in the space of maybe an hour.

Last year's "opportunity" list resolved as follows:

Size   Features    Price $/SqFt Sale$   Date     Zest   %-chg
1,958  4/2/pool    $354K  $181  $335K  03/06/07  $322K   -9%
1,985  4/2/none    $375K  $189  $355K  09/10/07  $349K   -7%
2,234  4/2/none    $364K  $163  $331K  06/28/07  $348K   -4%
2,400  4/2/pool    $449K  $187  $428K  06/07/07  $412K   -8% 
2,446  4/4/none    $398K  $163  none!   ...      $374K   -6%
2,446  4/4/pool    $469K  $192  none!   ...      $394K  -16%
2,600  4/2.5/pool  $359K  $138  $310K  07/19/07  $345K   -4%
3,005  5/3.5/pool  $569K  $190  $520K  05/10/07  $496K  -13%
3,621  4/3.5/none  $699K  $193  none!...no listing?...   -??
3,686  6/3.5/pool  $695K  $189  none!   ...      $585K  -16%

According to Zillow, each property is "worth" less today than at this time last year. (A raw average of these nine properties shows a loss of over 9%.)

In the opposite of what we see here in Silicon Valley, the highest-priced houses tend to be down the largest amount.  This phenomenon suggests Orlando-area buyers are increasigly unwilling and/or unable to aggressively undertake financing and this is affecting prices.

Of the six houses which did manage to sell, five are "worth" less today than the new buyer paid.  The lone exception was listed at, by far, the lowest price at $138 per square foot.  Even so, it sat vacant for 10 months and closed another -14% below that already-lowest asking price at $119 per square foot.

Admittedly, there are obvious "issues" with using Zillow for the "worth" of these houses.  In a steady market, Zillow's use of comps to create a Zesstimate should be a useful tool.  However, in rising, and now in falling, markets, Zillow's methodology tends to trail actual results.  (In other words, in a rising market Zillow's estimates are too low and in a falling market their estimates are too high.)

In short, actual sale prices for these houses will probably be lower than the Zillow's current Zestimate.

Conclusion:
Orlando-area prices are undeniably falling.  Even sellers priced below comps can expect to wait several months to find a willing and able buyer.