Thursday, June 26, 2008

A Bad Time to Buy

Last weekend there were several articles in the St. Petersburg Times about the falling economy and the housing slump in the Tampa Bay area. One particular article was about Hernando County; the county where I currently reside. It made the front page of the Times last Saturday.

It was a well researched article by Times Staff Writers Chandra Broadwater and John Frank. The Headline read “Housing Slump slams Hernando County”.

Here are some interesting facts and figures about the recent economic downturn in Hernando County from this story (Please note that there are 67 counties in Florida).

• The second-highest increase in the number of households receiving food stamps from May 2007 to May 2008, at 58 percent.

• The third-highest unemployment rate in April, at 6.6 percent.

• The fourth-highest rate of foreclosures in May from the previous year.

• The fifth-highest jump in students receiving free or reduced-price school lunches from March 2007 to March 2008.

And these numbers are accelerating as I write this Blog.

My son-in-law and daughter (hereafter referred to as “the kids”) decided to look at homes, in Hernando County, in the fall of 2004. They were tired of “throwing away their money” on rent. I thought that this was a good idea. But why look in Hernando County? My daughter explained that the same size house in Pinellas County (St. Petersburg-Clearwater area) was selling for $50,000 to $70,000 more with smaller lots. This made sense to me, but I did mention the fact that most of son-in-law's work (he is a plumber) was in Pinellas County.

At that time there was a construction boom going on in Hernando County. The kids were primarily looking at new homes in new subdivisions. I looked at some of the brochures and I couldn’t believe what was being offered for under $200,000 on a quarter plus acre lot. Swimming pools (screened in), fireplaces, vaulted ceilings and marble countered Kitchens and Bathrooms.

By April of 2005 these houses had gone up in price by at least $50,000 and there was at least a nine month wait for occupancy. This put the home that the kids wanted out of their financial range. In May 2005 the kids began to panic. Not only were prices escalating but it was also rumored the Apartment Complex that we lived in was being sold and being turned into Condos (the rumor was true). So they decided to look at older homes (built in the 1980’s).

The house they found had 2000 Sq Ft of living space situated on a well landscaped half-acre plus lot with a screened-in swimming pool, for under $200,000. The kids put in a contract and went to settlement in July.

Now let’s jump ahead to 2008.

The current market value of this house is about $30,000 less than what the kids paid for it. Although they have made several improvements to the house and the property.

The new construction has virtually ceased. Developers have reduced prices on finished homes (vacant) as much as $50,000 just to recover some of their losses. Investors (speculators) who had bought homes during the boom (looking to make a fast profit) are letting their properties go into foreclosure. Nobody is buying.

What happened?

First the real estate market began to fall apart in 2006. Then the job market began to decline (the two major industries in Hernando County were the construction industry and the service industry – Wal Mart is the largest employer in the County). Finally gas went up from under $2 a gallon (regular) in the summer of 2005 to nearly $4 per gallon in 2008.

Who is to Blame? You have to blame someone, it’s the American way!

Personally I blame President George W Bush, his brother Jeb (former Governor of Florida), the Congress (both State and National) and the apathy of the average American citizen like me.

The Beach Bum

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Blogger Dancing Buffalo Ranch said...

Your Hernando County Blog was very interesting and well put & thought out. We too live in Hernando (Brooksville) and we have a ranch; (Dancing Buffalo Ranch). Bought it two and a half years ago; invested much money in it & the various critters... our business took a downfall and the new ranch business we attempted didn't work. we too looking at the foreclosure and/or Short Sale; Truly tragic for us. For those of us that bought on the tail end of this "Bubble" that popped...hope somehow we'll all get a break... be it from that taxes or insurance or even the bank (fat chance there)but what else can you do when one is upside down in value vs. mortgage+. ??

Thu Jun 26, 09:51:00 PM  
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