Realtor Roundtable

We talked to local residential real estate experts to answer key questions about the state of the market in Gainesville today and how it might look in the near future.

Four years have passed since the real estate market crashed locally and nationally. With recent reports indicating some increases in sales and prices, both in Gainesville and in many parts of the country, new questions arise:

– Is it time for sellers to become optimistic?
– With both prices and interest rates low, why aren’t more people buying?
– Is the influx of new residents adding more buyers?
– Are foreclosures and short sales still dragging down prices?

The Business Report turned to Lauretta Fogg of Coldwell Banker M.M. Parrish Realtors, Betsy Pepine of Pepine Realty and Tommy McIntosh, president of Prudential Trend Realty and Trend Management Solutions, for the answers to these questions and more. Their answers might surprise you.

1. Are more people in a position to buy right now?
Pepine: More people are able to buy, and they’re able to buy “more house” because prices are down, but buyers are not taking advantage of that. They are being conservative.

They still ask, “What’s the maximum amount I can qualify for?” But then they step back and say, “I want to take a step down.”

When you probe them, more often than not, they say, “If one of us loses our job, we still want to keep our house.” It’s been very enlightening that they’re not trying to max out what they can buy, given what they qualify for.

Fogg: Buyers aren’t necessarily saying, “Just because prices have come down and interest rates are down, now is my time to move up.” They’re staying extremely conservative. They’re happy to be in the home they’re in because they don’t know what the future holds.

Doctors and private business owners are feeling uncertain about the future. Even if they can afford a home over $1 million, they aren’t buying one. There are 20 houses priced over $1 million in Alachua County. Since January, three of them have sold, and they all closed just under $1 million. In contrast, in 2010, we had 10 houses close over $1 million.

"A lot of sellers who consider renting think they can just rent it for a year and ride out the market." —Bestsy Pepine, Pepine Realty

2. Do you see people remodeling instead of buying a bigger house?
McIntosh: There are some pretty significant remodelings going on. In general, our economy in this town is driven by the state budget, and there has been a lot of uncertainty in the state budget. When there is uncertainty, people tend to hunker down where they are until they feel a little more optimism or have a little more certainty.

There a lot of people who could be taking advantage of the low prices and interest rates who are choosing not to stretch.

3. How important is the influx of people moving here?
Fogg: With a few exceptions, they are the people who are buying. But I’ve lost sales to medical residents who were looking at other locations of a similar size, such as in North Carolina and Tennessee, because of our high property taxes. It’s not so much the principal and interest but the taxes that are added to that mortgage payment that hurt. It’s hard, because the taxes make the cost of living here look really expensive.

If people moving here have a home to sell where they’re coming from, they’re going to be renters. That scenario is making the rental market strong.

McIntosh: In the summer, there are folks who are getting job offers, and they have to find a place so they can be ready for school to start. Many of them are wanting to rent. In addition, we’ve had a couple of significant employers coming to town, and that’s starting to touch our market.

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1 Comment

  1. Dave Gibbs

    This is an interesting article and a nice service by the BRNCF (Chris Eversole) providing insight and perspective to all parties interested in our highly localized Gainesville Florida residential real estate market. All three individuals who were asked to contribute to this article are highly regarded real estate professionals in this community for good reason.

    The well informed consumer has grown much wiser these years since the real estate bubble burst late 2006, early 2007. During these last number of years since, the Inconvenient Truth made it’s debut and Al Gore along with the Intergovernmental Panel on Climate Change (IPCC) were awarded the Nobel Peace Prize for their effort(s) in bringing climate change (and what we are doing to ourselves) to the forefrunt. We also realized the extent that greed and complete disregard for the public’s interest damaged the very foundation of our democratic system and capitalistic economy as the Wall Street Meltdown (aka subprime mortgage crisis) happened in 2008 subsequent to the repeal (by our elected officials) of the Glass Steagall Act.

    The overriding question becomes “do we want to keep doing the way we have been?” and it appears the answer is a clear “No”.

    Pepine touched on it in question #1 by explaining that people seem to no longer be interested in buying and owning the biggest house in the neighborhood anymore, i.e. they are not interested in maxing everything out on a house. The question that is being asked by the consumer now as they line up on a significant home investment is “What is enough house for me….all things considered?”

    Relative to remodel vs. purchasing (bigger) posed by question #2 people have to ask themselves “relative to my property investment and my personal comfort/health can I remodel and achieve those goals or do I need to buy new (and better) technology?” Contrary to the premise of the question itself the market is showing those of us who are paying attention that it is no longer a matter of bigger is better…..and the traditional builders are being “shown the way” in this regard. Many people are now asking the fundamental question “what out there is worth buying?”, also, “Who is going to buy today’s traditional building technology 5-10 years out….I might be better off remodeling to today’s upgraded technology…..and that isn’t going to necessarily be granite counter tops”

    Regarding question #3, it is also going to be important to take a look at what type of person constitutes the “influx” into our developing and highly innovative culture here in Gainesville. Key word here……”innovative”.

    Question #4 is a stand alone consideration relative to the languishing seller’s market. The overriding question is…..how much is that rental going to be worth five years from now while all else (with the rental property) may remain the same. It may end up coming down to what the real property underneath the improvement may be worth to the discerning investor relative to the improvement (that sits on top of the ground in the form of a dwelling).

    McIntosh’s response to #5 is correct and it will be the consumer who corrects the bank’s ineptness and the overswing in the pendulum. The government under Greenspan’s guidance and the bank lobby messed things up, it will be the consumer in a stabalized economy that fixes it.

    Owner financing (#6) is both appropriate and prudent in times of rising or already high interest rates (a phenomenon that will definitely take place once again at some point in the future). A Purchase Money Mortgage given by the seller (owner financing) in some circumstances can be a very sound longer term financial decision.

    All participant’s answers to #7 were realistic, accurate and excellent advice for the property owner who currently may be looking to sell in this current market. Those seller’s who don’t “get it” end up losing a lot MORE money.

    With question #8, the potentially most revealing of all nine questions, Pepine came the closest with “the prices and what the builders are putting in to the homes” but came up just a bit short with what the builder(s) are putting in to those homes. Longleaf is a very well done and well laid out development fundamentally speaking. In short it is beautiful and a nice place to live with an active and pertinent HOA. Moreover there is one builder in particular that is doing very well in Longleaf and it is because the standards the product is being built to and the amenities included go far beyond wood floors and stainless appliances. One builder has pegged the contemporary consumer demand and is providing the high performance product. These Longleaf properties are a very good investment and the brisk sales pace demonstrates it.

    #9 is fairly obvious and thanks to the contribution of participants McIntosh and Pepine in confirming what the distressed market is about. Participant Fogg will most likely have more to contribute on this topic soon enough as more and more $750K+ jumbo loans (doctors and lawyers) go in to foreclosure (next on the agenda as the banks finish clearing the hidden gray market they created).

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