The Truth About the Housing Market

If you were to take everything you read in the newspaper at face value, you'd think the so-called housing bubble had not just burst, but exploded in our faces. But don't believe it for a minute.

First of all, unlike some other superheated markets, Northeast Florida never had a housing bubble to start with. Thus, there was no bubble to burst. What we did have was an aberrant 2005, during which a variety of factors combined to create an unsustainable situation.

In fact, the current situation is a "slowdown" only when compared to one out-of-whack year. Taking a longer view, it's clear that the market is simply returning to normal. And that means steady growth and solid appreciation.

Bryan Lendry, president of Brylen Homes and a past president of the Northeast Florida Builders Association, has a great analogy. He says that if you compare all golfers to Tiger Woods, then even Phil Mickleson looks like a hacker.

"People who put an overly negative spin on what's happening don't understand the dynamics of the housing industry," Lendry says. "But because of these misperceptions, we've got buyers sitting on the sidelines until their current homes sell and we've got builders who aren't starting new homes until the buyers come back in the market."

Lendry has done his homework. He hired a research firm, Metro Market Trends, to compile the numbers-and he shared them with us.

A dramatic illustration of the disconnect between the doom-and-gloom media coverage and the reality of the situation can be seen in a graph plotting the number of new homes sold in Northeast Florida, by quarter, since 2001. The chart also plots mortgage interest rates, unemployment rates and building permit volume.

It certainly doesn't take a Ph.D. in statistics to see that the line representing units sold shows consistent growth over time. There's a spike in 2005, but the first two quarters of 2006 outpaced 2004, which was a record-setting year.

Unsold inventory is up, but Lendry says that's because some sellers were deluded by unrealistic appreciation recorded in 2005, and have priced their homes above market value.

In fact, Lendry commissioned appraisals of three randomly selected resales and found them to be listed at $50,000 to $60,000 more than their actual value. Two of the three were subsequently reduced to a more reasonable price and sold quickly.

In 2005, a convergence of low mortgage interest rates, spiking construction costs due to materials and labor shortages and a gold-rush mentality on the part of amateur investors buying homes in hopes of flipping them for a quick profit threw the market out of equilibrium. Now, reality is setting in-but reality is a good thing.

So, if you're selling your home, price it realistically and it will move. Then you can jump into the market and buy that new home you've been dreaming of. Unlike last year, you'll find an array of choices in all price ranges. And you'll find the kind of solid value that the Jacksonville market has long been known for.

Notes Lendry: "It's good to take a pause. This is a healthier situation for builders and buyers."