A Return to Sanity

Is sanity returning to the local housing market? Some preliminary indicators say it might be-and that's good news if you're house hunting. For most of 2005, new-home communities were faced with backlogs of sold but unbuilt homes. And would-be buyers were taking numbers, hoping that luck would be on their side and give them an opportunity to put down a deposit.

Nobody thinks that's a healthy—or a sustainable—situation. As Bill Silliman, president of the Home Builders Association of Metro Orlando, says, "We always come back to equilibrium."

In recent months, sales of existing homes have actually dropped a bit, although the rate remains torrid. Price appreciation has leveled off to something resembling reality. And anecdotal evidence seems to indicate that that many new-home communities must now do more than simply plant a sign in the ground to attract shoppers.

Part of this subtle but noticeable shift in the market is a result of new-home inventories being worked down. Part of it is a result of an upward tick in mortgage interest rates. And part of it is sticker shock, as the median price of both new and existing homes in Central Florida nears the $250,000 milestone.

For buyers, this means more choices and moderating price increases. But it also means builders are going to have to work a little harder to earn your business—especially if the subdivision down the street is working a little harder as well.

What it doesn't mean, most experts insist, is that the Orlando housing market is headed for a fall. Some Florida markets, where appreciation has exceeded 30 percent per year over the past couple of years, may well be on the cusp of a bubble that has the potential of bursting. But Orlando doesn't appear to be in that situation.

For example, Credit Suisse First Boston recently released a list of the nation's top 10 metro areas with the greatest risk of a future drop in home prices—and Orlando wasn't on it. However, three of the 10 were Florida cities: Sarasota (No. 7), Jacksonville (No. 9) and Naples (No. 10).

Still, even in those markets, economists admit it would take a significant rise in mortgage interest rates, combined with sagging job creation and slower growth, to trigger a serious problem. And the chances of those things happening anytime soon are remote, at best. Will all those folks from the Northeast and the Midwest suddenly decide to stay put and enjoy their snowstorms? Will golf courses, beaches, lakes and rivers lose their allure?

I don't think so, either.

So, Orlando home shoppers, rejoice. Over the next 12 months you'll have more choices than you had during the previous year. You'll be able to move in more quickly. And you'll be paying prices that, while high by historical standards, are a bargain relative to the rest of Florida's major markets.

If you were waiting until the market calmed down a bit before jumping into the fray, I'd say it's time now to jump.