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July 26th, 2010 2:10 PM by David W. Welch
New home sales numbers came out this morning and they were much improved over last month, but still very slow compared with past years. At the very core of the housing bubble was the tremendous over building that took place between 2004 and 2006. There were easily a million too many homes built nationally in that time period. Couple the over building with way too easy credit terms and, boom, here we are today cleaning up this mess. Here in Orlando we are cleaning things up from the bottom up. If you look at our numbers, our market is being dominiated by first time buyers and investors. So far this year just over 50% of all sales have been cash purchases. It is not a big stretch to assume most of these are investors bargain shopping.
Nationally, the median sales price is over $180,000, but here in Orlando it is running around $110,000. That is because investors and first time home buyers are the bulk of our marketplace right now. Both are snapping up bargain priced foreclosures and short sales at a brisk pace. The homes in the middle price ranges are not faring so well. Sellers have seen their equity eroded, and there are few buyers who can afford to move up. Add to the fray, the lawyers on television every six minutes telling people to call them about a "strategic default", and it looks like we could be cleaning up things for a while.
The good news is that unemployment appears to slowing turning around, and there are still a lot of great things going on in Orlando. I have heard a statistic that 95% of Americans will visit Orlando in their lifetime. If you have been to the new Wizarding World of Harry Potter at Universal, you would swear they are all here right now. The third largest university in the nation is right here; the University of Central Florida boasts more than 52,000 students, and is home to a new medical school. The new medical school is part of a world class medical city that is developing in the Southeast part of Orlando. Economists estimate the economic impact could be on a par with Epcot opening back in the 80's. Downtown has a new Amway arena opening soon, and the old arena is slated to become a major hub for digital media. As I have said many times before "jobs equals rooftops", and all of these initiatives should add jobs to the area.
I am looking for continued strong sales in the 2,000 per month range though September and December will probably fall a little shy of that number. I know these numbers are lower than what we have experienced in the first half of the year, but the Fall tends to be a slower sales period. If employment begins to finally improve, prices will likely come up a bit too. As long as employment growth remains slow, prices will likely remain low for some time. In other words, I am not looking for any big changes just yet.
David Welch Real Estate Optimist, Orlando Real Estate