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Investors drive hot housing market

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A growing pool of real estate investors sends demand soaring as local home sales set new records this year. By MICHAEL VAN SICKLER Published July 17, 2005 TAMPA – Despite forecasts that Tampa Bay area home sales and prices would cool from last year’s red-hot housing market, 2005 is shaping up as more frenzied than ever – particularly in Hillsborough County. By the end of May, 14,118 homes, condos and townhouses had been exchanged in Hillsborough, a 30 percent spike over last year’s record pace. Half the homes fetched more than $186,500 – an all-time county high, according to property appraiser records. But it’s not just a growing population that is sparking the sales explosion. Experts say that, like most of Florida, much of the recent surge is the work of an emerging breed of buyers – investors – who are inflating demand and changing the rules in local real estate. Since 2004, 40 percent of homes sold in Hillsborough County weren’t listed as primary residences by their new owners, an indication that many are investors, said Tim Wilmath of the Hillsborough County Property Appraiser’s Office. But it’s hard to fathom the investor phenomenon because it’s not clear how many there are. The Florida Association of Realtors doesn’t track investors. Some properties not listed as primary homes may be owned by people who haven’t filed the necessary paperwork yet. Many purchases could be second homes, another growing trend in the Florida housing market, said Marisa DiNatale, an economist with the consulting firm in West Chester, Pa. “Tampa is one of the more popular cities in the country for second homes,” DiNatale said. “There’s no good way to make a distinction between these purchases and investors.” Still, it’s hard to deny that investors are becoming ever more prevalent, she said. “Tampa Bay, like the rest of Florida, has affordable housing when compared to other coastal areas in the country, such as California and Washington,” DiNatale said. “In that sense, it’s ripe for investment.” You might think this would have builders smiling, but the speculators complicate their cost and price calculations, and have some developers balking at the trend. “We’re moving toward a market where builders want to do something about speculators,” said Federico Stubbe, a developer who’s building a 102-home project in Wimauma called Lake Toscana. “It’s becoming just too risky.” At issue are profit margins. Builders often find themselves locked into preconstruction contracts, often with speculators. Then the developer’s profits go down as the cost of building materials rise. The speculator, meanwhile, floats with the market and is free to resell the finished house at a higher price. Stubbe also said some builders don’t like it when investors buy their houses but don’t move in. The development takes on an empty, ghost town feel that isn’t good for sales to people shopping for a friendly, suburban neighborhood. To discourage absentee investors, some builders have begun inserting clauses in preconstruction contracts that prohibit buyers from flipping homes or condos after closings for at least a year, unless they agree to split the profits. But many now accept speculators as permanent players in the market, whether they’re investing in high-end condos in the Channelside district, or renovated bungalows in Seminole Heights or yet-to-be built waterfront homes in Apollo Beach. Some see a benefit for buyers from the speculation frenzy. “Builders have such a backlog of buyers that they’re selling homes to a waiting list,” said Craig Beggins, president of Century 21 Beggins Enterprises. “The couple from Michigan who wants to buy their dream house would have only one option: to wait 10 months because there’s no inventory. Investors list homes once they’re finished, so buyers can get a house immediately. They’re filling a void in the market.” * * * Whatever their worth, the investor ranks appear to be growing. One such speculator is Elli Armstrong, who ditched a career for the lure of house trading. Just two years ago, Armstrong was working in Baltimore doing advertising and marketing for an upscale restaurant chain. She sought a similar job in Tampa when she moved – until she noted that waterfront property sold cheap around here. “Compared to how much I knew they were selling for in Baltimore and New York, these properties were real depressed,” she said. So she bought a condo in Ruskin for about $232,000. Armstrong didn’t upgrade it and it’s now under contract for more than $400,000. A home she bought in Mirabay for $525,000 about 18 months ago she now has under contract for about $650,000. She has become a Realtor and bought five other properties. “It’s an unbelievably hot market,” Armstrong said. “But people think it’s easy, and it’s not. It takes a lot of work and you need the care and diligence of a Realtor to make sure it goes smoothly.” Armstrong couldn’t have made many of these deals without low interest rates and mortgages that don’t require principal down. She said risk isn’t a concern as long as she carries no more than five properties at a time. “I don’t want to be spread too thin,” she said. “My advice to anyone doing this is, “Don’t get greedy.’ ” These are lessons the 27-year-old said she has learned in her brief real estate career. “I majored in advertising and marketing in college,” she said. “I never thought I’d be doing this. But I learned you can make a lot of money.” * * * How much longer can it last? Everyone, from Yale economists and Wall Street analysts to your neighbor and uncle, have an opinion on when the so-called housing bubble will burst. Sales figures suggest no end in sight for Tampa Bay. By May, 10,778 homes were sold in Pinellas County, a 10 percent increase and a new record, as well. Only Pasco County showed a decline in the number of homes sold – 17 percent – but officials said they’re not finished processing deeds that came in after March. Once those are counted, they expect to see a jump over last year’s sales, said Mark Gallo of the Pasco Property Appraiser’s office. And in all three counties, average home prices have climbed to record heights. Pasco homes now sell for an average of $185,933, a 15 percent uptick from last year at the same period. Pinellas prices have reached $249,286 – a 21 percent jump. Hillsborough’s more modest appreciation of 11 percent suggests its housing market is the most balanced of the three, said Warren Weathers, the county’s chief deputy property appraiser. “Hillsborough is the central business and labor community in Tampa Bay,” he said. “There’s still lots of open land available, and you’re seeing that get developed right now.” Indeed, in just the past year, the county lost more than 20,000 acres of farmland to development – a decline of about 11 percent. But much of that land will take years to develop. It can take that long to get the permits necessary to build homes on rural or vacant land. And that land needs to have adequate infrastructure like roads and sewer lines to make it an attractive venture. “I’ve got a line of builders and developers looking for land right now,” Beggins of Century 21 said. “They say, “Craig, if you know of any land we can build on, let us know.’ ” “Demand is outstripping supply. In Miami, they’re building high-rise condo towers to make up for it,” said DiNatale, the economist. “That’ll happen (in Tampa Bay) too. When you throw investors into this mix, that only makes it more volatile and uncertain.” But real estate agents like Beggins say they’re bullish on the next few years. “Tampa has so many amenities, from three major sports teams, one of the best airports, a great downtown, wonderful weather and excellent roads and highways,” he said. “What I’m saying is, the rise in price isn’t where it should be yet. It can only go up.” Michael Van Sickler can be reached at or 813 226-3402. Source:
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