TAMPA, Fla. – May 18, 2009 – Ray White thought now was the perfect time to help his daughter buy her first home.
Home prices are more affordable than they have been in years, interest rates are low, there are plenty of homes on the market, and the federal government is offering an $8,000 tax credit.
But because of one problem after another, every house they find seems out of her reach – even though she’s approved for a loan and has a downpayment.
“The other night, she just broke down and cried,” White said, noting that they’ve looked at more than 100 homes. “I actually have this feeling right now that it’s almost impossible for her to buy a house.”
That’s partly because the Whites are competing with investors who often pay cash and then flip the property for big profit. They typically won’t sell to those getting an FHA loan, which are very popular among first-time homebuyers.
Situations like this are becoming commonplace, real estate agents and buyers say. And that could be a serious problem.
In the midst of the worst housing downturn since the Great Depression, the real estate market desperately needs buyers to gobble up homes that have been sitting on the market for months.
The median home sales price in the Tampa metro area was $130,800 during the first quarter. Compare that to the market’s peak median sales price of $239,600 in June 2006.
Meanwhile, the area’s foreclosure rate climbs and many homeowners find themselves trying to make deals to persuade lenders to agree to a short sale instead of losing them in foreclosure. This means the lender allows the home to sell for less than the mortgage.
The lower prices and desperate homeowners have lured buyers off the fence. Many of the buyers, though, are investors.
One way for them to make cash quickly is to file a notice of option to purchase the property at a low price at the county courthouse. This gives the investor time to market the home for sale while they negotiate the short sale with a lender.
Once a buyer willing to pay more is found, the investor buys the home and sells it, usually on the same day.
The problem occurs when so many of the investor’s potential buyers are seeking loans that forbid flips. More and more lenders say they won’t approve such deals.
Good deals out of reach
In the Whites’ case, home after home is locked up in an option contract. The Whites’ real estate agent has tried to negotiate with some of the investors but have found that FHA won’t fund loans on homes that are being flipped.
“We keep reading about all the good deals out there,” White said. “But that’s not true if you can’t buy the homes.”
While it’s clear this is frustrating for first-time homebuyers, what does this mean for the health of the Tampa Bay area’s troubled housing market? If investors are buying the homes and selling them, isn’t that a good thing – no matter who’s buying them?
Not necessarily, says Chris Lafakis, an economist with Moody’s Economy.com.
Recovery may take longer
If willing and able buyers are turned away while investors search for other buyers, homes could sit on the market much longer. That could make the housing recovery process much longer, Lafakis said.
“The faster we can work off inventory, the better,” he said.
Anybody watching our housing market knows that.
And that makes it all the more frustrating for buyers, such as George Russell. He recently found the perfect home in Valrico. It’s a short sale, and the asking price was just right.
He offered to pay the full price only to learn it was locked up by an investor with an option contract. Russell is obtaining FHA financing and therefore can’t buy the home.
“At first, I thought someone had beat us to it,” he said.
“But when I found out about the investor, it kind of made us mad, disgusted. It was very puzzling.”
Copyright © 2009 Tampa Tribune
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