Move My Realty - Real Estate News

Slow real estate market creates dilemma for homeowners

LAKELAND – Aug. 17, 2007 – Jon Brock was sure Polk County’s rental home market would take off, just like property values did nearly two years ago.

In a typical real estate climate, higher home prices drive a greater demand for rental units, he said.

But so far, it hasn’t happened.

“It hurts,” said Brock, broker and owner of The Agency, a real estate and property management company in Lakeland. “It should be good but it’s not.”

Home renting just isn’t as affordable as apartment complexes and condominium units. Those sectors of the rental market are quite healthy.

Across Florida, about 40 percent of the homes purchased during the peak of the housing boom two years ago were picked up by investors looking to make quick money by turning around and selling the property, Brock said. But many investors were caught in a high-stakes version of hot-potato in the latter stages of the boom.

When the market went cold, those investors were left with high interest mortgages, exorbitant tax bills, large monthly payments and no buyers.

Their only option: Rent or suffer foreclosure. Selling isn’t usually an option if the investor’s purse strings are tight and time is of the essence.

Now those rentals have flooded the local market, giving renters a wide selection. But just like in the sales market, if they aren’t priced right the homes will remain vacant.

It’s a problem that property managers and Realtors have been struggling with: Getting investors to ask reasonable prices for their properties.

“The prices (of homes for sale) went so high that the rents were needed to cover the mortgages,” Brock said. “It has not been an easy time for investors.”

Brock isn’t alone in his frustration with the market. Many other local property managers have to take different approaches to the rental sector.

“I’ve been doing this for 17 years,” said Dottie Rowe, a Realtor and certified property manager for Alpha Property Management & Rentals Inc. in Auburndale. “For the first time this year, I’ve had people not show up for appointments. It’s a unique market.”

One of the reasons for the sudden problems with rental homes is Polk’s sluggish increase in median family income.

For 2005, the most recent figures from the U.S. Census Bureau, the median family income was $44,025, a 6 percent increase from $41,442 in 2000.

“Just because it is common for someone to pay an $1,800-a-month rent in their city doesn’t mean that people can pay that here,” Rowe said. “You have to put the tenant’s hat on to view it like them.”

The majority of the problems with renting is with homes that have a price tag of $1,000 or more a month. Anything under that price is renting quickly.

The rental home market is mirroring the trend seen in Polk’s home sales market and is plagued with many of the same problems: Too much new-home inventory and a slowing of the real estate market as a whole.

Polk’s existing home sales dropped for the 13th consecutive month in June, the most recent figures available. The total fell nearly 40 percent from 554 in June 2006 to 333 two months ago.

It is the county’s longest sales drought since The Ledger began tracking home sales in 1994. The longest previous sales decline was for seven consecutive months from January to July 1999. The Ledger’s home-sales figures include existing duplexes, condos, co-ops, manufactured and mobile homes, modular, single-family and town homes, as well as new-home sales by Realtors.

It’s a time of grappling to make ends meet for some real estate professionals. Some are taking on additional jobs, coming up with new and inventive ways to market property and others are just leaving the industry.

“A lot of real estate companies are referring homes that couldn’t sell,” Brock said. He has clients who have For Sale and For Rent signs up simultaneously. “They want whichever hits first.”

Rowe is attempting to keep a balanced portfolio of properties, turning away many requests that would conflict with her long-time clients. She has found that having too many properties in the same style and price range can make the properties more difficult to rent because they are competing against each other.

And with the flood of new homes, property managers have to be more careful.

It wasn’t until two years ago that the real estate veteran began marketing new homes for rent.

“The boom just opened the market up,” she said.

Rowe estimates that about 22 percent to 23 percent of the available homes for rent are new.

“It is a relatively high number,” she said. “The people have to do something with them because they can’t sell them.”

Tracy Crews, a Realtor and property manager with Elliott & Co. in Lakeland, is also having a difficult time closing on properties for her clients.

“The sales (prices) are higher and mortgages are higher,” she said. “So, we are having to ask for more money. Now we are trying to cover for the mortgages with rents.

“We have more three-bed, two-bath rentals over $1,000 a month than I have seen in seven years,” Crews continued. “If they are priced right and advertised right, we are finding we can rent them. Everybody is flooded.”

That glut in the market is forcing a decline in rental rates, said John Marchetti, broker for Star Realty of Winter Haven Inc.

“There has definitely been a decline,” he said. “We’ve had almost a $200 (a month) pullback on some of these homes. Say you were asking about $1,400 a month for a new home in 2006. Now you really couldn’t get more than $1,200.”

The majority of those homes, he said, were all built during 2005 and 2006.

“We have too many,” Marchetti said. “We are having to educate our owners. It’s quite simple if they don’t want to budge on the price. I ask them, how many months do you want it to be vacant? Although you might not be getting the amount you want, you are still getting more money than it sitting empty.”

So when is business going to pick up?

“We’re not out of the woods yet,” he said. “But I hope we are at the bottom.”

Copyright © 2007 The Ledger, Lakeland, Fla., Jeremy Maready. Distributed by McClatchy-Tribune Information Services.