Homebuyers confused by market reports

ORLANDO, Fla. – Oct. 15, 2007 – Are potential buyers worried about real estate or just overwhelmingly confused? Last week, two studies came out. One put Orlando in the top 10 nationwide for a great time to buy, while the second listed Orlando-Kissimmee as one of 11 nationwide markets with a greater than a 50/50 risk for price declines.

Time to buy

Forbes magazine examined current home sales patterns and sales projects in the country’s 40 largest real estate markets to identify the most attractive markets. Based on models that estimated 2008 housing inventory, sales rates and turnover, the magazine compiled a list of markets that are experiencing price declines, but where buying looks attractive because there is likely to be an increase in sales in the near future.

Only one Florida city made the list, but Orlando ranked at No. 8, noting a recent 2.4 percent price decline since 2006. However, authors expect that decline to turn around fairly quickly.

Not time to buy

On the other hand, PMI Mortgage Insurance Co. noted in its second-quarter U.S. Market Risk Index that Orlando was one of 11 metropolitan statistical areas (MSAs) with a greater than 50 percent chance of price declines over the next two years. The Risk Index – which considers elements such as home prices, market volatility, affordability and employment – creates scores, with any score greater than 500 considered “at risk” for an increase.

Orlando-Kissimmee scored 506 – slightly less than two other Florida MSAs on the list, West Palm Beach-Boca Raton-Boynton Beach with 532; and Fort Lauderdale-Pompano Beach-Deerfield Beach with 507.

Even the Risk Index had some good news for Florida cities, however. The second quarter saw two MSAs drop off the list, meaning their chance for a price decline over the next two years went from greater than 50 percent to below 50 percent. They include Miami-Miami Beach-Kendall with 466, and Tampa-St. Petersburg-Clearwater with 462.

Always a good time to buy

To understand slow real estate markets better, PMI also studied homebuyers who purchased during down cycles over the past 25 years to see the long-term effects. But they found that it’s never really a bad time to buy. PMI economists assumed a 20 percent downpayment and found that even during the worst times, buyers had a positive return on their home investment over 10 years.

“Homeownership is a good way to build long-term wealth” and homebuyers “shouldn’t panic when we are going through a phase like that,” says Mark Milner, PMI’s chief risk officer.

© 2007 FLORIDA ASSOCIATION OF REALTORS®

Questions, comments or suggestions on this article? Have a news tip? Send a letter to the editor to: Newseditor@floridarealtors.org.