Orlando Housing Tipping Point #1

I saw this day coming for a while now. I could see it happening; I just didn't know when they would make the move. Today was the day.

To what am I referring? I am talking about the home for sale at 2802 Kemper Ave, Orlando, FL 32814. Why is this house any different from the other homes for sale in the Orlando area? Sure, it's one of the nicer homes in the downtown Orlando area. It's a 3BR/2BA 1,740 sq.ft. single family home, built in 2005. It's located in Baldwin Park, which is one of the newer Orlando communities and also one of the most unique. Baldwin Park was formed after the closure of an old naval base. It's one of the rare places in Orlando where you can buy new condos, townhomes, and single family homes and not be 15 miles or more from downtown and not have a 30+ minute commute to work.

But, that information isn't what makes this home special. What makes this home at 2802 Kemper special is that it is the first single family home in Baldwin Park to have a listing price below $400,000 since the housing market turned. Sure, for Orlando, that is still a lot of money for a 1,700 sq.ft. house but in Baldwin Park that is a milestone. This is a neighborhood where 1,700 sq.ft. townhomes will go for $400-500K, that is, until now.

It's been a long road for 2802 Kemper. Thanks to the internet I am able to dig up some data on this home. It was purchaed on July 14, 2005 for $358,300 by Dang Nguyet. Less than a year and a half later, Dang decided that it was time to sell the house, since he had never lived in it anyway. The original listing price? $479,000. Somehow the house was suddenly worth 30% more in only 16 months. Unfortunately, for Dang, buyers didn't share his belief that the house was worth that much.

Since November the house price has been lowered a total of five times, including,

• $479,000 to $449,000
• $449,000 to $429,000
• $429,000 to $419,000
• $419,000 to $400,009
• $400,009 to $389,900

Even if Dang sells the house for the current full listing price, which won't happen, after the 6% realtor fee is taken out plus any sort of closing costs and such, he would be lucky to break even on the deal. Of course, this house will be lucky to sell for $350-360K, which means that he will lose money on his "investment."

This isn't the last house that is going to cost someone money at Baldwin Park. This market has a way to go to correct itself. In the meantime, I'm going to go pay my monthly rent, sit at the apartment pool with a cool drink, and bide my time.

Housing Market 2007: Up or Down? I Know Which Way I'm Leaning

It's strange how quickly I got pulled into the whole game. Last month, I spotted a house in Thornton Park, one of Orlando's historic neighborhoods. It was listed at what I thought was a very reasonable price. My fiance and I called up our realtor, checked it out, and all-of-a-sudden we were making an offer on this place. We eventually ended up pulling out of the deal. While the house seemed like a decent deal it would have required us pouring money into it to repair the plumbing and some of the structural, assuming that the seller's took care of the wiring upgrades.

After that we found ourselves checking out more homes, identifying more possibilities. We made another offer last weekend and, perhaps fortunately for us, the seller took another offer that just happened to come in on the same day. Why do I think we may have been fortunate?

I think housing is in for another rough year. I just don't know who is going to buy the inventory that is out there at the prices that people are asking. There is $1 TRILLION in ARMs that will reset this year. 1 TRILLION DOLLARS! What are all of these people going to do? Sure, some will hang on to their homes and keep making their inflated payments. But, many of these people, who figured they would sell and get out with a nice profit, will find that there is no one to sell to; that the house they bought in 2004 is now worth less than when they bought it.

The National Association of Realtors (NAR) is trying to spin the news to make it sound like the housing bust is slowing down. Remember, these are the same people whose job it is to sell you a house. It's interesting to see how they do it. When the housing boom was happening, the NAR would release statements stating how home prices had risen vs. the previous YEAR. If you look in the news these days you'll see how their statements now talk about home sales are up vs. the last MONTH. They can't compare vs. last year any longer because then they would have to talk about how home sales are still 15+% lower than last year. Be careful who you listen to in the news.

Part of me thinks that I might be missing the bottom of the market and that I should buy now before the real buying season begins. But, a larger part of me comes back to the same question. Who is going to buy all of these houses?! I look around Orlando and see all of these concrete block homes in older neighborhoods listed for $279,000. Let's say you want to buy that place and have 10% to put down (which is a stretch these days but let's say it anyway). With a 30 year mortgage at 6.5% your monthly payment would be $1586/month, just for the principal and interest. Assume your property taxes run about $360/mo. (calculated on the Orange County appraiser's website) and insurance, which everyone knows is fun in Florida, runs you another $200/mo. You're looking at a monthly payment $2146. Over 12 months that will run you $25,752 in mortgage payments. That is after tax money. If you pay about 40% of your salary in taxes, you would need to make $42,920/year just to pay for your house. As of the 2000 census the median family income in Orlando was $40,648. That's all the money this family has, for food, clothing, vehicles, everything. So, the average person in Orlando can't buy the average house in their town. That, to me, seems like a big problem.

Where does that leave us? That leaves us with one group of people that bought a house and now can't pay for it and another group of people that would love to buy a house but have been priced out of the market. Either the group of people that can't afford to buy a home need to get huge raises in 2007 or housing prices have to fall. My money is not on the house.