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South Florida housing market won't get quick fix from economic bailout

Sun-Sentinel - 9/25/2008 12:00:00 AM
by Paul Owers

The proposed $700 billion banking bailout won't offer a quick cure for South Florida's housing slump, but it could help in a year or two if lenders loosen their purse strings.

The Bush administration wants to buy the bad debts of banks, restoring public confidence in the financial markets. More mortgages would mean more home sales, and more sales ultimately would stabilize falling prices nationwide.

But sustained improvement on the housing front here in the near term will depend more on foreclosures subsiding and the inventory of unsold homes shrinking, analysts say.

"The dominoes are going to fall slowly," said Greg McBride, senior financial analyst with Bankrate.com in North Palm Beach. "It's not going to transform the housing market into sunshine and daffodils overnight."

The region's housing picture remained unsettled in August. Palm Beach County's existing-home sales increased as buyers again went bargain-hunting.

Countywide, sales rose 10 percent, to 623 from 568 a year ago, the Florida Association of Realtors said Wednesday. It was the second consecutive month of year-over-year increases.

The median price dropped 12 percent, to $323,300 from $366,200 last August. Home prices now are at summer 2004 levels.

As the housing downturn searches for a bottom, Congress is grappling with whether to sign off on the bailout package.

Critics say it lacks details and saves Wall Street bigwigs at the expense of average Americans, who are watching their home values drop or losing their properties to foreclosure.

"They have to come up with a plan," said Bertram Lieberman, 66, a retired locksmith in Delray Beach. "But some of these big executives are walking out like kings, while the poor people are left to pay the tariff."

On Wednesday, Treasury Secretary Henry Paulson said he would agree to limit the pay packages of executives whose companies would benefit from the proposed bailout.

Although House Democrats want the government to renegotiate mortgages it buys to help homeowners stay in their properties, the foreclosure problem in Florida is likely to get worse in the months ahead as more adjustable-rate mortgages reset with higher interest rates. Miami-based Keyes Co. said Palm Beach County homes for sale at the end of August fell 13 percent from a year ago, but the supply remains bloated.

"The local housing market will be in the doldrums through most of next year, regardless of what the government does," said Mike Larson, an analyst with Weiss Research in Jupiter. "The reality is, there is no free lunch."

South Florida condominium buyers in August also responded to price declines.

Sales jumped 11 percent, to 483 from 435 last year. The median price plummeted 37 percent, to $131,600 from $209,000 last year.

Statewide, existing-home sales fell 4 percent from last year, and the median price sank 20 percent, to $186,900. Nationally, sales fell 2.2 percent and the median dropped 9.5 percent, to $203,100. The median means half sold for more, half for less.

The housing meltdown began in 2006 in part because too many people stretched to buy homes they couldn't afford during the preceding five-year boom. From now on, analysts say, lenders will be more careful and home buyers will have to save for down payments.

"Old-style banking is back in vogue," said Alex Sanchez, president of the Florida Bankers Association.

Meanwhile, the housing slump is testing Patti Hall and legions of other sellers.

Hall's three-bedroom home west of Boca Raton has been on the market for about six months. After two price reductions, she's asking $309,000 and may go even lower.

"I'm getting all emotional about it because it's so frustrating," Hall, 52, said this week.

Her agent, Liliane Weinstein of Lang Realty in Boca Raton, said sellers shouldn't take the market personally.

"They don't want to give their homes away, but they're not understanding that there's so much inventory," Weinstein said. "Buyers have vast, vast, vast choices."