November 2007
Community Paper
copyright ©2007 by Community Publishing, Inc. All rights reserved.


Sign of the Times....
by Mike Derenthal, Derenthal Realty Group and College Park resident

I was driving south on 441 recently when I spotted two signs that caught my eye. Both were advertising the same new-home community, the entrance to which was about 100 yards ahead. The first sign was a billboard sized ad, and appeared to have been there for some time as the colors were bleached by the sun. It read "New Homes from the $300’s." As I drove up to the entrance to the community, a smaller sign, also from the same builder and obviously much newer, read "New Homes from the $200’s."

Now if I might borrow from one of my favorite philosophers, Forrest Gump… "I may not be a mathematician, but I know what $100,000 is."

I also know it can’t cost a whole lot to pay someone to REMOVE an old, outdated sign that is essentially broadcasting to every passerby that this new home community has experienced a painful drop in values.

I should be fair. Perhaps the builder felt that the implied $100,000 reduction in values might bring in some bargain hunters who would be willing to place a contract on an inventory home. Then again, perhaps the builder just wanted to get their last few inventory homes sold ASAP and get the heck out of Dodge.

If I was a prospective buyer (yes, rumor has it that there were actually 924 of them in Orlando last month) I would be wondering, "just how motivated are these folks, and how hard of a deal can I negotiate?" In other words, I’d smell blood, and I’d negotiate even more aggressively if and when I decided to put an offer in on a home.

And if I were an existing homeowner in this community, I’d have a pit in my stomach the size of an avocado seed, wondering if the new home I purchased two years ago has possibly dropped in value by $100k. (The quick answer in this particular case, is… perhaps.)

As I pulled into the neighborhood I saw streets peppered with for-sale signs, a lot of empty driveways and very few people out and about. It was a bit eerie.
This is not an isolated situation, and similar stories are unfolding in other developments all along Orlando’s perimeter.

There are definitely some heartbreaking stories out there of folks who have been affected by our market slowdown. For people who own in these neighborhoods and find themselves in a position where they NEED to sell right now, the situation can be downright bleak.

For those of us who live in older, more established neighborhoods like College Park and other downtown areas, our values are somewhat insulated.

One reason, believe it or not, has to do with the wide range of age groups that live in College Park. Unlike the newer neighborhoods where everyone has purchased within the past few years, a good number of our homeowners have owned their homes for many years and have significant equity in their homes.

Should any of these folks find themselves in a situation where they need to relocate, they have an equity position in their home that gives them options on pricing and financing terms, or if need be, allows them to rent the home without being in a negative cash flow situation.

This is in stark contrast to many of the newer communities on Orlando’s perimeter, where entire neighborhoods exist with an extremely low percentage of equity throughout. At the end of the day, this difference in equity position may be a determining factor on how different neighborhoods handle the housing slow down.

Despite all the wishful thinking in the world, it would be incorrect to assume that College Park and similar neighborhoods are totally insulated from the surrounding market effects, and we’re beginning to see that as homes take longer to sell and at values that are sometimes less than they would have sold for two years back.

Fortunately for College Park homeowners, the shift in values has been relatively small. And while it seems that buyers have gone into hiding, they will be back. Folks still need a place to live and we’re fortunate to be living in one of the most desirable areas in the region, and that’s not going to change in the foreseeable future.

by: Mike Derenthal, Derenthal Realty, www.DerenthalRealty.com
1520 Edgewater Drive, Suite E, Orlando, FL 32804
407-965-1919

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