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Investors ride the bull

Newcomers flood into the hot real estate market. In fact, investors may be fueling the frenzy. Which brings up the question: Is there a "bubble" and will it burst?

By BILL COATS
Published May 13, 2005

Is housing a hot investment now?

Just ask Wayne Spencer, who in February looked down his Northdale street, noticed a moving van loading up, and decided to buy the house.

Or Wanda Vann in Cheval and Sammy Tuffaha in Tampa Palms, who recently bought new homes but wouldn't let go of their old ones.

Or Keith Silberman, who committed to a house in Live Oak Preserve on the belief that he would be moving here from Decatur, Ga. The job fell through, but Silberman found that his "lucky accident" may turn a juicy profit anyway.

Sizzling property values have inspired Silberman, and all the others, to become real estate investors.

Of the people who bought existing homes, townhomes or condos in Hillsborough County last year, an unprecedented 40 percent didn't move into them. It was 30 percent the year before.

"The returns have been unbelievable," said Alan Schreier, who buys rundown houses in Seminole Heights and Tampa Heights and modernizes them. "A lot of people are jumping into the business."

Existing homes sold in the first quarter this year were nearly 10 percent more expensive than those sold a year earlier, the Hillsborough County Property Appraiser's Office found. New-home prices in Hillsborough last year were 16 percent higher than a year before, said Marvin Rose, who monitors the local home building industry in Rose Residential Reports. New townhouses and condos cost 5 percent more.

In Georgia, Silberman decided to switch from software consulting to real estate investing. He's studying Florida on the Internet, looking for something on the waterfront.

"People make money in Georgia, but it's definitely not like some of the Florida markets," Silberman said.

Such investors may be accounting for much of the high demand for housing. Hillsborough property appraiser records show that since 2001, houses sold to people who didn't obtain homestead exemptions rose from 3,918 in 2001 to 9,322 last year.

Those numbers don't include newly built houses.

But the investment surge among those new homes has unnerved many home builders, who fear that investors will pepper new neighborhoods with "For sale" signs while the builders are still erecting roofs around the corner.

"I'm hearing builders say a surprisingly high number to me - 20 to 25 percent - are being sold to investors," Rose said. "Two years ago, it would have been less than 5 percent."

Late last year, Pulte Homes began attaching to its contracts a requirement that the buyer must live in the house for a year, said Scott Campbell, president of Pulte's Tampa division.

"I think a lot of the other larger public builders are moving in the same direction," Campbell said.

Centex Homes is requiring buyers who sell within a year to give the profit to Centex, said David Ivin, Centex's division president for Hillsborough and Pasco counties.

"The whole investor thing is at an extreme right now, and we're just trying to limit it," Ivin said.

Despite the hot market, real estate experts debunk the notion that prices have inflated into a "bubble," much less that any such bubble is about to burst.

"I think it will ebb," said George Bodmer, president of the Greater Tampa Association of Realtors and co-owner of Brandon's Bayside Realty Group. "I think a little air will come out of the bubble this year, but not much."

"I don't think we're looking at a housing bubble," said Tony Polito, director of the Tampa/Sarasota market for Metrostudy, a market research and consulting firm on housing.

"We may start to trend back to a more normalized market," Polito said. "We'll stop talking about a 20 percent increase and maybe talk about a 3 to 5 percent increase."

Polito and other experts cite Tampa's thriving economy, the migration of people taking jobs here and low mortgage rates.

"We're still undervalued compared to many parts of the country," said Rose.

"There's still some pent-up demand," he said. "Every builder I talk to - virtually every builder - tells me they can sell a lot more homes than they're selling now. They can't get enough lots."

Developers would prefer an 18- to 24-month supply of lots. Polito said those in Tampa Bay have an eight-month supply.

"That's the lowest level in the last 10 to 15 years," said Pulte's Campbell.

Waiting lists of 100 or more are common at many new developments.

"There are six buyers for every one home that's out there," said Linda Nowicke, a Carrollwood real estate agent who estimated that two of those buyers will be investors. A house that's offered near market value is going to be snapped up within six hours to six days, she said.

"My firm opinion of this market is, it's crazy," Nowicke said. But even Nowicke thinks Tampa will experience "an ascending market," as the industry calls it, for years.

Vince Arcuri, a Lutz real estate agent, urges his buyers to offer the asking price.

"Even at full price, there's a 50-50 chance you'll lose the house," he said.

Arcuri also represents clients who buy lots, with contracts for new houses, and then sell the houses at a fat markup before construction is finished.

"I've got 30 people wanting to get into these investments," Arcuri said.

For several years, Sammy Tuffaha has lived in Tampa Palms but coveted historic Hyde Park.

"A lot of people are moving to South Tampa," said Tuffaha, 34, a telecom manager for AT&T. "It's like a happening part of town."

But when Tuffaha shopped for a condo there, he couldn't stomach the prices. For two years, he watched the market and stewed. This year, Tuffaha concluded that prices will keep climbing. He paid $233,450 last month for a two-bedroom condo at Madison at SoHo, an apartment conversion.

"It's at least double what I would have been willing to pay two years ago," Tuffaha said.

His faith in the market extends to New Tampa. Tuffaha is keeping his house there, seeking a tenant. He paid $135,000 in 2001. Judging by nearby sales, the house is worth more than $200,000 now.

Like Tuffaha, Wanda Vann of Cheval also is becoming a first-time landlord. She paid $132,000 four years ago for a home in Cheval West. Last month, by the time she moved to a bigger house in Cheval East, the first house was worth about $225,000, based on nearby sales. She couldn't bear to part with it.

"The prices are going up so tremendously fast," said Vann, 46, a computer support representative.

As for being a landlord, she said, "I'm getting a little brave . . . I didn't know if I could do it. I decided to try."

David Bamberger retired from New York to Lutz in 2001 after a career in corporate law. Property looked a lot better than the stock market.

Since then, Bamberger and his wife, Anelia, have bought four rental houses. They started with two near South Tampa's Gandy Boulevard, followed by a third in the Plantation of Carrollwood, and a fourth in West Tampa.

Bamberger, who has paid an average of $100,000 for the houses, likes that price range for rentals. If interest rates rise, which would make homes too expensive for the lowest incomes among today's buyers, Bamberger thinks they'll turn to rentals like his.

Perhaps soon.

"I think the prices right now are getting out of line and I don't think I want to do another deal," Bamberger said.

Nowicke, the Carrollwood real estate agent, entered the business after moving here in 1998 from Michigan, where she owned a day spa.

"I help people all the time with investment properties," she said. "They've been burned by the stock market, and they're looking for places to protect assets."

In the process, Nowicke began buying investment houses for herself. The first was last July in Lutz's Deer Park. The second was in Land O'Lakes; the third, Wesley Chapel. The Land O'Lakes house was a preconstruction contract. Nowicke prefers houses she can see.

"It was a great leap of faith in there," she said.

But she is reassured by the fortunes of her own neighborhood, Carrollwood Village. Nowicke estimates that homes there sold for up to $100 per square foot in the late 1990s, but now sell at $140 to $150 a square foot.

Wayne Spencer of Northdale has been sold on real estate since several pals persuaded him to join in buying a small office building in Wesley Chapel. His $5,000 down payment led to a $200,000 share when the building appreciated.

Spencer, 53, is the inventor of a coin-drop game he markets to fast-food chains for their front counters.

But the office building profit was in the back of Spencer's mind four months ago when he noticed movers loading a van in the driveway of a doctor's home, just down Hampton Village Drive from Spencer's house. Spencer approached the doctor's sister, who was supervising the movers, and said he was interested in buying the house.

So Spencer and Dr. Abib Conteh soon shook on a $245,000 deal. Spencer bought the house with his fiancee, Pauline Karas.

"I could have flipped it and made 40, 50 thousand dollars in a couple of months," Spencer said.

He also has bought a home on Lutz's Sunset Lane, which he'll use as an office. Spencer is looking for more.

"I believe Florida will be the next California," he said.

[Last modified May 12, 2005, 00:28:09]