Route to Recovery
A trip through the epicenters of the American recession

PENSACOLA, Florida – Home owners here who don’t need to sell right now are staying put.

“Those people who aren’t in a hurry to sell their homes are taking them off the market,” said Denis McKinnon, senior vice president of the Gulf State Region of real estate firm Coldwell Banker. “They’re sitting this out until the market improves a bit.”

“It’s a great market for buyers,” he added, “but not such a good one if you have sell.”

Though the average home price in Pensacola has dropped close to 20 percent to $178,000 from the peak in 2006, local realtors say the that the best thing going for this northern part of Florida right now is that it has not been hit as hard by the housing slump as the southern part of the state.

“We didn’t experience the best of the boom up here,” said Rick Harper, director of the Haas Center for Business Research and Economic Development, “but that also means we’re not experiencing the worst of the downturn now that the bubble has burst.”

Parts of Florida have been decimated by the worst housing crisis since the Great Depression. Like Nevada and Arizona, a good portion of that collapse has come down to the second-home market. Home owners tend to find it far easier to give up their second home in a crisis than the one they live in most of the year.

Local realtors and others in this city of around 55,000 in the Florida Panhandle – the narrow strip at the top of the state that stretches to the west until it bumps up against Alabama – say that because Pensacola does not have much of a second-home market like the southern part of the state it was spared the rampant speculation of the south.

Non-performing mortgage loans here make up to 6 percent of the total here, compared to more than 15 percent in some southerly areas.

“The economic fundamentals up here are different,” Harper said. “The foreclosures we’ve seen here are more related to economic distress.”

Not that there has been any shortage of foreclosures and short sales, where a bank agrees to let a distressed home owner sell their home at a loss. According to data compiled by Metro Market Trends Inc (MMT), which monitors regional real estate trends, there were 3,018 foreclosures in Escambia and Santa Rosa counties – which make up the greater Pensacola area and have a combined population of around 450,000 - in the first 10 months of this year.

“If you live here then the people in foreclosure could be your neighbors, your friends or you could go to church with them or work with them,” said MMT co-owner Al Muller.

McKinnon said that property prices have remained fairly flat throughout this year, which makes him hopeful that the worst may be over.

“The market appears to have reached a bottom,” he said. “And even if it does end up falling further I think the declines will not dramatic.”

Stabilized or not, in this market Muller said it is hardly surprising that home owners that are not forced to move are trying to wait out the worst of the slump. The number of homes sold in Escambia and Santa Rosa is still below 600 month, down from more than 1,400 at the peak of the market in 2006.

“Home owners are either waiting for a better price or they are not selling because they cannot afford to take the loss,” he said.

McKinnon and other realtors here said that foreclosures or short sales form up to 30 percent of sales at the moment.

Deborah Mays, a realtor at Coldwell Banker, said that if a buyer has the patience they should consider a short sale. This is because short sellers are forced to sell and may have neglected home repairs while trying to pay their mortgage – which means that buyers have to be willing to invest in a home.

“If you can afford to wait and you can accept that you’ll have to invest some money in home improvements,” she said, “then you can get a lot more house for your money.”