Is real estate really on the mend in Florida?

Is real estate really on the mend in Florida?

Given the improvement in local and state residential real estate demonstrated by last week’s 2012 Florida Realtors statistics, there’s a lot of positive buzz, and possibly a bit of wishful thinking taking place among would-be sellers, Realtors, mortgage brokers, appraisers, developers and contractors.

But a reality check still shows a murky future: Up to a tenth of Florida homes, and almost a fifth of Manatee-Sarasota area homes are in some state of distress, raising concerns that a tsunami of bank sales could increase inventory, depress prices and lengthen closing times for residential sales in 2013 or even longer.

That view is “overly pessimistic,” said Florida Realtors chief economist John Tuccillo. But, he concedes, Florida has “a third of the nation’s ‘shadow inventory,’ a term used to define homes more than 90 days delinquent, or already in foreclosure, and that is very, very high.”

After the misery and displacement of the Great Recession, everyone, including President Obama, wants to believe that a broad-based real estate recovery is well and truly under way. In his State of the Union message, Obama announced that “the housing market is finally healing from the collapse of 2007. Home prices are rising at the fastest pace in six years, home purchases are up nearly 50 percent and construction is expanding again.” So far, so good.

But then, Obama put his finger right onto the tricky bit when he said, “Even with mortgage rates near a 50-year low, too many families with solid credit who want to buy a home are being rejected. Too many families who have never missed a payment and want to refinance are being told no. That’s holding our entire economy back, and we need to fix it.”

Banks and mortgage lenders – many of whom received federal assistance to the tune of $700 billion in the controversial 2008 Troubled Asset Relief Program (TARP), which was designed to address the subprime mortgage crisis – are simply not lending to would-be buyers.

And maddeningly, sellers, frequently the very same banks themselves, clearly prefer cash buyers to avoid burdensome, messy and uncertain mortgage applications, and all-but-frozen secondary mortgage markets.

In fact, the big banks and other financial institutions that, in the heyday of mortgage madness, shoveled money out the door to “anyone with a heartbeat who could also fog a mirror,” are today part of the obstacle to a sustained real estate recovery, says Jack McCabe, CEO of McCabe Research & Consulting, a Florida-based real estate and economic analyst.

He pointed to the February 2012 joint state-federal settlement with the country’s five largest mortgage servicers Ally/GMAC, Bank of America, Citi, JPMorgan Chase and Wells Fargo, in which roughly $25 billion in relief was earmarked for distressed borrowers and various local and federal jurisdictions.

“Since the lawsuit has been settled, those banks are no longer holding back on foreclosures, which is one reason why real estate inventory levels were limited, and why prices rose in 2012,” said McCabe.

‘Best guess’

“Of the 475,000 completed Florida foreclosures since 2006, banks, realty funds and other financial players still hold an estimated 200,000 housing units,” said McCabe. That is roughly equivalent to the total number of 2012 statewide single-family home sales as reported on Monday by the Florida Realtors.

“There are currently 377,000-plus open foreclosures in Florida state courts, and 80 percent of them will become distressed transactions in the coming two to three years,” McCabe estimated. “The remainder will likely get loan modifications and possibly some relief from the lenders.”

But that is the tip of the iceberg, says McCabe.

“Another 550,000 additional Florida homeowners are 90 days-plus delinquent and thus subject to future foreclosure filing,” he said. “Taken together, there are 1.1 million distressed residential properties in the state.”

Given that the U.S. Census shows Florida has 9 million housing units in total, that means about 11 percent of the state’s housing stock is experiencing some level of distress.

The 11 percent distressed figure sounds “entirely plausible” to Anne Ray, Florida Housing Data Clearing House manager at the Shimberg Center for Housing Studies at the University of Florida, the official repository for state housing data. Ray estimated more than 320,000 open foreclosures statewide, close to McCabe’s figure.

Ray also pointed out that the Manatee-Sarasota MSA, one of the state’s best performers in sales increases, “had a foreclosure rate of 13.77 percent as of September 2012, and a ‘pending’ rate of an additional 3.36 percent.” Taken together, it means more than 17 percent of the area’s homes are in some state of distress.

But Florida Realtors argue that those statewide figures might be double-counted.

According to Sept. 30, 2012, estimates from CoreLogic, a leading provider of real estate and financial data, 562,664 homes have mortgages delinquent by 90 days or more, 389,149 are in foreclosure and 36,284 are REO (Real Estate Owned) loans, property in the possession of a lender as a result of foreclosure, says Florida Realtors research economist Brad O’Connor.

“Loans that are counted in foreclosure and REO estimates can also be counted in the 90-day plus delinquency estimate, so it would be erroneous to add them together to obtain a count of distressed loans,” O’Connor said. “Unfortunately, the statistics we receive from CoreLogic do not provide us with any counts of how many loans are both 90-plus delinquent and in foreclosure/REO status.”

Worlds apart

One reason many banks are not lending is that with undigested and often unsavory inventory in their bellies, many may be at or near the regulatory threshold for the portion of their portfolios dedicated to residential lending, said McCabe.

Charles “Charlie” Brown III, chairman and CEO of Insignia Bank, a Sarasota-based community bank which includes Manatee in its core market, says “there’s a big difference between what the large institutions may be contemplating, and what’s going on at locally owned and operated community banks, where I’m seeing a flood of portfolio lending nationwide.”

“Insignia is making portfolio loans, typically five- to 15-year fixed mortgages, has excess capacity and could double its current mortgage portfolio on top of its total of $113 million, 200-plus loan portfolio,” Brown said.

A portfolio mortgage is one that the bank itself holds to maturity, as opposed to secondary mortgages that are usually sold to government-sponsored enterprises, including mortgage giants Fannie Mae, Freddie Mac and others. That secondary market is where the squeeze, and most of the money and problems are, says Brown. He’s in a position to know, since he recently completed his second two-year term as one of 14 members of the Federal Deposit Insurance Corp.’s Community Bank Advisory Board in Washington, D.C.

Brown said that getting loan approvals in the secondary market where the GSE’s set the base standards is an ever-shifting and increasingly difficult process.

“They are continually tightening, tweaking and revising performance standards,” Brown said. “It’s very difficult to get a ‘conforming’ GSE mortgage and many banks have thrown up their hands altogether. I’m sensing both tension in the GSEs, as well as political pressure.”

But real estate attorney Anne Weintraub of Sarasota’s Band Weintraub says the larger banks are tired of being sued and are starting to cooperate with homeowners.

“They are tired of spending monies on attorneys to fight borrowers and realize owning a home is not ideal,” she said. “Most homes are abandoned, left in a state of disarray and the volume of abandoned homes is so enormous some banks don’t even realize they own the homes.”

In either scenario, banks can be both lenders and sellers, and typically hire the appraiser.

“Until the banks get the foreclosures off their books, they are sellers who want to get the best possible prices,” McCabe said. “Due to the legal wrangling, foreclosure sales in 2012 were basically ‘on the shelf’ while banks saw prices increasing, so now, after the settlement in a ‘perceived recovering market,’ I’d expect foreclosure filings and bank sales to accelerate this year and next.”

Bank-retained private appraisers also can be part of the problem, he contends, if their low valuation compared to the contract sales price inhibits lending.

Uncertainty surrounds issues

Additional flies in the recovery ointment are state and federal issues that may have adverse impacts on sustainable realty recovery.

In Tallahassee last week, a bill designed to speed up the foreclosure process passed the Florida House Civil Justice Subcommittee on a 10-3 vote. Foreclosure monitoring service RealtyTrac reported that “House Bill 87 allows third-party lienholders to start foreclosure proceeding and rushes final judgment of foreclosure if a homeowner doesn’t file a defense. The bill aims to streamline and expedite the foreclosure process.” RealtyTrac termed the bill a controversial piece of legislation in Florida – the state that leads the nation in foreclosure filings.

Immediately, more than a half-dozen law firms and attorneys aligned to defeat the bill, including St. Petersburg’s Matt Weidner, Mark Stopa and Charles Gallagher, a member of Florida Consumer Justice Advocates, a self-funded consumer lobbying group.

“Our fear is the current due-process rights of homeowners are being further diluted by the provisions of HB 87 and if passed, this bill would further handicap homeowners from defending their foreclosure and provide banks with little judicial resistance from the speedy foreclosure of their homes,” said Gallagher.

Tuccillo, the Florida Realtors’ chief economist, says the bill has “its pros and cons, and while I’m not a raving fan of HB 87, I would like to see it passed.” He called the slow judicial process a primary contributing factor to the huge build-up of the state’s shadow inventory.

“It’s been a long, long time” that banks have held onto the troubled mortgages, and “it’s time to get all this garbage out of the way,” he said.

In Washington, the Consumer Financial Protection Bureau – the agency that holds primary responsibility for regulating consumer protection with regards to financial products and services in the United States – is viewed by some as part of the problem.

The CFPB, in its attempt to protect consumers, is creating a “bigger mess” as compliance and risk escalate with every new rule they put out, Charlie Brown says. CFPB sends out revised guidelines “almost every 30 days that are scaring off mortgage lenders due to litigation and compliance risk.” The situation with the secondary market and the CFPB is “extremely difficult, and very much worries me,” said Brown.

It could get uglier.

“About 40 percent of Floridian mortgage holders who are current on payments are nonetheless underwater,” meaning that their current mortgage balance is greater that the market value of their property, says McCabe. That portends an expanding horizon of potentially distressed properties coming onto the market.

Veteran Florida real estate analyst Lewis Goodkin agrees.

“There used to be a stigma attached to foreclosures, but no more,” Goodkin said. “I know people making good money, professionals, whose homes are underwater and they have decided to simply stop making payments and put the money into the bank instead.

“In one case, fully 21 months after not getting payments, the bank finally foreclosed. When banks unload property, they are so leery of mortgage availability that they only take cash offers, which means they sold at prices 20 percent lower than they normally could have,” he said.

Those buyers are either large specialized Wall Street funds that have been snapping up distressed property, or foreign buyers.

“Over half of the (2012) transactions in the Miami market were cash-only deals, which means that a normal person with a steady job is unable to compete, or even to buy at all,” Goodkin said.

So what do the numbers mean?

“Bottom line is that, if you only pay attention to Realtor data, everything looks great,” summarized McCabe. “However, if you remove the blinders and consider underlying financial market activity and data, there’s still trouble in paradise and it’ll take another two to three years to achieve a normal healthy real estate market.”

Goodkin echoes that time frame.

“It’s not a very dynamic situation and we’re not out of the woods yet, and probably won’t see a normally functioning market until mid-2014, unless we have a depression, God forbid,” he said.

Realtors and hopeful sellers and buyers who cheered 2012’s rose-tinted Florida housing report as an indicator of better things to come in the short term are “smoking Hopium,” said McCabe, adding tongue-in-cheek that he “trademarked the term” for the duration of the Great Recession.

© 2013 The Bradenton Herald (Bradenton, Fla.), Stephen Frater, The Bradenton Herald. Distributed by MCT Information Services

Steve Geving
Jones and Co Realty
239-573-1400
stevegeving@hotmail.com
www.swflhomeresource.com

Trends: More cash sales, shrinking time on market

Trends: More cash sales, shrinking time on market

All-cash buyers have surged since the housing downturn while the typical amount of time it takes to sell a home is shrinking, revealing the changing dynamics of today’s home buyers and sellers.

Academic experts took a closer look at cash buyers and how time-on-market impacts home sales during the “Changing Dynamics of Recent Home Buyers and Sellers” session at the 2012 Realtors® Conference and Expo. Funding for the research was provided by the Realtor University Center for Real Estate Studies.

“We’ve seen a tremendous increase in cash buyers since the housing downturn that we haven’t seen before in history,” said Lawrence Yun, chief economist of the National Association of Realtors (NAR). Yun said a decade ago, cash home purchases were less than 10 percent of the market, but they’ve increased steadily since 2008 – up to 30 percent of sales.

Yun said the increase in cash buyers results from tight lending conditions and an increase in investor sales, which make up the bulk of cash purchases. Increases in the number of international buyers, who often have financing difficulties when purchasing a home in the U.S., are also adding to the cash sale rise; 62 percent of international purchases were all cash, a percentage that has increased since 2007.

Recent NAR research may offer insight into how cash buyers receive funds for home purchases. According the 2012 NAR Home Buyers and Sellers Profile, 40 percent of repeat buyers use proceeds from the sale of their primary residence as a source of down payment, but downsizing boomers may have enough equity left from their home sale to pay all cash for their next purchase. Yun also noted that one in 10 buyers rely on proceeds from the sale of stocks or 401K disbursements for down payments. Those with stable jobs and who had investment gains in recent years may use those cash funds to buy a home outright rather than financing the purchase.

Dr. Grant Ian Thrall, president of the American Real Estate Society, agreed that cash sales have increased dramatically in recent years. Thrall spoke at the session and conducted an in-depth market analysis to gain greater insights into cash buyers.

“Research shows a bias toward cash sales for newer and lower priced homes,” Thrall said. “Many of those sales are occurring within the first 60 days that the home is on the market, and more than half sold within the first 120 days.”

Thomas Springer, professor of Finance and Real Estate at Clemson University, discussed how time-on-market responds to employment changes, and shifting market and economic conditions. Springer analyzed market data from more than two dozen metro areas. His findings indicate that time-on-market is a function of property characteristics, price and market factors for a specific home; however, at market level, time-on-market for an area is a function of local, national and global economic and market factors.

Yun said that tightened inventory conditions also impact time-on-market, which has steadily decreased nationally since the start of the year.

“Tightened inventories in some places mean homes are selling more quickly and reducing time-on-market,” Yun said. “Our research shows that last year, homebuyers saw 10 homes before buying, down from 12 the year before. And more than half of buyers reported that finding the right home was the hardest part of the home search process.”

© 2012 Florida Realtors®

Steve Geving
Jones and Co Realty
239-573-1400
stevegeving@hotmail.com

Rate on 30-year mortgage rises to 3.39%

Rate on 30-year mortgage rises to 3.39%

Average U.S. rates on fixed mortgages ticked up from record lows last week. Cheaper mortgages are fueling a modest housing recovery that could help the broader economy.

Mortgage buyer Freddie Mac said Thursday that the rate on the 30-year loan increased to 3.39 percent from 3.36 percent. The previous week’s rate was the lowest since long-term mortgages began in the 1950s.

The average on the 15-year fixed mortgage edged up to 2.70 percent, from last week’s record low of 2.69 percent.

The average rate on the 30-year fixed mortgage has been below 4 percent all year. And rates have fallen even further since the Federal Reserve started buying mortgage bonds in September to encourage more borrowing and spending.

The Fed said it will continue buying bonds until the job market shows substantial improvement. When home prices rise, people tend to feel wealthier and spend more freely. Consumer spending drives nearly 70 percent of economic activity.

Stronger housing markets helped boost economic growth at the end of the summer in nearly every region of the United States, according to a Fed survey released Wednesday. The survey follows other reports that show marked improvement in the housing market five years after the bubble burst.

Home sales are up from last year and home prices are rising more consistently in most areas. Builders are more confident and starting more homes. Lower rates have also persuaded more people to refinance. That typically leads to lower monthly mortgage payments and more spending.

Still, the housing market has a long way to full recovery. And many people are unable to take advantage of the low rates, either because they can’t qualify for stricter lending rules or they lack the money to meet larger down payment requirements.

To calculate average rates, Freddie Mac surveys lenders across the country on Monday through Wednesday of each week.

The average does not include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount.

The average fee for 30-year loans was 0.7 point, up from 0.6 point last week. The fee for 15-year loans rose to 0.6 point from 0.5.

The average rate on one-year adjustable-rate mortgages increased to 2.59 percent from 2.57 percent. The fee for one-year adjustable rate loans was unchanged at 0.4 point.

The average rate on five-year adjustable-rate mortgages edged up to 2.73 percent from 2.72 percent. The fee held steady at 0.6 point.

Copyright © 2012 The Associated Press, Marcy Gordon, AP business writer

Steve Geving
Jones and Co Realty
239-573-1400
stevegeving@hotmail.com

Foreclosure activity up again in Florida

Foreclosure activity up again in Florida.

Foreclosure activity fell 7 percent in the United States in September from a year earlier, but rose 13.5 percent in Florida, continuing a trend, according to RealtyTrac, an Irvine, Calif.-based data firm.

Foreclosure activity – which includes default notices, scheduled auctions and bank repossessions – has risen for eight of the past nine months, the firm said.

In Miami-Dade, foreclosure activity rose 26 percent in September from a year earlier to 4,316 filings from 3,424. The county has shown increases in 10 of the past 11 months.

In Broward County, activity jumped 65 percent in September to 4,214 filings from 2,553 a year earlier, the firm reported.

The increase in activity in Florida is likely driven by the fact that foreclosures are handled in the courts, which take longer than states that resolve them administratively, the firm said.

“This isn’t a new crop of distressed owners deciding to stop paying their mortgage,’’ said Daren Blomquist, vice president at RealtyTrac. “This is a function of it takes longer for foreclosures in judicial states.’’

In many cases, banks are not filing foreclosure notices until the amount in default is very large, he added.

Other so-called judicial states such such as Illinois, Ohio, New Jersey and New York, where foreclosures are handled in the courts, also showed increased activity counter to the overall decline in foreclosure activity, RealtyTrac said.

Miami Herald – 10/11/12

Steve Geving
Jones and Co Realty
239-573-1400
stevegeving@hotmail.com

New homes: Monthly home price increase sets record

New homes: Monthly home price increase sets record

WASHINGTON (AP) – Sept. 26, 2012 – Sales of new homes in the U.S. dipped slightly in August from July but the median price of homes sold during the month rose by a record amount.

New-home sales edged down to a seasonally adjusted annual rate of 373,000 in August, a dip of 0.3 percent from July’s revised rate of 374,000, the Commerce Department said Wednesday. That had been the fastest pace since April 2010 when government tax credits were boosting sales.

Sales in August were up 27.7 percent from the pace a year ago. But even with that gain, new-home sales remain well below the annual pace of 700,000 that economists consider healthy.

The median price of a new home jumped 11.2 percent in August to $256,900, the biggest one-month gain on record.

The median sales price was up 17 percent compared to August 2011. The $256,900 median price in August was the highest sales price since new homes sold for $262,600 in March 2007, a period when prices were coming down from the peaks reached during the housing boom.

By region of the U.S., sales rose by the most in the Northeast, climbing 20 percent. Sales were up 1.8 percent in the Midwest and 0.9 percent in the West. However, sales in the South, which accounts for nearly half of new home sales, dropped 4.9 percent.

Robert Kavcic, an economist at BMO Capital Markets, said the August report was “more evidence that a recovery in U.S. housing is taking root.”

Kavcic said that the drop in sales in the South could have been influenced by disruptions from Hurricane Isaac in August.

The housing market has been making a modest but steady recovery, helped by the Federal Reserve’s efforts to give the economy a boost through lower interest rates. The Fed earlier this month announced a third round of bond buying in an effort to stimulate the economy and attack unemployment, which has been stuck above 8 percent since early 2009.

Sales of previously occupied homes jumped in August to the highest level since May 2010. Builder confidence is at a six-year high and construction of single-family homes rose last month to the fastest annual rate in more than two years. However, even with the gains, home sales and construction remain well below healthy levels.

On Tuesday, the Standard & Poor’s/Case Shiller home price index showed home prices increased 1.2 percent in July compared to July 2011. That was the second straight year-over-year price gain after two years when prices had fallen every month compared to the same month in the previous year.
Copyright © 2012 The Associated Press, Martin Crutsinger, AP economics writer.

Steve Geving
Jones and Co Realty
239-573-1400
stevegeving@hotmail.com

Florida consumer confidence hits five-year high

GAINESVILLE, Fla. – Sept. 26, 2012 – Florida’s September consumer confidence reached a post-recession high of 79 – up three points from a revised August reading of 76 – according to a monthly University of Florida (UF) survey.

“The last time Florida consumer confidence hit 79 was in October 2007,” says Chris McCarty, director of UF’s Survey Research Center in the Bureau of Economic and Business Research. “At that time, confidence was on its way down as the housing crisis was getting under way. This month’s index comes at a time when the economy is still in recovery.”

The September survey showed increases in all five components that researchers use to assess the collective economic opinion of Floridians.

In September, the component measuring whether respondents’ think they’re better off economically today compared to a year ago rose one point to 62. In addition, the component that measures economic expectations one year from now rose one point to 86, while the component measuring expectations that personal finances will improve a year from now rose one point to 86.

Floridians had a rosier outlook for the state as well. That component rose three points to 78. The component that measured their outlook for the nation went up two points to 84.

Finally, the component that measures whether Floridians think it’s a good time to buy big-ticket items, such as automobiles and refrigerators, rose two points to 82.

Despite the uptick, McCarty says several economic conditions serve as a drag on Florida’s recovery: job losses in construction and government helped keep the state’s unemployment rate in August unchanged from the previous month at 8.8 percent. And “although inflation is currently under control, consumers should expect increases in prices next year, as the effects of the drought hitting much of the U.S. make their way into food prices.”

However, there is good economic news for Florida.

The median price for a single-family home in August was up 5.8 percent over the previous year’s average at $147,000, although it was down slightly from July’s figure.

“The stock market is getting closer to the all-time record and this, along with increases in housing prices, are certainly a boost to consumers’ sense of wealth,” McCarty says, adding that October should prove to be an “interesting month.”

Political ideology, which already plays a significant role in consumer confidence, could also become even more crucial as the presidential campaign heats up. “Obama supporters have much higher confidence than Romney supporters,” McCarty. “Whether Floridians react negatively or positively remains to be seen, but it will largely determine consumer confidence as we get close to the holiday shopping season.”

Conducted Sept. 12-20, the UF study reflects the responses of 419 individuals who represent a demographic cross-section of Florida. The index used by UF researchers is benchmarked to 1966, which means a value of 100 represents the same level of confidence for that year. The lowest index possible is a 2; the highest is 150.

© 2012 Florida Realtors®

Home prices up again in July

NEW YORK – Sept. 25, 2012 – The July 2012 Home Price Index released today by S&P/Case-Shiller finds solid price increases in 16 of the 20 cities studied.

“Case-Shiller looks at the same homes over time and compares historical sales prices,” says Florida Realtors Chief Economist John Tuccillo. “As a result, it’s highly accurate – an apples-to-apples price comparison. As a tradeoff for accuracy, however, it’s important to note that it’s a lagging measurement. The data released this morning are already about two months old. Still, the price increase and month-over-month upbeat data suggest that the housing market recovery seems to have legs.”

Case-Shiller’s July report found a 1.5 percent price increase in its 10-City Composite, and a 1.6 percent increase in its 20-City Composite. For the third consecutive month, all 20 cities and both composites recorded positive monthly changes. It would have been a fourth month had April prices not fallen by 0.6 percent in Detroit.

Tuccillo offers another note of caution: “The Case-Shiller Index provides an accurate reading for home prices using a cross-section of U.S. cities,” he says. “However, only two Florida cities are included in its data – Miami and Tampa. As a result, the data can’t be extended to cover statewide home price changes. As every Realtor knows, each market is unique.”

In Miami, the data show that home prices rose 2.1 percent from June to July. The June report found a one-month increase of 1.6 percent. Year-to-year, Miami prices rose 5.3 percent.

In Tampa, home prices rose 0.9 percent from June to July compared to 2.0 percent in its June report. Year-to-year, Tampa prices rose 3.6 percent.

“The news on home prices in this report confirm recent good news about housing,” says David M. Blitzer, chairman of the Index Committee at S&P Dow Jones Indices. “Single family housing starts are well ahead of last year’s pace, existing home sales are up, the inventory of homes for sale is down and foreclosure activity is slowing. All in all, we are more optimistic.”

Federal Housing Finance Agency

A second home price index released this morning also shows positive data, though the Federal Housing Finance Agency (FHFA) Index looks only at mortgages held by Fannie Mae and Freddie Mac – roughly half of all outstanding mortgages.

FHFA’s July House Price Index found that home prices rose 0.2 percent on a seasonally adjusted basis from June to July, according to the Federal Housing Finance Agency’s monthly House Price Index. For the 12 months ending in July, U.S. prices rose 3.7 percent. The index is 16.4 percent below its April 2007 peak and roughly the same as June 2004.

© 2012 Florida Realtors®

Steve Geving
Jones and Co Realty
239-573-1400

Will short sales become taxable?

Members of Congress (departed) Washington, D.C., on Friday (and won’t return) until after Election Day. They (left) behind some serious unfinished business for a post-election session.

At the top of the list is avoiding the fiscal cliff that looms if lawmakers let all the Bush tax cuts expire just as across-the-board spending cuts kick in. But another item belongs on their lame-duck agenda: extending the federal Mortgage Debt Relief Act.

Congress passed the act in 2007 to make it easier for owners to sell distressed properties. It removes the capital gains tax penalty that would normally be imposed on any forgiven debt – the difference between what was originally owed on a house and what it sells for – on a primary residence sold in a short sale.

But the act is scheduled to expire on Dec. 31. Letting its tax benefit lapse would be foolish. Short sales remain the primary means of clearing out properties that are underwater – where owners owe more than their homes are worth – and revitalizing the housing market.

The return of the tax penalty on short sales could have substantial negative consequences for this nation’s economic recovery. It would be especially bad news in those distressed housing markets – including Florida’s – where real estate sales have been stalled due to the high number of underwater properties.

If Congress wants to maintain relief for struggling homeowners and counter its do-nothing image, lawmakers should extend the Mortgage Debt Relief Act before it expires at year’s end.

© 2012 The Orlando Sentinel (Orlando, Fla.) Distributed by MCT Information Services.

Steve Geving
Jones and Co Realty
stevegeving@hotmail.com
236-573-1400

Florida home prices bottomed earlier than previously thought

A new home sales measure says Florida prices hit a soft bottom in 2009, years earlier than what some experts have declared as the low point for real estate.

The measure, similar to the respected national Standard & Poor’s/Case-Shiller price index, was created by Florida Realtors Chief Economist John Tuccillo to be a more accurate reflection of sale prices in the state.

Tuccillo said he was surprised that the index pointed to 2009 as a bottom, but said that was also a time when investors began eyeing Florida for real estate deals.

“Since then we’ve been sort of rocking along on a bumpy road,” said Tuccillo, who developed the index over about a year’s time. “It’s essentially been flat – but in this context, flat is probably good news after the large run-up and drop.”

According to the index, Florida sales prices increased 152 percent from January 2000 to the peak of the market in November 2006. They fell 43 percent from the peak to mid-2009.

Realtors have long complained that the current method of reporting monthly median home sales prices doesn’t offer a true measure of increasing and decreasing values. The median, which means half of homes sold above the price and half below, can be greatly influenced if a large number of either distressed properties or luxury homes sell in one month.

Florida’s new index is considered a “repeat sales index.” It combines Florida Department of Revenue data with prices of the same individual properties sold over time. The index is expected to be released quarterly but because of a lag in some statewide data, the first index runs only through August 2011.

Like Case-Shiller, the Florida home price index measures sales as compared with January 2000 when the index was set at 100. Case-Shiller’s Florida data include Tampa and South Florida, which combines Palm Beach, Broward and Miami-Dade counties.

National Association of Realtors spokesman Walter Moloney said he’s not aware of another state that has its own price index. California releases an “affordability index” that measures the percentage of all households that can afford to purchase a single-family home, but its sale prices are reported as a median.

While the public may prefer a median sales price that reports an actual dollar figure over an index, the index is considered more accurate.

Still, Palm Beach County Realtors said a statewide index doesn’t always reflect regional specifics.

Kevin Kent, a broker-associate with Platinum Properties, which has offices in Jupiter, Juno Beach and Stuart, said South Florida’s home sale prices probably hit a bottom later than 2009.

“When you step back and look at the entire state, that’s probably accurate,” Kent said. “But when you break it down into pockets and certain areas that were hit the hardest, the numbers wouldn’t be the same.”

In April, analysts at the online real estate database Zillow said South Florida sale prices hit bottom at the end of 2011. Case-Shiller’s index shows a bottom in Palm Beach, Broward and Miami-Dade counties in April 2011, but that prices had stabilized some before that.

Florida International University real estate professor Ken H. Johnson agrees that 2011 marked the bottom.

“Back in November, I thought it was pretty clear we had bottomed and housing was as affordable as it’s been in 40 years,” he said. “I said that was the turn, and we’ve not seen prices go down.”

© 2012 The Palm Beach Post (West Palm Beach, Fla.), Kimberly Miller. Distributed by MCT Information Services

Steve Geving
Jones and Co Realty
www.swflhomeresource.com
239-573-1400

U.S. housing starts rose 2.3% in August

U.S. builders started work on more homes in August, driven by the fastest pace of single-family home construction in more than two years. The increase points to steady progress in the housing recovery.

The Commerce Department said Wednesday that construction of homes and apartments rose 2.3 percent to a seasonally adjusted annual rate of 750,000 last month. That’s up from 733,000 in July, which was revised lower from last month’s initial estimate.

Single-family housing starts rose 5.5 percent to an annual rate of 535,000 homes, the best pace since April 2010. Apartment construction, which can be volatile from month to month, fell 4.9 percent.

Applications for building permits, a good sign of future construction, fell to an annual rate of 803,000. Still, that’s down from a four-year high of 811,000 in July, which was revised higher.

The rate of home construction has risen nearly 60 percent since hitting a recession low of 478,000 in April 2009. It’s still half the pace considered healthy. But the steady gains suggest the housing recovery could endure.

“Housing is clearly in a recovery mode,” said Jim O’Sullivan, chief U.S. economist at High Frequency Economics. He said home construction should add about a 0.3 percentage point to overall economic growth this year.

The broader economy may also benefit from recent and more sustainable gains in home prices. When that happens, Americans typically feel wealthier and spend more. Consumer spending drives 70 percent of the economic growth.

The August gains in housing starts were uneven across the country. They were led by a sharp 20.7 percent increase in new construction of homes and apartments in the Midwest. Starts also rose 3.7 percent in the South. But they fell 12.6 percent in the Northeast and 4.3 percent in the West.

Confidence among builders rose in September to the highest level in more than six years, according to a survey released Tuesday by the National Association of Home Builders/Wells Fargo. And builders are more confident that sales will improve over the next six months, the survey noted.

Sales of both new and previously occupied homes are running ahead of last year. Home prices are increasing more consistently, in part because the supply of homes has shrunk and foreclosures have eased. And mortgage rates remain near record lows, a strong enticement for potential buyers with good credit.

Even with the gains, the housing market remains weak. Many would-be buyers are having difficulty qualifying for loans or can’t afford the larger downpayments being required by banks.

Though new homes represent less than 20 percent of the housing sales market, they have an outsize impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in tax revenue, according to the NAHB’s data.

The Federal Reserve last week announced new stimulus measures intended to keep mortgage rates low for the next few years.

Fed Chairman Ben Bernanke said the bank would purchase $40 billion of mortgage-backed securities each month until the job market improves “substantially.” That could push down longer-term interest rates and spur more borrowing and spending.

The Fed also hopes that lower mortgage rates will accelerate the housing market recovery and boost home prices. That, in turn, could make people feel wealthier and more willing to spend, which would bolster economic growth.

AP – Martin Crutsinger

Steve Geving
Jones and Co Realty
www.swflhomeresource.com
239-573-1400
239-321-1395

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