Daily Archives: May 1, 2012

Bedford NY Real Estate | Soaring Prices Suggest a Florida Phenomenon

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The numbers leap off the page.

Seven of the top ten markets in the nation whose media list prices are up year over year are Florida markets.  According to the latest data from Realtor.com, the world’s largest real estate site, Florida single family home and condo prices are zooming at the same time that the rest of the nation is still recovering from the first quarter’s double dip.

Unlike most sales and price reports which are surveys of a representative sample of transactions or indices based on just a few markets, Realtor.com’s report is based on the actual data from the 2.2 million listings in the 146 markets in its data base.  However, Realtor.com captures only the prices for which properties are listed, not actual sale prices.  Nor does it know when sales are closed, only when listings come and leave the site’s inventory.

August median prices in Fort Myers are up 33 percent from 2010. Miami is up 24 percent, Punta Gorda 20 percent, Sarasota-Bradenton 10 percent, Daytona 9.3 percent and Lakeland-Winter Haven 8.8 percent. Compare those increases to the national average increase for median list prices from all 146 metros tracked by Realtor.com: .46 percent.

These amazing year over year numbers are not simply the result of being compared to prices during the August 2010 nose dive following the end of the tax credit.  They are the real thing.  A handful of Florida markets have been leading the Realtor.com hit parade since the end of the first quarter.

With a high saturation of condos, resort, retirement and second homes, these markets were devastated by a combination of foreclosures evaporating demand.  Massive inventories of distress sales and slow absorption drove prices to peak lows.

Florida has a long way to go to get healthy.  The median property in a number of Florida markets has lost half its value or more since 2006.  The peak to trough price differential in many Florida markets is over 50 percent, among the greatest in the nation, according to Case-Shiller.  In Miami, for example, prices fell over 50 percent and didn’t trough until the double dip in the first quarter of this year.  Prices in Fort Lauderdale fell from 2006 at least 46 percent to 2010. Naples fell 52 percent.  Tampa, 43 percent.  Orlando, 51 percent.

It makes sense that at some point bargain prices like these in prime Florida markets will attract investors, both foreign and domestic, and there have been bargains indeed.  In Vero Beach, for example, the discount on foreclosures reached 53 percent in the second quarter; state-wide the media discount was 40 percent according to RealtyTrac.  By all accounts that seems to be the case. In several markets, notably Orlando, Sarasota, Lakeland and Miami, demand has been strong enough to bring supply and demand into close enough balance to reduce median time for listings in inventory by five to 25 percent.

Why then are markets like Jacksonville, Tampa and Orlando, where prices fell nearly as much as South Florida markets, not participating in the renaissance?  Discounts, deals and demand-such as it is-don’t tell the whole story.

The answer may be fewer foreclosures, and in turn, reduced inventory.  What differentiates markets like Fort Myers and Miami from Tampa and Orlando not just geography by a significant decline in foreclosure filings in South Florida that began early this year and reached 60 percent year to year decline in foreclosure activity in July and August.  Inventories are higher in northern Florida markets.

Miami-Dade County recorded 3,352 foreclosure-related actions in August, a 61 percent decrease from a year ago. Broward County had 2,806 foreclosure actions, a 63 percent decrease, while Palm Beach County recorded 2,035 foreclosure-related actions, a 66 percent decline, according to

During the second quarter of 2011, foreclosure actions plunged by 51 percent in the tri-county South Florida region compared to the same three-month period in 2010, according to a new report from CondoVultures.com, a site listing condos.

Fewer filings means fewer REOs are being listed, which has contributed to the significant reductions in inventories shared by all of the markets were pries are zooming.  Almost all have reduced their inventories in the past 12 months, some dramatically.  Since last year inventories of condos and single family homes are down 41 percent in Fort Myers, 47 percent in Miami, 32 percent in Punta Gorda, 33 percent in Sarasota, 32 percent in Daytona and 38 percent in Lakeland.

How long will the Florida phenomenon last?  Will double digit price increases discourage bargain hunters and encourage local owners to list their properties and dilute the inventory vacuum that has been behind the price?  Is the foreclosure fall off a result of servicer processing delays rather than fewer defaults?  Or is it just the beginning of a recovery trend in markets that have suffered most?

Perhaps Bank of America answered that question when it doubled its foreclosure filings in South Florida in August.  With a default rate well into the double digits, Florida still ranks number one in defaults.  Until the larger economic picture improves, it’s hard to believe the Florida price phenomenon will last much longer.

“Florida, particularly South Florida, is still in a real estate crisis and experts predict it will take a couple of years for Florida to win its battle over this downturn…Looks like there are going to be lots and lots of good bargains here in beautiful South Florida for those with the wherewithal to purchase them,” says Florida real estate attorney Rosa Eckstein Schechter.

via realestateeconomywatch.com

In Two Years, Real Estate will Rock | Pound Ridge Real Estate

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Housing starts will nearly double and home prices will begin to rise in 2013, with prices increasing significantly in 2014.

Those rosy predictions come from a new semi-annual survey of 38 of the nation’s leading real estate economists and analysts by the Urban Land Institute’s Center for Capital Markets and Real Estate. The economists foresee broad improvements for the nation’s economy, real estate capital markets, real estate fundamentals and the housing industry through 2014, including:

  • The national average home price is expected to stop declining this year, and then rise by 2 percent in 2013 and by 3.5 percent in 2014.
  • Vacancy rates are expected to drop in a range of between 1.2 and 3.7 percentage points for office, retail, and industrial properties and remain stable at low levels for apartments; while hotel occupancy rates will likely rise;
  • Rents are expected to increase for all property types, with 2012 increases ranging from 0.8 percent for retail up to 5.0 percent for apartments;

These strong projections are based on a promising outlook for the overall economy. The survey results show the real gross domestic product (GDP) is expected to rise steadily from 2.5 percent this year to 3 percent in 2013 to 3.2 percent by 2014; the nation’s unemployment rate is expected to fall to 8.0 percent in 2012, 7.5 percent in 2013, and 6.9 percent by 2014; and the number of jobs created is expected to rise from and expected 2 million in 2012 to 2.5 million in 2013 to 2.75 million in 2014.

The improving economy, however, will likely lead to higher inflation and interest rates, which will raise the cost of borrowing for consumers and investors. For 2012, 2013 and 2014, inflation as measured by the Consumer Price Index (CPI) is expected to be 2.4 percent, 2.8 percent and 3.0 percent, respectively; and ten-year treasury rates will rise along with inflation, with a rate of 2.4 percent projected for 2012, 3.1 percent for 2013, and 3.8 percent for 2014.

The survey, conducted during late February and early March, is a consensus view and reflects the median forecast for 26 economic indicators, including property transaction volumes and issuance of commercial mortgage-backed securities; property investment returns, vacancy rates and rents for several property sectors; and housing starts and home prices. Comparisons are made on a year-by-year basis from 2009, when the nation was in the throes of recession, through 2014.

While the ULI Real Estate Consensus Forecast suggests that economic growth will be steady rather than sporadic, it must be viewed within the context of numerous risk factors such as the continuing impact of Europe’s debt crisis; the impact of the upcoming presidential election in the U.S. and major elections overseas; and the complexities of tighter financial regulations in the U.S. and abroad, said ULI Chief Executive Officer Patrick L. Phillips. “While geopolitical and global economic events could change the forecast going forward, what we see in this survey is confidence that the U.S. real estate economy has weathered the brunt of the recent financial storm and is poised for significant improvement over the next three years. These results hold much promise for the real estate industry.”

A slight cooling trend in the apartment sector – the investors’ darling for the past two years – is seen in the survey results, with other property types projected to gain momentum over the next two years. By property type, total returns for institutional quality assets in 2012 are expected to be strongest for apartments, at 12.1 percent; followed by industrial, at 11.5 percent; office, at 10.8 percent; and retail, at 10 percent. By 2014, however, returns are expected to be strongest for office, at 10 percent, and industrial, at 10 percent; followed by apartments at 8.8 percent and retail at 8.5 percent.

The forecast predicts a modest increase in vacancy rates, from 5 percent this year to 5.1 percent in 2013 to 5.3 percent in 2014; and a decrease in rental growth rates, with rents expected to grow by 5 percent this year, and then moderate to a growth rate of 4.0 percent for 2013 and 3.8 percent by 2014. This may be indicative of supply catching up with demand.

For the housing industry, the survey results suggest that 2012 could mark the beginning of a turnaround – albeit a slow one. Single-family housing starts, which have been near record lows over the past three years, are projected to reach 500,000 in 2012, 660,000 in 2013, and 800,000 in 2014. The overhang of foreclosed properties in markets hit hardest by the housing collapse will continue to affect the housing recovery in those markets. However, in general, improved job prospects and strengthening consumer confidence will likely bring buyers back to the housing market.

via realestateeconomywatch.com

Bedford Corners NY Homes | Renters Outspend Owners on Housing

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Renters now spend five percent more of their household budgets on housing costs than do homeowners, and the difference is growing as rents rise.

Since 2005, homeowners’ expenditures for housing have risen from 31.9 percent of their household budget to 33.2 percent, but renters’ costs have risen even more from 35.6 percent to 38.4 percent, according to the October CoreLogic U.S. Housing and Mortgage Trends.

Since 1985, homeowners have increased their housing expenditure allocation by 12 percent, while renters increased by 22 percent.

As consumers allocate more of their expenditures toward housing, they have less money to spend on non-housing consumption. The largest decline in a household’s budget occurred in transportation expenditures which fell by 17 percent and 22 percent since 1985 for homeowners and renters, respectively, CoreLogic said.

The increased spending allocation for housing, which is largely due to the stagnation of incomes among Americans of home buying age beginning in the 1990s, has actually contributed to the decrease in homeownership by making buying a home more difficult.

Demographics have also contributed to the decline in homeownership.  For the 25 to 34 age group, the homeownership rate fell from 51.6 percent in 1980 to 42.0 percent in 2010. For 35 to 44 year olds, homeownership rates fell from 71.2 percent to 62.3 percent over the same time period.

The CoreLogic report also found that a significant number of foreclosures are remaining on the market for as long as four years or more.  One out of five REO foreclosures (21 percent) are taking more than a year to sell.  Nearly 10 percent, or 23,200 properties that were auctioned in 2006, remained in REO as of Q2 2010. In other words, these properties have been in REO continuously since 2006.

via realestateeconomywatch.com

Five Ways to Fight a Low Appraisal | Chappaqua Real Estate

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What do you do when the appraisal on the dream home you want to buy comes in below the price in the offer the buyer has accepted… even as much as 10 to 20 percent below?

Chances are that raising the cash for your down payment and closing cost has tapped you out.  Finding thousands more to make up the difference between  the appraised value and the contracted amount is out of the question.

You’re not the only buyer who has hit the low appraisal snag.  This past June and July, 16 percent of real estate pros reported a cancelation in a sale, mostly due to a large number of low appraisals.

However, you don’t have to walk away.  In fact, some real estate professionals and economists say that low-ball appraisals are pushing values down home values and undermining the housing recovery.

You can fight back.  You have options and chances are you can find a way to make the deal work without increasing your down payment.

Appraisals are largely based on prices recently paid for comparable local properties.  Over the past decade, finding “comps” that accurately reflect values has been a challenge as values rose quickly during the boom and fell just as fast during the bust  Discounts paid for foreclosures and short sales have created a dual price structure between “normal” and distress sales.  .

Finally, when pricing offers today many buyers rely popular online valuation tools, called AVMs or automated valuation models, instead of a comparable market analysis from a real estate professional.  AVMs give fast property value estimates but they often differ greatly from appraised values because they are determined by algorithms using available local price data, not actual inspections of the property.  During this time of record low home values, it’s no wonder that more and more appraisals are coming in below prices that buyers and sellers have agreed on.

It may seem ironic that buyers would want the homes they want to buy to appraise for as much or more than they are willing to pay.  Remember, the purpose of the appraisal is not to help you get a better price, but to protect your lender should, heaven forbid, you default.  The lender wants assurance that your home will be worth enough to recoup their investment.

Even if you have a great job, sterling credit, an adequate down payment and money in the bank, you lender will still want a conservative appraisal.  In light of losses they have taken on the millions of foreclosures in recent years and the tough times many banks have had on Wall Street, lenders are taking no chances these days.  They are more interested in protecting themselves from a loss than they are in making you a loan.

Here are five steps you can take to save your dream home.

1.    Get the seller to lower the price.  By far, this is the easiest solution, especially if your appraisal comes in less than 10 percent of the contract price.  Obviously, a lower price is a great idea for the buyer, but why would a seller go along?  In July, 2011 the average home in America took about 88 days to sell.  Demand is soft and time is money.  Your seller, particularly if they are selling to buy another home, could be in a real bind if you are forced to back out and they have to put the house on the market again.  After all, there is no guarantee that if you walk away, the seller won’t receive a low or even lower appraisal from the next buyer’s lender. Today, many buyers are offering incentives to sellers, such as payment of some or all closing costs.  Lowering the price might be a cheaper option for the seller in order to get the deal done on time. Sometimes a bird in the hand is best.

2.    Ask the seller to offer to carry a second mortgage for the difference.  This solution doesn’t cost the seller anything but the buyer incurs greater debt. If the buyer really wants the home but cannot come up with the difference in cash, making payments or a lump sum payment at a later date to the seller is an option.  After the escrow closes, sellers often retain the right to discount the second mortgage, sell it for less than face value to an investor.

3.    Do your research and dispute the appraisal.  Is the contract sales price a fair assessment of the property value based on a well-prepared comparable market analysis (CMA) from your real estate agent as opposed to an online AVM? Was the appraisal done by an appraisal management company that may have used a less than expert or out-of-town appraiser?

Disputing the appraisal may sound a little aggressive but you might be the victim of a poorly prepared appraisal.   Do some research first and go to war if you have the ammunition.

You have the right to get a copy of the appraisal from your lender and to find out who did it.  What is the appraiser’s reputation?  Have any complaints been filed with your state appraisal licensing agency?  Where is the appraiser based? Did they perform an appraisal in a housing market that they may not know well? Did the appraiser have adequate information about the subject property.  If your appraisal was conducted by an out-of-town appraiser unfamiliar with your market, you have every right to demand an new appraisal.

What comparables did they use?  Ask your agent and the seller’s agent to put together a list of recent comparable sales that justify the agreed-to sales price. Submit that list to the underwriter and ask for a review of the appraisal. Also, ask the agents to call the listing agents of pending sales to try to find out the actual sales price of those properties. Listing agents do not have to disclose the sales price, but many are happy to help out because they could find themselves in the same situation.  Pending sales are more current and are not closed, so the original appraiser would not have access to them.

The key to a successful dispute is data. You will need as much data you can get to back up your dispute.

4.    Ask the lender for a new appraisal.  Should you find that you have a good case that the appraisal wasn’t fair or accurate, ask your lender for a new appraisal, which you may be charged for.

Another strategy is to get two additional, unbiased appraisals and use the average of all three to arrive at a fair price. This is a risky strategy, in light of the fact that another appraisal might not come in higher than your first; it might even be lower if values have fallen.

Depending on how convincing your argument is, your lender has the ability to override the appraisal estimate, which is unlikely, or to order a new appraisal, which is more likely. If a new appraisal is ordered, talk with your agent about somehow splitting the cost with the seller. Perhaps the listing agent and selling agent will split the fee so the buyer does not have to incur additional costs associated with the transaction.  Appraisals cost around $400 or so.

5.    Get your own, independent appraisal.  If you order your own appraisal and your loan is an FHA loan, ask the lender for a list of approved appraisers. Usually the bank will review your appraisal and ask the previous appraiser if they agree or disagree with the newly submitted one.

If the first appraiser disputes your appraisal, the bank may request a third appraisal done by another appraiser, or they may just reject your appraisal.

However, if the first appraiser agrees with the disputes you present, they may adjust their original appraisal and you may get a better price.

If these tactics fail and you cannot make up the shortfall in the appraised value, you may find yourself moving on.  If so, be sure that you were protected by a contingency clause in the sales contract, stating that the transaction can be terminated if the home doesn’t appraise at, or above, the sales price.

via realestateeconomywatch.com