METRO MARKETS

Since the bust of the real estate bubble, people have become cynical about the state of affairs of the residential real estate markets in America’s major metros. While it is true that the residential housing market is depressed, it’s not all bad news.

According to the Fiserv Case-Shiller Index, which monitors and forecasts single-family home price changes in over 375 U.S. metropolitan cities, it is predicted that 75 percent of these metro cities will see stabilization in home prices by the end of 2011. According to this Index, despite price declines of up to 1.5 percent in the third quarter of 2010, home prices have leveled out in one out of four metro U.S. cities.

The Index points that after five years of record declines in home prices a few metro area housing markets are beginning to hit their bottoms. According to Fiserv, prices have already stabilized in the metro areas of Washington, D.C., San Francisco and San Diego. Furthermore, the Index states that as 2011 goes by, about 75 percent of the metro markets would bottom out and subsequently stabilize. Portland (Oregon), Minneapolis, and New York City are amongst those that will join the ranks of stability by the end of 2011.

Metros that are not expected to recover till the end of 2012 include Las Vegas, Phoenix and Miami, according to the Index. These three cities had the steepest declines in home prices. For the mid and smaller cities, the recovery in prices will be slow and an uphill battle because of the ongoing financial crisis and the large supply of foreclosed properties that continue to drag most of the nation’s housing markets.

The housing market situation in Central Florida is worth looking into from an opportunity perspective. According to the Florida Association of Realtors, home prices across the state of Florida have fallen about 20 percent since the past year. However, they are still about 13.3 percent higher than the past five-year period. But the good news is the volume of home sales is rising again, which is a signal that the market may be recovering. Thanks to the high inventory, conditions are ideal for buyers. Mortgage rates are at their lowest levels since the 60’s. Families that are looking to upsize can expect to get more home for their money.

According to several studies, Florida will continue to be the favorite retirement destination for the 80 million strong Baby Boomers. Central Florida in particular, where the healthcare and technology sectors continue to show healthy growth, is seen as one of the best bets in the nation as far as recovery and growth in single-family home sales.

Single family home sales in Central Florida reached 1,708 in March, which is a 36 percent increase over February. Over 10,000 properties were under contract waiting for closing. About 5,400 new listings were reported in March, which is a substantial increase. Consumer confidence is on the rise in Central Florida and interest from Canadian and European buyers continues to grow.

Existing-Home Sales Fall About 5% in 2010

According to a report released by the National Association of Realtors (NAR), existing home sales fell about 5 percent to 4.9 million in 2010. This included single-family homes, condos and co-ops. In 2009, the number was 5.6 million. The NAR report states that sales rate for previously owned homes rose 12.3 percent in December 2010 as compared to November. But compared to December 2009, the sales slid about 2.9 percent. The number of people who bought previously owned homes in 2010 fell to the lowest level in 13 years. The estimated median price was flat in 2010 at $172,500, compared to 2009.

NAR reported that the seasonally adjusted annual rate of existing single-family home sales rose 11.8 percent from November to December but dropped 2.5 percent compared to December 2009, while the rate of condo and co-op sales rose 16.4 percent in December and fell 5.2 percent compared to December 2009. The median price was $168,000 in December, which is a 1 percent decline from the same month in 2009.

But according to CoreLogic, a provider of housing market data and statistics, home sales totaled 3.6 million, down 12 percent from 4.1 million in 2009. As per CoreLogic’s report, NAR’s existing home sales data are overstated by about 15 – 20 percent. NAR is in the process of evaluating its benchmarking methodology to determine the reality behind this discrepancy.

It’s not just the lower sales numbers that concern economists, but also the falling prices.  Home prices fell 5.1 percent for four straight months ending November 2010. The downturn in home prices is driven by weak sales, an excess supply of unsold homes and larger impact from distressed sales.

The number of homes sold in 2010 was at its lowest point since the housing market collapsed. Sales were more than 50% below the level seen before the crisis in 2005 and 33% below the level measured in 2000.

The trend for 2011 doesn’t show any positive changes. As of the end of November 2010, there was a 16-month supply of homes on the market, which is the highest level since February 2009 when prices were falling about 20% on a year-over-year basis. Typically, the housing market has a six or seven month supply.

Since loans are becoming more expensive, the ability for borrowers to obtain home loans will become more difficult. So what does all this mean for home sales figures for 2011? Only time will tell.

Fair Housing Laws: Fair, But Confusing

All “home-owner wannabes” have several common objectives. They want to find the best house money can buy, in the most perfect, decent and safest neighborhood, with ideal neighbors on either side! These objectives are purely subjective.

While it is easy for a real estate agent to provide a plethora of specific but publicly available data to potential home owners such as the best schools, parks, past resale values, etc., it is impossible for agents to answer questions such as “is this a good neighborhood, is it safe, does it have decent people or what’s the ethnic makeup?” and so on. It is impossible on two counts. First of all, any answer provided by the agent to any of these questions is not only 100 percent subjective, but it is also illegal under the federal fair housing laws.

In 1968, Congress passed the federal Fair Housing Act. The primary purpose of the Fair Housing Law is to protect the buyer/renter of a dwelling from seller/landlord discrimination. Its primary prohibition makes it unlawful to refuse to sell, rent to, or negotiate with any person because of that person's background, as opposed to their financial history and resources.  When the Fair Housing Act was first enacted, it prohibited discrimination only on the basis of race, color, religion, sex and national origin. In 1988, disability and familial status (the presence or anticipated presence of children under 18 in a household) were added. The law is enforced by the U.S. Department of Housing (HUD).

Real estate agents support the fair housing laws. They are expected to fully understand it and required to strictly abide by it. This is where the can of worms opens. While everyone agrees with and appreciates the intent of these laws, folks in the real estate industry unanimously find it confusing, convoluting and frustrating because of its numerous land mines.

For example, a house cannot be advertised as a family home or a great place to raise a family. Instead, it can only be labeled as a single-family home, multiple-family home, condominium or townhouse. Because of the broad language of the fair housing laws, a simple expression of a preference can get an agent into a boatload of trouble with the HUD.

The National Association of Realtors' (NAR) Office of Legal Affairs suggests the following tips:

·              Use words that describe features of the property rather than describing the type of buyer that might want those features. For example, describe the property as ‘located near a scenic park with jogging track in the woods' as opposed to ‘great location for joggers, athletic people or nature lovers'.

·              Avoid words that relate to race, color, religion, age, familial status, or national origin ("Heart of China Town", "Hispanic neighborhood" , "adult building", "walking distance to Baptist church", etc.)

·              Avoid using descriptive words such as "exclusive," "private," or "integrated" that convey preferences for one group over another or may tend to characterize a community's makeup.

·              Do not make references to nearby landmarks that may be racial, ethnic, or religious in nature.

Here are a few resources which provide various details about the fair housing laws:

http://www.realtor.org/library/library/fg705

http://portal.hud.gov/hudportal/HUD?src=/program_offices/fair_housing_equal_opp

http://www.nationalfairhousing.org/

http://www.fairhousing.com/

http://www.civilrights.org/fairhousing/laws/

FICOs and FHA: 2 Big Lenders Loosen Up

There is some good news for home buyers, especially first-timers according to Ken Harney of Inman News.  With no fanfare or public announcements, two of the largest FHA-approved lenders – Wells Fargo and Quicken Loans – have backed off their controversial "overlay" requirements on FICO scores (lender overlays are qualification requirements that can be more stringent than FHA's own requirements).

Both these large lenders confirmed last week that they will now lend to applicants with 580 FICOs and 3.5 percent down payments. These revised standards conform in most respects to FHA's own minimums, and open the agency's financing to large numbers of buyers whose credit scores have sagged during the recession.

Along with most other major lenders, both companies previously had insisted on minimum FICOs of 620 for otherwise qualified borrowers seeking 3.5 percent down payment loans. If your score came in even slightly lower, they wouldn't even look at your application. An estimated one third of Americans now have FICO scores below 620, according to one consumer group's estimate.

The lending industry's rationale for imposing a higher bar than FHA's own: They need an extra cushion of protection against potential defaults by borrowers with subpar credit scores. Many of those defaults, they said, could prompt indemnification demands by the Federal Housing Administration -- essentially punitive repayments for insured loans that go belly up. Similarly, FHA lenders want to avoid the costs of servicing nonperforming defaulted mortgages.

Wells' newly revised policy actually dips the FICO score cutoff line well below 580 -- all the way down to deep subprime 500 -- but also sets strict underwriting hoops and snares to weed out unqualified applicants. For example, borrowers with scores in the range of 500-579 will need a 10 percent down payment from their personal resources. They will not be able to use gift money from relatives, friends or a charitable down payment assistance program to meet the 10 percent upfront equity test.

Home buyers with scores of 580-599 will need 5 percent down payments, and will be prohibited from supplementing their own cash with gifts. Borrowers with FICOs above 600 will qualify for 3.5 percent down payment FHA deals, but will be allowed to use gift money.

Contributions from home sellers to defray buyers' closing or loan origination costs will be limited to 3 percent. Debt-to-income ratios will be tight: 31 percent for monthly housing-related expenses, and 43 percent for total household debt service.

If the mortgage industry adopts the Wells and Quicken guidelines in some form, tens of thousands of consumers -- along with the real estate professionals assisting them -- could be beneficiaries in the weeks immediately ahead.

Buyer selection declines as Orlando inventory slips to post-boom levels

(March 14, 2011 – Orlando, FL) Members of the Orlando Regional REALTOR® Association reported a 5.68 percent year-over-year increase in the number (2,085) of home sales completed in February, helping to whittle Orlando’s inventory of unsold homes down to its lowest point since March 2006. The fast-flying condo market alone has 43.40 percent less inventory than this time last year.

“A downward slip in inventory means a downward slip in the number of choices available to homebuyers,” explains ORRA Chairman of the Board Mike McGraw, McGraw Real Estate Services, PL. “Nevertheless there is still a wide selection of homes on the market, and the weekend of March 26 -27 is a great time to explore the options. Orlando’s REALTORS® will be celebrating the Florida Open House Weekend by opening scores of their listings to visitors.”

Potential buyers should also consider the current level of median home prices in Orlando, a level that was last seen in 1997. The $96,000 overall median price of all existing Orlando area homes sold in February increased a fraction (1.16 percent) from last month, but is 8.57 percent below the February 2010 median price of $105,000.

The lower median prices of bank-owned and short sales, which accounted for 73.48 percent of all sales in February, do continue to exert a downward influence on the overall median price (as do the sales of low-priced condos). The median price for bank-owned sales in February is $74,000 and the median price for short sales is $98,000. The median price for “normal” existing homes – i.e., those that are neither a short sale nor a foreclosure – sold in February is $155,000.

The number (9,223) of homes under contract for purchase in February is a decrease of (2.53 percent) compared to those awaiting closing in February 2010. However, there are (5.08) percent more homes currently under contract than were last month (8,777).

The Orlando affordability index decreased to a still-rocking 274.55 percent in February from January 2011. (An affordability index of 99 percent means that buyers earning the state-reported median income are 1 percent short of the income necessary to purchase a median-priced home. Conversely, an affordability index that is over 100 means that median-income earners make more than is necessary to qualify for a median-priced home.) Buyers who earn the reported median income of $53,561 can qualify to purchase one of 7,929 homes in Orange and Seminole counties currently listed in the local multiple listing service for $263,567 or less.

First-time homebuyer affordability in February decreased to 195.23 percent from last month’s 197.98 percent, which can be attributed in part to February’s slight rise in median price. First-time buyers who earn the reported median income of $36,421 can qualify to purchase one of 5,643 homes in Orange and Seminole counties currently listed in the local multiple listing service for $159,312 or less.

Homes of all types spent an average of 99 days on the market before coming under contract in February 2011, and the average home sold for 94.47 percent of its listing price. In February 2010 those numbers were 91 days and 94.87 percent, respectively.

The area’s average interest rate increased in February 2011 to 4.88 percent, from the 4.84 percent posted in January 2011.

Inventory

There are 13,480 homes currently available for purchase through the MLS, which is 2,571 homes (16.02 percent) less than were available in February 2010. The current pace of sales translates into 6.47 months of supply; February 2010 recorded 8.14 months of supply.

There are 10,889 single-family homes currently listed in the MLS, a number that is 8.65 percent less than the 11,920 single-family homes listed in February of last year. Condos make up 1,544 offerings in the MLS, while duplexes/town homes/villas make up the remaining 1,047. Orlando’s condo inventory is 43.40 percent lower than it was in February 2010.

Condos and Town Homes/Duplexes/Villas

The sales of condos in the Orlando area increased by 2.14 percent in February when compared to February of 2010 and decreased by 10.00 percent compared to January of 2011.

The most (263) condos in a single price category that changed hands in February were yet again in the $1 - $50,000 price range and accounts for 55.14 percent of all condo sales. The next greatest range, representing 10.69 percent of the month’s condo sales, is the $50,000 - $60,000 category.

Orlando homebuyers purchased 225 duplexes, town homes, and villas in February 2011, which is a 39.75 percent increase from February 2010, when 161 of these alternative housing types were purchased.

MSA Numbers

Sales of existing homes within the entire Orlando MSA (Lake, Orange, Osceola, and Seminole counties) in February were up by 10.50 percent when compared to February of 2010. Throughout the MSA, 2,653 homes were sold in February 2011 compared with 2,401 in February 2010. To date, sales in the MSA are up 14.43 percent.

Each individual county’s sales comparisons are as follows:

• Lake: 9.50 percent below February 2010 (305 homes sold in February 2011 compared to 337 in February 2010);
• Orange: 10.31 percent above February 2010 (1,370 homes sold in February 2011 compared to 1,242 in February 2010);
• Osceola: 20.82 percent above February 2010 (528 homes sold in February 2011 compared to 437 in January 2010); and
• Seminole: 16.88 percent above February 2010 (450 sold in February 2011 compared to 385 in February 2010).

For detailed statistical reports, please visit www.orlrealtor.com and click on “Housing Statistics” on the top menu bar. This representation is based in whole or in part on data supplied by the Orlando Regional REALTOR® Association and the My Florida Regional Multiple Listing Service. Neither the association nor MFRMLS guarantees or is in any way responsible for its accuracy. Data maintained by the association or MFRMLS may not reflect all real estate activity in the market. Due to late closings, an adjustment is necessary to record those closings posted after our reporting date.
ORRA REALTOR® sales, referred to as the core market, represent all sales by members of the Orlando Regional REALTOR® Association, not necessarily those sales strictly in Orange and Seminole counties. Note that statistics released each month may be revised in the future as new data is received.

Orlando MSA numbers reflect sales of homes located in Orange, Seminole, Osceola, and Lake counties by members of any REALTOR® association, not just members of ORRA.

How to sell a house: basics and myths

“Should I hire a real estate agent or sell on my own through the For Sale By Owner (FSBO) process?” This question comes to the minds of many home sellers who hope to save the commission they would have to pay a real estate agent. The brave few who choose the FSBO route quickly realize and appreciate the value of hiring an agent once they encounter the massive amounts of paperwork involved and the state laws that govern real estate transactions. Statistically, sellers who sell their home without a real estate agent often get less from the sale than sellers who use one.

The basics of how to sell a house are very simple. A clean home that’s correctly priced, properly staged, well maintained and is accessible to potential buyers via MLS and websites will sell quickly. Having great photographs or a virtual tour video would also help. The one other thing that a seller could do to get a better price and sell faster is to hire a savvy real estate agent.

While the low-tech, inexpensive for-sale sign and flier box are still powerful ways to market a house, this alone is not good enough in today’s depressed real estate market. It is important to hire an agent who has mastered the use of modern technologies including social networking, smart phone apps, text messages, Quick Response (QR) codes, GPS map data, syndicating property information to hundreds of marketing websites, etc.

Facebook and Twitter are no longer buzz words. There is proof that Realtors that employ these new media not only have higher sales records, but they also sell much faster than their contemporaries that still depend only on the traditional newspaper or print ad marketing staples of the past. Baby boomers and younger generations prefer to receive property information via text messages on their phones by dialing a number or by using the cameras on their smart phones to scan a QR code displayed on the for-sale sign.

Selling a house also requires objective, fact-based decisions which can often become obscured by some of these age old myths.

Myth: Set the price high and lower it gradually if it doesn’t sell.

Truth: Pricing too high or low is equally bad. A comparable market analysis created by a real estate agent is the best way to set the right price. 

Myth: Upon receiving an offer, make the buyer wait to get an upper hand in price negotiations.

Truth: Promptly responding to an offer is not only professional, but it actually increases the possibility of a quick sale.

Myth: It’s OK to list a home that needs repairs, as long as the defects are clearly disclosed upfront.

Truth: Today’s buyers prefer homes that are in ready to move-in condition. While major defects can be disclosed in exchange for a lower price, taking care of minor repairs makes a house more marketable.

Myth: A home warranty is unnecessary.

Truth: A home in good condition which comes with a warranty is preferred by most buyers because it provides peace of mind and consequently, it speeds up their decision making process.

Myth: It’s better to sell on your own to save the real estate agent’s commission.

Truth: Not only do sellers net less when they sell on their own, but many end up hiring a real estate agent half way through the sales process because they get overwhelmed by the amount of work and time involved.

Reminder…Homebuyer Tax Credit Extended for Military Personnel

Good news for service members! Military and certain other federal employees serving outside the U.S. may qualify for a one-year extension on the homebuyer tax credit, up to $8,000.* The tax credit applies to homes purchased after November 6, 2009 for $800,000 or less. A binding sales contract for a principal residence in the U.S. must be signed on or before April 30, 2011 and close by June 30, 2011.

For complete eligibility details, visit the IRS's section on Homebuyer Credit for Members of the Military.