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Tag: Anna Maria Island real estate

Castles in the Sand

Renovations, teardowns rampant on Island

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

I challenge you to take a ride around Anna Maria Island and find a street where there are no properties either being currently or recently renovated or torn down. I can’t guarantee you won’t find any and I won’t take that bet, but all of us who either live on the Island or visit it often know what I’m talking about.

Finding the right home in the right location is everyone’s dream. Unfortunately, in spite of increased interest rates and a slight downtick in demand, the housing market is still a three-alarm fire. So, what do buyers with cash in their pockets do when what they’re looking for just isn’t available? They buy location and plan a major renovation or a complete teardown.

However, if you’re planning on taking on this kind of project, you need not only professional help but also the ability to stay focused. It’s important not to overbuild even on an island where properties are selling at what seems to be extraordinary prices. There is a broad calculation when remodeling a home or deciding on a complete teardown. The finished home should be worth no more than three to five times whatever you paid to acquire the original property per Ken H. Johnson, Ph.D., a real estate economist at Florida Atlantic University in Boca Raton. To quote him, “…otherwise you might develop way too much home for the neighborhood.”

Of course, building on waterfront property in the state of Florida opens up a Pandora’s box of regulations and requirements. First of all, in most of Florida and certainly here, if the cost of the improvements you’re making exceeds 50% of the market value of the existing structure preconstruction, you will be required to bring everything up to code.

Therefore, if you purchase a cottage on the beach on Anna Maria Island for $2 million and you plan on renovating it at a cost of $1.5 million, you will be required to bring it up to current codes. That means current hurricane codes for doors, windows and height as well as building materials and techniques for the roof structure like roof tie downs. All of this could make the cost of the renovation prohibitive and result in a complete teardown being more cost-effective. In addition, properties in a flood zone – all of Anna Maria Island – will need to meet FEMA’s requirements requiring that elevations have pilings of a certain depth, concrete walls and more.

Another factor supporting teardown as opposed to renovations are the hazardous materials you’re likely to find in older homes. Asbestos and lead paint were used with abandon in construction for many years and were great products until they were found to be lethal, especially to children. Getting rid of hazardous materials can be an expensive proposition since they need to be disposed of in a very specific way. I’ve been in a lot of older homes where all of the plumbing and heating systems were wrapped in asbestos; it was a nightmare to remediate and not unusual for the homeowners not to have any idea there was a problem.

Clever real estate agents are marketing properties not just in coastal areas but around the country as ripe for teardown in view of the shortage of available inventory. As in any real estate transaction, if you’re thinking of this type of purchase, doing your research and getting the correct advice is paramount.

Just for fun, pick a non-beach day and take a ride around the Island and count the number of renovations and teardowns you encounter; I doubt you’ll be surprised.

Castles in the Sand

Is the country in a housing affordability crisis?

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

This pains me to say, but I’m glad I‘m not in my 30s anymore. Not because I didn’t think it was the best decade of my life, but because I would hate being in the real estate market now shopping for my first home.

Housing affordability is hitting first-time buyers the hardest. They’re getting it from all sides, high prices, low inventory, tremendous levels of inflation and interest rates that keep inching up. Back in 2020 and 2021, buying a home was more affordable due to record-low interest rates in spite of the fact that inventory was also extremely low. The big question is, will this ever happen again?

Now, however, interest rates and prices are still going up, and although there is some movement in the amount of inventory available, it is still historically low. Now that the Federal Reserve has raised rates again at the end of July to another 0.75%, everyone is watching the mortgage rates to see what happens. As of this writing, the rates went up slightly and were standing last week at an average of 5.55% for a 30-year fixed mortgage per Forbes.

Since the rates have increased, many of the first-time buyers who were doing pretty well on the affordability scale are dropping out of the market. Not only are the monthly mortgage carrying charges going up with the rates, but likely their rent is also climbing too, creating a situation where nothing is being added to their down payment nest egg.

The result of this is the share of first-time buyers is dropping every month. A year ago, their market share was about 31% per The National Association of Realtors, but this year that percentage is dropping into the mid-20% range. In addition, millennials who are between 25 and 40 years old, the age when most adults are starting to own a home and build equity in that home, are being denied that opportunity.

In addition, the favorable tax position that homeowners have is also eating into their wealth. Many of these first-time buyers also live with the fear of overpaying for a home in the real estate frenzy that’s been going on, stretching to buy that home and worrying that it could come crashing down on them. Everyone remembers the financial crisis that was largely fueled by an overheated real estate market and way too careless lending practices.

The National Association of Realtors’ housing affordability index measures whether or not a typical family earns enough income to qualify for a mortgage loan on a typical home at the national and regional levels based on the most recent price and income data. The last time this was updated was in May of this year when the index fell to 102.5. This was the lowest level of affordability since the index fell to 100.5 in July 2006. Also, this was very close to the lowest level recorded in July 1990 when the index stood at 100.2.

The decline in affordability makes it especially difficult for first-time home buyers to find their way into the real estate market. There are economists who say we may never see the level of affordability we experienced in the past year or two again. This perfect storm of COVID-19, inflation, interest rates and housing shortages has put an enormous burden on this generation, and it will affect the country’s economy for many years to come. The answer is yes, we are in a housing affordability crisis right now, ask a 30-year-old.

Castles in the Sand

Are we starting to turn a corner?

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

It’s a fact – the number of real estate sales around the country appears to be slowing, but the sale prices aren’t. There is no way to spin this. It’s a fact. The question is, what does it mean and where will it lead?

The June median national sales price was $416,000, according to the National Association of Realtors. However, sales activity continued to slow under pressure from higher mortgage costs and higher asking prices.

Locally, as we saw last week, Manatee County is also seeing a slowdown in sales, but no significant change in selling price – the median single-family home was $550,000 for the second month. June’s percentage of increase for Manatee County was 35.7% from last year, compared to the national average of 13.4%.

The demand for homes continues to exceed the unusually low levels of supply, pushing prices higher all over. High interest rates and record home prices are eliminating buyers from the market every day… not a good position for the real estate market since first-time buyers and move-up buyers are the engine of the market and the single thing that keeps it moving.

And as usual, the economists are all over the place in their opinions about the future. Some expect higher rates to slow the home price growth this year and others expect the home prices to keep rising around 5% this year per the chief economist for Fannie Mae.

I started noticing something interesting as I perused realtor.com for listing and selling prices. I took a sampling of the most recent sales as of this writing in the three cities on Anna Maria Island and Cortez. Out of the sampling of 10 closing in Anna Maria, only three properties sold at full price. Out of my sampling of 10 properties in the combined cities of Holmes Beach and Bradenton Beach, only one sold at full price. And in Cortez, I was only able to use five property sales, but even for those sales, only one sold at full price.

This analysis is, of course, totally random and not very scientific, but it does speak to me that there may be a slight shift. I was frankly surprised – what happened to all those full price and over offers that were going on for so long? Well, maybe what happened is that the market is starting to run out of steam just a little. It would appear there is still plenty of activity and the buyers are out there and being aggressive, but with a little more of a level approach. But what about the sellers? Are they starting to think that negotiating may not be a bad thing?

At the Federal Reserve’s meeting last week, the basis point was raised 0.75% as expected. Generally, every time the Feds raise the rate, it does result in mortgage interest rates increasing. That’s not written in stone, so we’ll see what happens over the next few weeks. I’ve said this many times, but mortgage rates between 5.5% and 6.5% may be a shock to the new generation of buyers, however, those of us who have bought and sold properties or have been in the real estate business for years have lived through much higher rates.

So, are we starting to see a chink in the real estate armor or is it just a little scratch? Is even the mighty Anna Maria Island showing signs of battle fatigue? Or maybe it’s just a normal readjustment of the market to where it should be – you make an offer, the seller counter offers and you meet somewhere in the middle. Those were the days.

Castles in the Sand

Cash is king in today’s real estate market

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

Are we starting to see an adjustment in the real estate market, maybe, or are only some parts of it changing? One thing that is still very strong relative to the country as a whole are the cash offers being made.

No matter how you spin the sales statistics, which we’ll get to shortly, when it comes to having the edge, buyers with all-cash offers are still the top of the heap. There is a slight downturn in cash offers both nationally and locally, however, the percentage of cash sales is still staggering.

Because of this, buyers are teaming up with family members to consolidate funds for cash offers. Many of these sales are converted to mortgages or home equity loans after closing. Of course, you need to find the cash first and there are suddenly a number of companies that are funding the cash on behalf of the buyers and then taking a fee in the form of a percentage of the cash fronted at a later time when a loan can be put on the property. Some cash offer companies buy the house on behalf of the buyer and then sell it to the buyer. Others give buyers cash to make the purchase themselves.

About 25% of home sales in June were paid in cash according to the National Association of Realtors, near the highest level since 2014. Comparing the national to the local market, the Realtor Association of Sarasota and Manatee for June reported cash sales for single-family properties were about 39%, significantly higher than the national average. Cash condo sales for June in Manatee County were just about 55%, however, I don’t have a national “paid in cash” figure for condos.

So, let’s move on to the overall June sales statistics recorded by the Realtor Association of Sarasota and Manatee.

Single-family homes closed 22.3% fewer properties, the median sale price was $550,000, the same as last month, the percentage was up 37.5% from last year, and the average sale price was $690,524, up 19.8% from last year. The median time to contract is six days and a month’s supply of available properties is up 200% from last year, at 1.8 months. This is because there are 31.5% more new listings this June compared to last, adding to the available inventory.

Condo sales closed 23.6% fewer properties, the median sale price was $356,500, up 27.3%, and the average sale price was $441,868, up 33.2%. The median time to contract is seven days and a month’s supply of inventory is 1.5 months, up 200% from last year. In addition, there are 8.4% more new listings this month compared to June of last year, accounting for an increased monthly supply of condo inventory.

The Realtor Association of Sarasota and Manatee indicates that both Sarasota and Manatee counties are beginning to see more and more homes available for sale compared to last year. This trend will likely continue considering the record high prices and rising mortgage rates. Sellers will get serious about selling and buyers who can qualify for the higher rates will want to buy before the rates start going up again. Nevertheless, even a two-month supply of available properties is still far from the six-month inventory that was always considered a balanced market.

Cash trumps everything in real estate in every market – always has and always will. Keep an eye on the future and the possibility of a sea change to a more level real estate market.

Castles in the Sand

Adjustable rate mortgages right for some

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

Less than a month ago, around the middle of July, I reported that the 30-year fixed rate mortgage loan interest rate was nearing 6%. It never went over 6%, but instead started dropping back down. As of July 15, the average 30-year fixed rate according to Forbes was 5.86% and the average 15-year fixed rate was 4.97%. It may not appear to be a big difference in interest rates, but when you convert it into actual money at the elevated prices of homes, it makes a difference.

The typical U.S. family will spend an additional $400 on their mortgage payment each month than they would have in January, according to the Federal Reserve Bank. It could be the difference between qualifying for a mortgage, not qualifying or looking for a less expensive property, either way, the average prospective homeowner is affected by the rate fluctuation and is likely watching the daily activity closely.

To help fill the gap for some borrowers, the interest rates of adjustable rate mortgages (ARMs) are increasing. The Mortgage Bankers Association indicated there was a 3% increase in people applying for ARMs since January.

The popularity of the adjustable rate mortgage peaked in 2009, helping to create the financial crisis. This was because ARMs carry a lower interest rate than fixed-rate mortgages at the beginning of the loan, then they adjust at regular intervals based on one of several indexes. This allowed lenders to make loans with ultralow teaser rates to subprime borrowers who, when the rates went up, could not afford the new payment and ultimately let their houses be foreclosed.

Although ARMs certainly have their place in the real estate world, we don’t want to go back to those years. It can be a good option as fixed rates increase to help buyers qualify for a mortgage with the hope of being able to refinance at a later time if the rates go down. The risk in this is the temptation to buy too much house that will end up being too expensive down the road. This was part of the fallout of the financial crisis.

It’s also a good option for buyers who may not plan on owning the property long-term or who are confident their income will increase enough to keep up with mortgage rates as they adjust. The calculation is whether the monthly payment savings with an adjustable-rate mortgage is worth the risk of increased rates.

Don’t let someone talk you into this just because you are crazy anxious to get into a home. Understand the complications and risks associated with an ARM, do the math and avoid being enticed by pricey upgrades just because you realize you will actually qualify for them.

On July 26, the Federal Reserve has its next meeting and it is rumored that the prime rate will increase by 0.75% again this month. My guess is a couple of months from now, buyers may be wishing they can get a 6% rate.

So, we’ll wait and see what effect, if any, that has on the daily rates.

Castles in the Sand

Homeowners consider renting in tight market

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

The majority of people in my generation and even those decades younger couldn’t wait to stop paying rent. It was drummed into our brains by our parents and grandparents that paying rent was a waste of money and you need to buy, buy, buy. Like so many other norms in real estate, that philosophy has also been somewhat upended.

An increasing number of professionals around the country who can more than afford to purchase a home and young retirees who may have just sold their family homes are reluctant to buy another one and have decided to rent instead. To make their decision just a little bit more confusing is the shortage of rentals, creating a similar market for rentals that we have been experiencing with sales, including bidding wars and offering more than the asking rental price.

They point out the increase in mortgage rates, the astronomical asking prices and the shortage of inventory to justify their decision. Instead, they are considering renting high-end rentals, way above the $2,000-a-month median national rent, with a lot of amenities, not caring about the cost-versus-owning calculation. Those calculations may have changed, and there are online calculators you can use to determine what the real cost of owning versus renting is over a period of years.

For most property owners, just the straight math of owning versus renting is in favor of renting. This is including the cost of mortgage, taxes, insurance, maintenance and many other homeownership-related expenses. Of course, property appreciation is not included in this calculation, but many new renters have already cashed out their equity in their previous homes and may be looking for just an easier and less expensive lifestyle and/or are willing to wait for a more normal real estate market.

Renting, of course, will give you more flexibility and freedom to make life decisions. There are no maintenance responsibilities and the burden of doing those repairs is someone else’s problem. Of course, your landlord can increase the rent at the end of your lease, there are no tax benefits to renting, you can’t make changes, pets could be a no-no and rules must be followed.

We all know the pros of owning a home, starting with the appreciation. Becoming a homeowner is the best way for average middle-class people to accrue wealth; over time, it’s a good investment and probably beats the stock market. But what really appeals to buyers about ownership is, of course, the freedom to modify your property, have a tax benefit during the years you will live in the home, have a big deduction on your equity when you sell and privacy.

Owning a home can be inconvenient. There is nothing liquid about a home if you need to sell, and there is a process, even in this favorable market. Monthly expenses can dramatically change in the face of a major repair bill or an increase in property taxes. And even though home ownership traditionally has been a good solid investment, we all saw during the financial crisis that property values can go down.

Renting has been frowned upon in the past by previous generations, but it’s getting another look from a large segment of the population, including young people who can’t afford the real estate environment we’re in and older people and professionals who can afford a home but choose not to buy at this time. Whoever you are, renting is not what it once was, so leaving the housing market and going into the rental market may not be as easy as it sounds.

Castles in the Sand

Mortgage interest rates rising again

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

Here’s a little perspective on the continuing increase of the 30-year, fixed-rate mortgage. Several months ago, I did an analysis of the average fixed-rate mortgage rates starting in 1971 recorded on Freddie Mac’s website. At the time, something told me that I should hang onto this research, however, I had no idea how much I would be referring to it during the past couple of months.

Since the Federal Reserve decided to increase interest rates in an effort to control inflation, the housing market has been substantially disrupted. Currently, the U.S. mortgage rates have reached their highest level in more than 13 years. The average interest rate for 2008 was 6.3% and we are already seeing rates at or near 6%. In June, the Federal Reserve increased rates by 0.75% points and Fed Chairman Jerome Powell indicates things are not likely to change soon. He hints that at the July meeting there will be another 0.75% increase. Mortgage rates don’t automatically increase when the Fed raises rates, but they are heavily influenced by it.

What we’re seeing happening around the country and in Florida is a decline in the number of sales, not a decline in sale price. Even though there is some increase in the number of new properties hitting the market, it is so marginal it doesn’t even come close to providing enough inventory to satisfy hungry buyers. In Manatee County in May, the supply of single-family homes finally exceeded one month, which is anemic when you consider that a six-month supply of available properties has traditionally been the benchmark for a healthy real estate market.

Complicating the availability versus demand ratio even further is the fact that so many homeowners refinanced their mortgages when rates were under and just over 3%. These homeowners have no incentive to sell any time soon and move on or up to another home. Even potential retirees are rethinking the benefit of selling, helping to freeze the market, not to mention the pandemic providing a new way to do business remotely, allowing employees to work from areas of the country with lower housing prices shifting the market.

Because the interest rates were so low for so long, buyers were able to purchase larger and more expensive homes. However, now with less purchasing power, young buyers are facing the reality of settling for a smaller home with fewer amenities in an area they may not really want to be. Housing costs in the country have jumped from 24% of the average household budget in the early 1970s to 27% in the late 1980s to 35% in 2019 with higher housing costs likely to come based on the increase in sale prices.

Most real estate professionals and economists don’t see prices going down. Goldman Sachs estimates housing prices will grow around 10% this year nationally and Bank of America forecasts 15%. So, it doesn’t look like the Federal Reserve’s plan to lower the heat on the housing market by increasing mortgage rates has worked; there is still a huge demand for properties. It has, however, brought a lot of pain to first time and marginal buyers.

Tony Veldkamp, the president of the Realtor Association of Sarasota and Manatee wisely says, “If the time is right for someone to purchase a home, they should not let interest rates deter them if they can afford the increase in payments. Homes can be permanent, whereas interest rates are temporary.”

I agree. The big picture is that interest rates are still low relative to other times in our history, and that’s my perspective.

Castles in the Sand

Homebuyers getting hit every day

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

Buying a home was once a happy time for families. Homes were plentiful to choose from, and imagining your grandmother’s credenza in the dining room and the Christmas tree in the living room front window made for happy thoughts.

Now, however, looking for a home is a stressful event if you’re just the average potential homeowner. Inventory is low, prices are high, and, of course, now we have to stress even more about the increase in mortgage interest rates.

As of June 23, according to Forbes, the average rate for a 30-year, fixed-rate mortgage was 5.89% and the average rate for a 15-year, fixed-rate mortgage was 5.13%. These numbers are slightly down. However, typically they are going up, forcing buyers to make some serious decisions, especially if they may not qualify for the additional monthly cost of the increased financing rate.

They can come up with more cash and apply for a smaller loan – usually not a good option for marginal buyers. They can lower their criteria for what kind of home they want at a lower price point and hope it exists. Or they can drop out of the market completely with the hope things improve in a year or whenever. Unfortunately, this is an option that is happening more and more as the interest rates and the selling prices keep going up.

New home buyers are getting hit even harder. Buyers who are in contract for new construction but haven’t closed are facing mortgage interest rates that are getting close to doubling since they agreed to purchase the home. In addition, they are also confronting construction that is taking longer than usual due to supply-chain and labor constraints. Some new home buyers also have to make difficult decisions; how long can they hold out while they’re watching mortgage interest rates go up and the construction on their new home crawling along?

Time now for the May Manatee County sales statistics published by the Realtor Association of Sarasota and Manatee.

Single-family homes closed 7.3% less than last May. The median sale price was $550,000, 37.5% higher, and the average sale price was $715,504, 26.1% higher. The median time to contract has not changed at six days but the month’s sup- ply of available properties has changed to 1.2 months availability. The good news is new listings are up 17.2%.

Condo sales were up 6.3% over last year. The median sale price was $369,900, 51.9% higher, and the average sale price was $441,674, 41.5% higher. The median time to contract is six days, the same as single family, and the month’s supply of available properties is one month. The good news for condos is also that new listings are up 15.5%.

A combination of higher interest rates and our normal summer slowdown is resulting in a fewer number of sales and more available properties on the market. However, prices, both average and median, remain very strong, according to the president of the Realtor Association, and are still increasing.

Making the biggest investment of your life has always been a stressful event, but it was also mixed with pleasant thoughts of the future and paint colors. Now, however, for the average buyer who needs to watch their dollars, the pleasant thoughts are gone, and they’re left with the stress. My heart goes out to them.

Castles in the Sand

Condo living getting more complicated

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

Florida is the mecca for condo living. East coast, west coast, the Panhandle, Orlando – no matter where you go in Florida, it’s likely you will trip over a condominium complex. However, the carefree condo living turnkey lifestyle so many Floridians have come to love is under the scrutiny of Fannie Mae and Freddie Mac.

I’ve written frequently about needing a “condo personality” to successfully embrace the condo lifestyle. “Live and let live” is the approach all condo owners should adopt. Losing total control of your property and the ability to make even small decisions is not for everyone.

You may love that all of the landscaping is taken care of, but you may hate that you can’t plant your tomatoes at the beginning of the season. You may love that you don’t need to clean and add chemicals to the pool, but you may hate when another resident tells you your grandchildren are making too much noise. And you may love that the roof repairs are someone else’s responsibility, but you won’t like the special assessment you have to pay to do the repairs.

Now, after the Surfside catastrophe, as predicted, there is more fallout. Florida lawmakers have passed legislation requiring recertification of condominium buildings three stories or taller that are more than 30 years old, or more than 25 years old within 3 miles of the coast, ongoing every 10 years thereafter. Now Fannie Mae and Freddie Mac are getting into the act.

The majority of lenders follow Fannie and Freddie guidelines when they are qualifying individuals for home mortgages, and they in turn guarantee the loans. Now Fannie and Freddie are requiring certain actions in order to mitigate their risk of loss for mortgages they are backing. The quasi-governmental agencies are creating a database of condominiums ineligible for financing and, therefore, they will not approve mortgages for buyers in these buildings.

Primarily they are looking for maintenance issues in older condo buildings that will make them ineligible for secured mortgages. The major issue is significant deferred maintenance and unsafe conditions. Are the deficiencies, defects, substantial damage or deferred maintenance severe enough to affect the safety, soundness, structural integrity or habitability of the property? Do the required improvements impede the safe and sound functioning of one or more of the building’s major structural or mechanical elements? And has the building not passed or completed inspection required by local ordinance or state statute?

In addition, lenders, with the assistance of condo boards and/or managers, are being asked to complete a questionnaire regarding the condition of the building. Most of the questions involve knowledge of deficiencies in structural integrity and safety. Some of these questions can be answered by board members, who are usually residents of the building, but others may require professional documentation. As of now the permanent requirements are still being worked on and will be available to lenders in the coming months.

This will be a new responsibility for condo boards whose directors are charged with maintaining buildings and preserving their value. If a lender is uncertain or unable to confirm the safety of the building, they will decline the loan so as not to jeopardize their relationship with Fannie Mae and Freddie Mac.

At this point it’s confusing, but will probably smooth out over time. If you own a condo unit or are considering purchasing one, be aware of changes on the horizon. Even if your purchase does not require financing, you still want to guarantee the building you’re purchasing is secure in order to keep your carefree lifestyle carefree.

Castles in the Sand

Money flowing into Florida

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

I recently read an interesting historical novel about the wealthy landowners in the South in the years just before the Civil War. These privileged folks moved their entire households, including their money – carried in the form of gold transported in chests – to escape the summer heat. Well, things haven’t changed that much, only this time the money is in the form of wire transfers and the migration isn’t from a warm climate but to a warm climate.

According to the IRS’s report about migration of taxpayers between states, 2020 was a banner year for states with low tax policies, and guess which state accrued the most income? Florida had $23.7 billion more in income for 2020, followed by Texas with $6.3 billion and Arizona with $4.8 billion. Of the remaining top income-producing states, no one was even close to Florida, which stands alone in this area.

I probably don’t need to tell you where all of this wealth is being transferred from, but I will: California, Illinois, Massachusetts, New York, New Jersey and other Northeastern states. New York state lost the most income, topping out at $19.5 billion.

Obviously, the flow of money is attached to their owners moving to our state and looking for properties to purchase, which accounts for the following analysis of $1-million-and-over properties in our area. This report covers six months from Nov. 1, 2021, through April 30, 2022. The available and pending properties are from the realtor.com website and the closed properties are from the Manatee County Property Appraiser’s website.

In Cortez, currently on the market or pending there are three properties listed over $1 million;  at $4,750,000, $3,350,000 and $2,950,000. The new community of Hunters Point has several properties listed, all of them over $1 million, starting at $1,850,000.

Anna Maria has 44 properties listed or pending $1 million or over; three over $8 million, two over $6 million, three over $5 million, seven over $4 million, nine over $3 million, 17 over $2 million and three over $1 million. The combined cities of Holmes Beach and Bradenton Beach have 69 properties listed or pending over $1 million; one listed over $28 million, one listed over $14 million, one listed over $11 million, one listed over $19 million and one listed over $7 million. There are also four listed over $6 million, one listed over $5 million, five listed over $4 million, seven listed over $3 million, 24 listed over $2 million and 23 listed over $1 million.

As far as closed properties, Cortez had five over $1 million. Anna Maria had 82 over $1 million, two over $9 million, one over $7 million, two over $6 million, three over $5 million, five over $4 million, six over $3 million, 29 over $2 million and 34 over $1 million. The combined cities of Holmes Beach and Bradenton Beach closed 128 properties over $1 million, five over $9 million, one over $8 million, one over $5 million, 12 over $4 million, eight over $3 million, 26 over $2 million and 75 over $1 million.

All three areas increased their closed sales from the previous six months by approximately 30% to 50%. The available and pending listings also increased, but by a much smaller amount. In addition, the selling and listing prices are also higher than six months ago.

Our new residents may not have gold in their suitcases, but the cash keeps flowing into Florida anyway, and not for just a visit, as in years past, but for a lifetime. The rest of the country may be slowing down, but Florida isn’t getting the message.

Castles in the Sand

Tallahassee finally at work

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

Just when you think it’s hopeless, there is a sliver of hope. The special session of the Florida Legislature is finally getting some changes on the books related to condominium recertification and homeowner’s insurance, all in the same week.

The special session called by Gov. Ron DeSantis was originally meant to address skyrocketing property insurance rates, however, the condominium safety bill was added to the agenda at the last minute. Both subjects were addressed in bills passed by the House and the Senate and signed by the governor.

Broadly, this is the outline of the condominium recertification requirements:

  • Recertification of condos three stories or taller will be required after 30 years, or 25 years if the building is within 3 miles of the coast, and every 10 years thereafter.
  • In addition, the bill requires that condominium associations have sufficient reserves to pay for major repairs and conduct a study of the reserves every decade.
  • Also, it will require associations to provide inspection reports to owners, and if structural repairs are needed, work must begin within a year of the report. Most of the provisions in the law will take effect in 2024, giving everyone some time to prepare.

There are estimated to be more than 1.5 million condominium units in Florida operated by nearly 28,000 associations, according to a legislative analysis conducted earlier this year. Of those, more than 912,000 are older than 30 years and are home to more than 2 million residents. With only about 650 certified structural engineers in the state, this will be a problem in getting the recertification program up and running in a timely manner.

As far as the homeowner’s insurance proposals, legislators came up with several short- and long-term fixes for the insurance market. Some of the proposals are:

  • Preventing insurers from dropping or refusing to insure homes solely because of a roof’s age if the roof is less than 10 years old.
  • For roofs older than 15 years, insurers will have to allow homeowners to have an inspection of the roof’s condition before refusing coverage.
  • Legislators also placed numerous limits on the fees lawyers can collect in lawsuits against insurers. Insurers have continually blamed excessive litigation by trial lawyers and claims triggered by fraudulent roofers for driving up the costs.
  • Legislators also agreed to assign $2 billion to create a new program for reinsurance – insurance that insurers buy – and require any companies that use it to pass those savings on to homeowners.
  • Enhancing scrutiny of insurers that fail.

At this point, no one can predict if rates will go down. My fear is that stricter regulations regarding roofs and scrutiny of companies will not sit well with the insurance companies and give them a reason not to do business in Florida. They will, however, like making it more difficult for lawyers to bring lawsuits. That said, we need to start somewhere, and hopefully Florida insurance companies will decide that our state is a good place to do business with a huge pool of homeowners.

The Florida real estate market has so much going for it, it’s important to everyone to make sure our buildings are safe and our insurance is affordable.

Castles in the Sand

Insurance and affordability

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

It’s the week to report the April sales statistics for Manatee County; it’s also the week where the Florida Legislature may be going into a special session to address the out-of-control property insurance market.

These two topics are completely opposite of each other on the likeability scale – we all love higher sale rates, and we all hate higher insurance rates.

Let’s get the insurance update out of the way so we can enjoy the real estate market part. Gov. Ron DeSantis must be getting a lot of phone calls in Tallahassee because he decided to call another special session of the Legislature when they couldn’t come up with any suggestions that would work to resolve the property insurance problems.

The special session is mandated to bring some stability into the property insurance market, which is experiencing companies leaving the state, dropping policies and/or increasing premiums by double digits. Before they ended their regular session earlier this year, the House and Senate in our state were at odds about how to address the insurance problems. A large part of the problem is higher litigation in Florida relative to other states and with the hurricane season starting June 1, it would take a minor miracle to get anything resolved that quickly.

Before we go over the April numbers, the Emerging Housing Market Index, which measures homebuyers looking for an appreciating housing market and lifestyle amenities, is illuminating for the first quarter of the year. It confirms what most of the real estate economists predicted – that buyers will eventually be priced out of the coastal big city markets and turn to smaller, less dense communities. This, of course, is an opportunity for those who can work remotely and are migrating because of affordability and increasing mortgage interest rates.

The top five emerging housing markets are: Rapid City, South Dakota, Santa Cruz, California, North Port, Florida, Santa Rosa, California, and Naples, Florida. North Port and Naples, Florida were the top two markets in the fourth quarter of 2021. Let’s hope our wonderful Florida west coast doesn’t get discovered too quickly.

Now finally, these are the April sales statistics as reported by the Realtor Association of Sarasota and Manatee:

Single-family homes closed 18.3% fewer properties. The median sale price was $515,000, up 27.2% from last year, and the average sale price was $729,375, up 26.2% from last year. New listings are up 1.1% and a month’s supply of inventory is up 33.3%, which is still very low at 0.8 month’s supply. The median time to contract is five days.

Condos closed 26.7% fewer properties. The median sale price was $350,000, up 48.9%, and the average sale price was $400,371, up 32.1%. New listings are up 7.7% and a month’s supply of inventory is up 14.3%, still very low at 0.8 month’s supply. The median time to contract is also five days.

The president of the Realtor Association of Sarasota and Manatee states, “As we’ve been anticipating, it appears that the rising interest rates and inflation are beginning to put pressure on our local real estate market.”

Yes, I agree there is a slight dip in the market with fewer sales, but I still think it will take a long time for the selling prices to experience the same dip – too many buyers and too few properties.

Florida continues to be nothing if not interesting. Don’t expect it to change anytime soon. Besides as lovely as it may be, who would really want to live in South Dakota after you’ve seen Anna Maria?

Castles in the Sand

Are you noticing the mortgage interest rates?

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

My April 20 column was titled “The end of an era,” the era being one of ultra-low mortgage interest rates. In that column I reported that the current average mortgage interest rate was 4.72%, a rate that was probably already a week old.

Now, only a month later, the average interest rate is 5.42%, likely hovering just above 6% after the most recent Federal Reserve rate hike of half a percent. When the rate hit 5.27%, it represented a 13-year high.

So far, the country in general has not seen a slowdown of the surge in home prices, according to the National Association of Realtors. Quite the contrary, many buyers are trying to lock in purchases before the rates climb even further, which Realtors can guarantee they will, continuing to push selling prices up and up.

So, what does the average potential home buyer do in this real estate environment? Mortgage interest rates are going up almost weekly. Inventory is being depleted with everyone rushing into the market before the rates go up even more. Sellers are taking advantage of the increase and the anxiety of buyers to do tough negotiating and/or increase their asking price.

Many buyers are just dropping out, renewing their leases, moving in with family and waiting for the insanity to end. Others who can afford it aren’t giving up. Some are opting to pay fees to secure lower rates in the form of rate lock-in agreements. It’s not unusual for the typical 60-day lock-in to expire before the buyer finds a property, putting them in the position to extend the lock-in, costing – of course – more money. Others are adding cash into the transaction so they can qualify for a lower mortgage amount making up for the higher rates.

In addition, adjustable-rate mortgages are starting to come back starting under 4% for now. This new generation of adjustable-rate mortgages are more closely regulated than the ones that helped to create the financial crisis. At that time, low teaser rates attracted buyers and then after a year or two went up so high many homeowners couldn’t afford the increase. Now lenders can’t offer short-term rates and lenders are required to have caps on how much the rates can increase. Nevertheless, borrowers still need to be careful when going into a variable rate mortgage, since not knowing what your mortgage rate will be down the road is still a risk.

Most real estate economists still think that home prices will come down by the end of the year because of the higher mortgage interest rates. However, all real estate is local, and Manatee County is such a specialized area with a high percentage of cash buyers, increasing mortgage rates will have less of an effect.

Even if you’re not in the market for a new home, increasing rates influence the entire real estate market. It’s important to pay attention to the rate increases which could at some point have an impact on the value of your home proving the economists right.

At the end of 2021, the average rate on a 30-year, fixed-rate mortgage was 3.1%; by the time this column is in print it could very well be at 6%. It appears mortgage interest rates keep creating new eras every couple of months, enough to make a homebuyer’s head spin.

Castles in the Sand

Is it worth the walk?

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

Many years ago, my husband and I were in Athens, Greece, and on our way down from touring the sights at the top of Acropolis Hill, someone stopped us and asked, “Was it worth the walk?” After my initial shock that this question would be asked – considering where we were – I thought, “Isn’t everything worth the walk?”

The thing that is definitely worth the walk now is every single house that comes on the market in your price range, even if it’s not exactly your dream house.

We’re in what appears to be a changing real estate market. This spring seems likely to be less competitive than last spring when homes flew off the market as buyers rushed to take advantage of ultralow interest rates in an appreciating housing market. Some buyers will have to drop out of the market if they were borderline for financing, but there will still be plenty of qualified buyers and plenty with cash. No one expects prices to go down anytime soon, but an increase in inventory is looking promising.

The increase in mortgage rates is slowing home sales. Existing home sales fell 4.5% nationally in March compared to March of last year, according to the National Associations of Realtors. Manatee County’s home sales for March decreased by a lot more than that, falling by 20.2% compared to March of last year. In the opinion of the chief economist for the National Association of Realtors, the frenzy is winding down and the volume of home sales is starting to revert to pre-pandemic levels. That I’ll believe when I see it, especially on Anna Maria Island. There are still multiple buyers for every property that comes on the market, even if there will be more properties available.

As reported last week, Manatee County continues to ride the enormous wave of an appreciating market. Selling prices continue to break records in both Manatee and Sarasota and indeed the entire North Port-Sarasota-Bradenton region, which is reporting a 29.9% increase in single-family homes from last March. Sarasota County also showed a large increase of 28.4% in the sale price for single-family homes, however, Manatee County led the pack with a 32.9% increase in single-family sales prices.

So where does all this great information and opinion leave potential buyers? It leaves them with the hope of more properties to see that may fit what they’re looking for. They shouldn’t expect the prices, certainly in our area, to change much, if at all, but they may get more of what they were looking for in a home.

This goes directly back to my “Is it worth the walk?” scenario and the answer is “Yes.” Every house that comes on the market in your price range and in your desired area should be seriously considered. Forget about the colors on the walls or the lack of interesting landscaping or the clutter on the bathroom counters. It’s time to go back to basic house-hunting principles: If a home has good bones, it should go on your list; if you can qualify for a mortgage for this home, it should go on your list; and if the home is workable, keeping the future in mind for your family or for your investment, it should go on your list.

It’s possible that eventually, prices will level off as the pipeline of buyers waiting for new properties is gradually exhausted, but we have no idea when or if that will happen. Now is the time to take the walk up the hill. You’ll be glad you did.

More Castles in the Sand

 

Does anyone know what’s going on?

 

The end of an era

 

Addictive real estate

Castles in the Sand

Legislators toss condo rules out

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

For a while there I thought we would have one more headache to worry about in addition to insurance rates and hurricanes. On March 11, Florida legislators failed to reach an agreement on a bill to improve building structures. So, one less headache but far less oversight.

Therefore, let’s take a quick review of what is going on. Because of the Champlain Towers South collapse on the east coast, everyone woke up to the possibility of older condos, especially those on or adjacent to barrier islands, being in jeopardy. Florida lawmakers attempted to pass legislation that would require specific inspections for condo buildings. However, at the end of the legislative session, they were not able to come to an agreement. Some of the legislators cited hardships on condo owners and associations who are not in a financial position to bear the brunt of the inspection results.

These discussions have been going on for a while and about a month ago the Florida House passed a bill outlining measures to help alleviate the possibility of older condo buildings being neglected. It was passed in the Florida Senate to little avail since they closed the session without any agreement between the two houses. This came as a surprise since most of the legislators and the governor expected something to come out of the negotiations.

The House bill stated that condo buildings that are three stories or taller need to be inspected and recertified at 30 years of age. In addition, those that are within 3 miles of the coast would require recertification at 25 years of age. After that, recertification would be required every 10 years. The Senate bill was similar, changing the benchmark to 20 years for buildings near the coast and inspections every seven years thereafter.

I wouldn’t get too excited about the end of this legislation. First of all, it could easily come back in the next legislative session. In addition, it’s possible that insurance companies and financial institutions may now impose reserve requirements on buildings, stepping in where the state official has been absent.

In spite of what happens or does not happen in Tallahassee, Manatee County’s real estate is still rolling along. These are the February sales statistics published by the Realtor Association of Sarasota and Manatee.

Single-family homes closed 4.3% more homes in February this year compared to last February. The median selling price was $478,000, up 25.8% above last February and almost the same as January of this year. The average sale price was $693,229, up 25.3% from last February. The median time for properties to get into contract is six days of being listed.

Condos closed 16.8% fewer units in February compared to last February. The median sales price was $325,000, up 41.3% compared to last February, and the average sale price was $371,367, up 36.1% from last year. The median time for properties to get into contract is five days of being listed.

The primary problem our market faces is low inventory which is resulting in fewer closed sales. With mortgage rates going up, that will put more pressure on the market from buyers looking to purchase before they go up even further. According to the Realtor Association of Sarasota and Manatee, the imbalance of supply and demand contributes to the rapidly increasing prices.

This is Florida, and for all our success in attracting new residents and having improving housing prices, we still have everything related to living on the water to contend with. I predict this isn’t the end of condo recertifications and a review of condo reserves.

More Castles in the Sand

 

Surfside: More collateral damage

 

When will the real estate market return to normal?

 

Feng shui your entry