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Tag: Anna Maria Island real estate

Will there be home stability in the New Year?

Written by Louise Bolger on . Posted in Business, Real estate | Development.

It’s a whole year later and we’re still talking about interest rates and low inventory – will it ever end? The sellers are still happy with their values, the buyers are still dismayed with the lack of inventory and it’s not likely things will change much in the new year.

The most recent conversation among real estate analysts is that even though interest rates have dropped slightly, it will make homes more affordable but not affordable enough since the shortage of available properties to purchase is not expanding at the national level.

The S&P CoreLogic Case-Shiller National Home Price Index, which measures home prices across the nation, rose 3.9% from a year earlier in September compared with a 2.5% annual increase the prior month. September was the highest since the index began in 1987. In addition, according to the National Association of Realtors, the median existing home sale price rose 3.4% in October from a year earlier to $391,800.

So, what is the outlook for the new year? Some analysts feel home prices are feeling the burden of high mortgage rates, which will slow the rate of price growth in the new year. Others agree and think it might be that home prices are going to tread water for a number of years until the economy gets in balance with higher incomes and lower rates.

One nice change for those buyers out there is the increase in the maximum size of home mortgage loans eligible for backing by Fannie Mae and Freddie Mac, which represent the majority of home mortgages. In expensive markets like Hawaii, California and New York, the increase will be a maximum of $1,149,825 from $1,089,300 and for less expensive markets, the cap would rise to $766,550 from $726,200. The increases are set by a legal formula and could make it easier and more affordable for some borrowers, especially in the high-end markets.

Let’s take a look at Manatee County’s November sales statistics reported by the Realtor Association of Sarasota and Manatee.

Single-family homes closed 22.2% more properties compared to last November. The median sale price was $485,861, down 4.1%, and the average sale price was $662,237, up 4%. The median time to sale was 82 days compared to 77 days last year.

Condo sales were up 20.7% compared to last November. The median sale price was $351,500, down 1.8%, and the average sale price was $393,475, up 0.6%. The median time to sale was 83 days compared to 56 days last year.

The month’s supply of available properties for both single-family and condos were up. Single-family properties had a 3.4 month’s supply, up 13.3% from last November and condos had a 4.4 month’s supply, up 63% from last November.

Overall demand is strong for both Manatee and Sarasota counties. With inventories in both counties continuing to increase, we can assume sales will be strong over the winter months when visitors and part-time residents return in force.

The stability of the real estate market really depends on the stability of countrywide and even worldwide economies. And don’t discount the emotional impact of wars and unrest as well. Fortunately, Florida is still a hot market that doesn’t look like it’s cooling off any time soon. We’re going into the busy buying and selling season, which will be the real barometer of how successful our market is.

Happy New Year and much joy and love in 2024.

It’s a wonderful Island

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

Although most Americans didn’t realize it then, the holiday season of 1946 was the opening bell of some of the most prosperous decades in our history. World War II had just ended, and men and women were coming home from overseas and starting new lives, which also included new homes.

The postwar housing boom created 40 million new homes starting in 1946. New suburban communities sprouted up all over the country but particularly adjacent to major cities where returning soldiers were filling jobs in a suddenly booming economy. Florida, of course, didn’t enjoy the same level of building as the Northeast and West Coast did, but starting after the war there was a steady increase in population that still hasn’t slowed down.

What happened in 1946 was the beginning of the suburban lifestyle. Americans for the first time had the choice of living in a single-family home and commuting to their jobs in the city. It was a way of life that mostly continued until COVID-19 locked everyone in their homes and on their computers. This once-in-a-century phenomenon pushed property values and the desire to own a home through the roof, which has substantially benefited Florida.

If you don’t pore over Manatee County listings like I do, take a few minutes to review the Realtor.com website. The website can be sorted by zip codes and if you start with the highest price properties you may be shocked. Here’s an overview, just to give you an idea as of this writing.

The city of Anna Maria has 79 listings. The highest price is $12 million and the lowest is $1.15 million. Less than half of the properties are under $3 million.

The combined cities of Holmes Beach and Bradenton Beach have 214 properties listed. The highest price is $10,950,000 and the lowest is $510,000. A little less than 25% of the properties are above $3 million.

All of Anna Maria Island has ongoing new construction of large homes with multi-million-dollar price tags. These properties have drastically changed the price point of properties on the Island, as you can see from the above.

Cortez has 19 properties listed starting at $3,750,000 and ending at $695,000. Out of the 19 listings, 12 are over $1 million. The construction of the new Hunters Point development on Cortez Road has also changed the price point of Cortez properties, listing new construction townhomes at just under $2 million.

If you are dazzled by the numbers, here’s a reason to step back in time. Another major event happening in 1946 was the release of the iconic holiday movie, “It’s A Wonderful Life.” This black and white film has been playing every year for 77 years and will undoubtedly go on forever. It’s a classic story about good and evil and the important things in life that rang true in 1946 as they continue to do today.

One of my favorite parts of the movie is when new homes are built for needy families in the town. James Stewart and Donna Reed present the keys to the new owners along with these gifts and an accompanying poem: “Bread that this house may never know hunger, salt that life may always have flavor and wine that joy and prosperity may reign forever.”

Wishing you a peaceful and happy holiday surrounded by friends and family in one of the world’s most beautiful places to live. Enjoy the food and the wine, and ring the bells because “Whenever you hear a bell ring, an angel gets its wings.” Happy holidays!

Working in paradise

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

This may seem redundant, but Anna Maria Island is an island and, like every island in the world, it’s surrounded by water. There are two bridges to the Island from Bradenton, one north and one south, and the traffic approaching these two bridges backs up consistently. Oh, by the way, the bridges are drawbridges that open every half hour, and one of them is slated to be torn down sometime in 2025, maybe, and will be replaced with a fixed-span bridge.

Now that I’ve told you something that you already know, what’s my point? My point is what do the individuals who work on the Island but don’t live there experience daily? I think a lot about this from time to time, since I too worked in Anna Maria for many years, and frequently felt like I was back in midtown Manhattan.

The success of Anna Maria Island is the envy of many coastal towns in the country. Our real estate values are sky-high and construction is on practically every street. The vacation rental market has sapped the life out of any long-term rental properties to turn them into weekly and sometimes daily rentals, leaving very little to choose from for just regular residents who need to rent rather than buy.

Many of these displaced renters are individuals who work in the Island’s restaurants, hotels and rental properties. One of the ongoing effects of the COVID-19 pandemic is not only the surge in real estate prices and the abundance of new visitors to the Island, but also the many service employees who never came back to the workforce when restaurants finally opened and visitors started returning. About a month ago, I read a fascinating story in the Wall Street Journal’s Mansion section about two high-end vacation locations that are enjoying the same success as Anna Maria Island and facing the same problems.

Those towns are Nantucket Island, Massachusetts and Vail, Colorado. Although entirely different geographically, they share the same issue of finding local people to work in restaurants, resorts and multi-million-dollar properties. I’ll start with Nantucket, since that’s a place I’m very familiar with. There is only one way to get to Nantucket and that’s by boat. The ferry from Cape Cod takes two hours or a bit less for the fast ferry, which, of course, costs more. If you’re in no hurry, it’s a lovely ocean voyage that can be subjected to frequent weather delays. In 1983, Nantucket established a land bank, buying up available property to promote conservation and recreation. This, of course, impacted the amount of buildable land.

Vail may not be surrounded by water but it’s still a substantial drive to the charming village to work for the day. Vail’s local government has built some housing restricted to local full-time residents, but it doesn’t totally solve their problem. They may as well be on an island.

Getting back to Anna Maria Island, without a land bank or resident-only rentals, the responsibility is totally on service employees and their employers. There is that new ferry that is starting service from downtown Bradenton to the Island, but it’s not planned to be available daily and will probably be mostly for tourists and day trippers with some future dispensations for Island workers.

Maybe there is still a way to mitigate the shortage of help. Certainly, including the problem in conversations about consolidation of the three cities could be a first step. The result of doing nothing will be higher prices for residents and visitors to the Island and, although I dislike saying this, declining real estate values.

Is owning a home still the American dream?

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

Last week we talked about first-time buyers who are taking a pause in their house hunting and redirecting their savings. But is this the new permanent reality in a country that includes homeownership as part of the American dream?

According to a new Wall Street Journal/NORC survey, only 36% of voters in the new survey said the American dream still holds. When this same question was asked last year by the Wall Street Journal poll, 68% said yes, almost twice the share of the new poll. In addition, half of voters in the new poll said life in America is worse than it was 50 years ago compared with 30% who said it had gotten better. But the scary outcome of this survey is that among all respondents, 18% said the American dream never held, a very sad statistic.

As reported last week as well, the National Association of Realtor’s October sales statistics fell 14.6% from last year. Manatee County’s sales of single-family homes also fell by 12.8%. This reflects the ongoing low inventory available to buy and higher interest rates. Who could blame young people when they say the American dream doesn’t exist when one of the major components of that dream is the ability to purchase homes?

Even though according to recent data inflation has eased, there is still a disconnect in the way Americans perceive the economy. Since ownership of housing isn’t measured by the Bureau of Labor statistics, the increasing cost of purchasing a home isn’t reflected in the inflation rate, however, not being able to purchase a home matters more than the price of gas or food to home buyers. Since January 2021 home prices have risen 29%, according to the Case-Schiller national home price index. In addition, mortgage rates have nearly tripled.

If you already own a house and have no reason to move, you might not care or be affected by lower sales numbers and higher interest rates. Many long-term homeowners with low mortgage rates are sitting back and enjoying seeing their equity going up, which it has consistently for the most part.

Homeownership is still viewed as achieving the American dream, as remote as it may seem to first-time buyers in this market. So far, this hasn’t lowered homeownership rates, which are higher among almost all age groups than before the pandemic, according to the Census Bureau. That could, however, change if the unaffordability of housing remains high. Mortgage rates have dropped with the easing of inflation, but they are still historically high. The consensus is that home prices will likely not fall in 2024 but level off somewhat. Since so much depends on that assumption it’s almost impossible to know what’s down the road next year.

Since I was a full-grown adult 50 years ago owning my own home, I tend to agree that at least the economic life of people now is worse than 50 years ago. That doesn’t, however, mean that all life is worse. Certainly, medical progress is better, education is more available and better, and women and minorities have more opportunities, not to mention technology, which has made all our lives better.

I believe the housing market will eventually normalize and all the first-time buyers who are booking exotic vacations will start buying again. It’s nice to have wealth, but we shouldn’t measure our happiness by it when so many other things in life are more important.

Enjoy life or keep waiting

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

What would you do if you had a bunch of savings and the thing you were saving for is unavailable? A lot of first-time home buyers in the country are faced with that exact problem but they’re not all making the same decisions.

The housing market nationally is not performing the way housing markets typically do. The price of housing ordinarily goes down when mortgage rates increase, but as we all know, housing values are still going up primarily because of a lack of inventory.

According to the National Association of Realtors, the sale of existing homes was down 14.6% year-over-year in October with home prices still high. This is arguably one of the worst times to buy instead of rent and many first-time buyers are postponing their weekend house-hunting expeditions in favor of enjoying life.

The worst part about this is that the deferment of house hunting is not just for a few months to see what happens with the mortgage rate or the number of homes on the market, but some buyers are talking years before they try again. So, what are these frustrated buyers doing with their inflated bank accounts? Being the Americans that we are, some of them are taking expensive vacations, others are renovating their existing homes and decorations and the more practical are increasing college funds or retirement funds.

The “we want to buy a house but can’t” savers are turning into consumers, completely setting the economists – who a year ago predicted a recession – on their heads. With oodles of cash available and the likelihood of missing the boat on building equity, they are spending on enjoying themselves, keeping the economy in positive territory. Who could blame them; fiddling with interest rates never has a good outcome.

Time to look at October Manatee County sales statistics reported by the Realtor Association of Sarasota and Manatee and see what’s going on locally:

Single-family homes closed 6.5% more this year compared to last. The median sale price was $479,000, down 12.8%, and the average sale price was $658,503, down 7.4%. The median time to contract was 29 days compared to 24 days last year and new listings were up 24.5%, bringing the month’s supply of available properties to 3.3 months compared to 2.8 last year.

Condos closed 7.5% more this year compared to last. The median sale price was $370,000, up 0.4%, and the average sale price was $415,591, up 7.1%. The median time to contract was 30 days compared to 22 days last year and new listings were up 28.3%, bringing the month’s supply of available properties to 3.8 months compared to 2.3 last year.

Lower sale prices for single-family properties may not look like a good thing, but since real estate numbers are always lagging, this could reflect the rapid increase in interest rates. The really good news aside from the increase in closings is the increase in inventory. Per the Association of Realtors, this is pointing to a more balanced future market, hopefully more like pre-pandemic activity.

Those of you who are not first-time buyers but buyers who would like to move up but don’t want to give up your ultra-low mortgage rate should have a little more respect for your mortgage. It’s hard to think of money you owe as an asset but if you have a fixed-rate mortgage below or around 3% you are sitting on a valuable asset. You may not see the asset in the bank, but you are wealthier for having it.

I’m of the school that you should always enjoy life but still find a way to balance that with improving your finances. All of this will return to normal someday, so don’t blow it all on a trip to Tibet to see the Dalai Lama.

Rent, buy or add on?

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

Confused? Of course you are, if you’re a potential buyer. We are living through a very dysfunctional housing market and the maze doesn’t look like it’s ending any time soon. Should you buy, should you rent or should you find a tiny accessory home? The answer is different for everyone.

Buying has almost always been favored over renting when it comes to housing. For some, renting is considered “throwing money away” while buying is an “invest­ment.” The truth is the answer is much more nuanced and really depends on what is the right fit for you.

Renting is a short-term solution as opposed to homeownership, which is much more of a commitment in terms of finances, time and labor than renting. Nevertheless, the argument for home ownership has always been building equity and doing as you please with your property.

In today’s real estate world, home­ownership is very elusive to first-time buyers. Inventory is in short supply, interest rates are rising and particularly in Florida, insurance is totally unpre­dictable from one renewal to the next. Right now, the cost of buying a home versus renting one is at the most extreme since at least 1996. The average monthly new mortgage payment is 52% higher than the average apartment rent, according to CBRE, a global commercial real estate services company.

A person buying a home today will pay 60% more for monthly repayment costs than if they had bought the same house three years ago. As a compari­son, rents rose by 22% over the same period, a little ahead of the inflation rate but far below the cost of purchas­ing on a monthly basis.

If the home you’re considering buying is a long-term investment and you can scrape up the monthly costs with a little extra for inevitable repairs, then in the long run you’re better off. But this decision is an individual one based on job security, family needs and the desire to grow equity.

Trying to fill the lack of the affordable property gap are tiny homes or ADUs (accessory dwelling units). These are typically small apartments tucked away in the backyard, over garages or extended out from the main house. They are getting a second look from buyers who are build­ing, and contractors are providing options for these units as part of new construction. This is a growing trend to keep an eye on.

Finally, I feel that in the best interest of homebuyers, I must mention this last item. Realtors – specifically The National Association of Realtors (NAR) – are facing two federal antitrust trials relative to com­missions charged. Realtor commissions are typically 6% shared between the listing and the selling agents, creating a potential conflict of interest. Keep in mind this is not set in stone and sellers can ask for a lower rate before they enter into a listing contract.

The first of these two antitrust cases was decided by a jury against the NAR on Oct. 31. The decision will be appealed, and it could take years before there is any final conclusion. The second case has not gone to trial yet, but we can assume there will be more antitrust cases going forward.

This ruling and others that may be com­ing can possibly change the way business is done in the real estate community. I know how hard most real estate profes­sionals work and how much experience they offer their clients; therefore, I’m staying neutral.

Well, if you were confused before, I just made it a little more confusing. However, renting or buying should not be confusing, it should be well thought out before moving forward.

Negotiating is coming back

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

Once upon a time, there was a great tradition in real estate where sellers listed their homes, buyers made an offer and eventually, both parties met in the middle and, like magic, you had a sound transaction. We haven’t seen much of that tradition recently, but don’t give up, you may start to see more of it.

Sellers, if you can find one, are more receptive to certain requests than they had been previously. Despite hearing that homeowners don’t want to give up their ultra-low mortgages, there is always someone who needs to sell their home. Since the pool of buyers has dwindled recently because of higher interest rates and lack of inventory, motivated buyers need to find sellers out there who are also motivated and more flexible than they were two to three years ago.

The obvious buyer strategy is to ask for money or something that costs money. With mortgage interest rates getting close to 8%, every penny in the hands of a buyer is a valuable one. Offering or asking for help with closing costs isn’t a new concept. Buyers who may be short on cash but qualify for financing may ask sellers to provide a credit at closing to be used for closing costs unrelated to their mortgage rate. This amount can usually be rolled into the financing for qualified buyers and the seller could easily be netting the same.

Sellers know or certainly should know what the flaws in their homes are. They may not want to take on a renovation project but are faced with buyers who may again be short on cash for repairs or adverse to doing renovations. Sellers can agree to make specific improvements to the home before closing. This agreement can be negotiated between buyer and seller so that both feel they come out pretty much with what they want and can close the property.

The next concept is a little more complicated but again includes money passing from the seller to the buyer. Sellers can agree to lower a buyer’s mortgage interest rate, known as a rate buy-down, by offering to pay closing costs in the form of points. If a buyer can reduce points, their mortgage rate can be lowered, resulting in a lower monthly payment. Points are typically 1% of the loan amount, so if a seller gives two points to the buyer on a $300,000 loan, that’s $6,000 the buyer doesn’t have to come up with.

Finally, sellers need to consider capital gains in a conversation with their tax attorney or preparer. A seller who is in a position where they may have large capital gains on the sale of their property needs to know exactly what those gains could be in real money. Entering a negotiation with this knowledge is important since the seller and the buyer may not be that far apart on their offers and counter offers if you calculate what it may cost the seller in additional capital gains. Knowing ahead of time how much flexibility you have between the sale price and capital gains could save the transaction and still net the seller almost what he wants. Holding out for an exact number embedded in your brain could kill the deal and keep you from moving on.

Go out there and make magic. Beat the bushes to bring those sellers out from the scrub. An old high school friend of mine’s mother would say, “There’s a lid for every pot.” And even though she was talking about boyfriends, the principle is the same. Go find your pot.

What is a condominium?

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

Condos are all over Florida, representing every imaginable price range. People live in them full-time, part-time or invest in them. They’re a very flexible real estate resource, but are they meant for you?

A condominium is a privately-owned individual unit within a community of other units. In general, the owner usually owns the interior of their condo and the structural components of the exterior walls. Condo owners jointly own shared common areas within the community, such as pools, garages, elevators, gyms and boat slips. Some condos are in high-rise buildings, mid-rise buildings, detached villas or semi-attached villas. In waterfront communities in Florida, you will even find condo associations of boat slips. You name it and it probably can become a condo as long as it abides by Florida condominium laws.

Condo communities are popular because they provide an easy, turn-key way of life. There is low homeowner maintenance – no lawns to mow, pools to clean or peeling paint to address. Many condo associations have secured gated entrances and some have on-site security personnel. It’s easy to make new friends and socialize if you’re new to the area. There are many affordable condo associations in Manatee County. They come in all shapes and sizes, but there are also some very high-end associations, mostly with water or beach access. Finally, condo living usually offers many amenities ranging from pools, clubhouses, barbecue areas, gyms and dog parks.

So that’s the good stuff, but what about the bad stuff? The biggest complaint about living in a condo community is the rules of the homeowner’s association. If you’re not a good, follow-the-rules kind of person, you may be in for a shock. Just about everything from trash to noise to pets to paint color to patio furniture could very well have a rule attached to it.

Also, condo associations are essentially small businesses and, in some cases, not so small. HOAs are required to maintain reserves for maintenance of the property, funded by the collection of monthly or quarterly dues. This is always the biggest cause for concern with condo owners who sometimes feel they have no real input on how much money is spent to maintain the property.

Associations are organized with an elected board of directors, and, with some limitations, they make the decisions on behalf of the community. If you don’t like what they have decided, the only thing you can do is run for the board yourself or not vote for some or all the directors at the next election. Since participating in a condo board can be tedious and time-consuming, it’s not that easy to get volunteers, so be careful what you wish for in a dispute with a board member.

Condo owners are sometimes worried about their investment since they don’t have complete control of their assets and maintenance decisions. The only thing I can say here is before you buy, go over the financials of the association as well as condo documents with a fine-tooth comb and see if this is the place for you.

I’ve written columns like this before, and I always point out that communal living is not always easy and, unless you have a “condo personality,” it may not be the right choice for you. If your neighbor isn’t quite making their trash into the trash bin and it ends up on the ground, you may not like it, but it’s one of those adjustments condo living requires. The good part is you’ll always find a friend to help you pick it up.

Speaking of spooky, look at those population numbers

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

Halloween is next week, so as you’re decorating your home with spooky and creepy stuff from the Dollar Store, think about the spine-chilling increase in population right here in Manatee County.

There’s a good reason why the traffic on the roads never seems to take a break and why your favorite doctors are all of a sudden working weeks out for an appointment. So far this year, the population of Manatee County is reported as 429,125. We grew by 29,420 in three years, per the U.S. Census. In April of 2010, the population was 322,833 per the U.S. Census, an increase of over 100,000 residents in not quite 13 years. Manatee County is the 15th most populated county in Florida out of 67 counties.

The above numbers, of course, do not include the scary number of visitors and part-time residents flowing into Manatee County every year. They also do not include the many thousands of residents that will be added to the county when the large construction projects are completed.

Lake Flores, Aqua by the Bay and Peninsula Bay, all on the southwest side of the county near or on the bay are already being developed or getting ready to start. The east and southeast sides of the county are exploding with plans for new subdivisions with good access to the interstate. In addition, all this construction is coming on the heels of the construction of both a new Cortez Bridge and Anna Maria Island Bridge. Are you scared yet?

Selling a property always involves disclosing anything that can be a material change to the value of the property. This usually involves structural issues not obviously observed and even appliances and air conditioning and heating systems. And, since we’re in scary season, you will be happy to know that you don’t need to disclose if your house is haunted, or if there was a murder or death in the home.

Also, there is no obligation I could find that a homeowner must disclose construction projects near the property, even if that construction could be a nuisance. Nevertheless, everything you know should be disclosed. This is not only the right thing to do, but it will also protect you as a seller from potential future lawsuits.

At least one thing that’s not haunted this Halloween is the September sales reported by the Realtor Association of Sarasota and Manatee.

Single-family homes closed 46.9% more properties than in September of last year. The median sale price was $503,495, down 2.6%, and the average sale price was $661,608, up 6.0%. The median time to contract was 29 days versus 19 days last year, and the month’s supply of available properties was 2.9 versus 2.7 last year.

Condos closed 48.6% more properties. The median sale price was $350,000, up 3.9%, and the average sale price was $402,480, up 0.3%. The median time to contract was 46 days versus 15 days and the month’s supply of properties was 3.3 months versus 1.9 days last year.

One interesting statistic in the September report is that cash sales are up for both single-family homes, 38.3%, and for condos, 58.3%. I suspect this has a lot to do with the high interest rates on new mortgages.

The Association of Realtors sums up the market this way, “While closed sales registered an unusually high year-over-year growth, median prices stayed relatively stable.”

Spooky or not, those are the numbers that reflect sales transactions booked during the slow summer months. We’ll see how that changes when we get into the selling season. Happy Halloween.

Get insurance if you can

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

Even though our area has so far been spared a major hurricane hit this year, the threat is always there, as is the threat of losing your insurance. What happens if you can’t get homeowners insurance is one of those “I don’t even want to think about it” questions, but, if it happens to you, you’re in good company.

Florida and Louisiana are the two states in the country that have the most challenging homeowners insurance markets. Florida has the highest average home insurance premium in the country. They also both have state-run insurance of last resort companies that are called Citizens, and they are both trying to reform their state’s insurance obligations.

In addition, Florida is attempting to bring insurers into the state to help create more competition, driving costs down. The state’s Legislature has worked to reduce the number of lawsuits by limiting what attorneys can charge. High attorney fees were mostly blamed for driving up costs and driving out insurance companies, leaving homeowners no choice except to go to Citizens. It’s too early to know for sure what the Legislature is accomplishing, however, there is some evidence that progress is being made.

Nevertheless, the stress for homeowners is enormous, prompting some residents to consider leaving waterfront properties and properties prone to flooding. If you do find yourself in the unimaginable position of not being able to get homeowners insurance on your home or condo while carrying a mortgage, you could be in for some serious problems. Not having the ability to find insurance on your property violates your mortgage agreement. Your lender may force you into a more expensive policy, which is called lender-placed or force-placed insurance. Worse, your loan can be declared in default, risking a foreclosure if you’re not able to satisfy the mortgage.

I know this sounds dramatic and it is, however, one way is to have an advocate on your side like an insurance broker who has access to any new insurance companies coming into the state as well as an understanding of the system and may be able to offer advice. Also, Fair Access to Insurance Requirements (FAIR) plans were created in the 1960s to make insurance available in areas that had abnormally high exposure to risk. The Florida contact numbers are 850-513-3700 and 904-296-6105.

Citizens Insurance in Florida asked the state Office of Insurance Regulation to raise its rates for property insurance by an average of 13.1%. This request was denied and replaced with a cap of not more than a 12% increase. Citizens’ higher-ups feel the approved rate increase is artificially low, resulting in potential exposure beyond its assets. This affects the private market by not being able to compete with what was designed to be the company of last resort for insurance.

As a comparison, Louisiana’s Citizens’ Property Insurance is uncapped. This means their rates are based on what’s happening in the marketplace, allowing private insurers to compete and taking some of the financial exposure of the state. In addition, Louisiana has an incentive program that provides grants to encourage insurers to write property policies in areas of the state that are most at risk.

The solution to Florida’s unraveling insurance market is obviously to attract more private companies into the state, a feat that is easier said than done. We can only hope a plan is in place before the next “big one” comes knocking on our coastline.

Making lemonade out of a lemon real estate market

Written by Monica Simpson on . Posted in Business, Castles in the Sand.

Sometimes it looks like the national real estate market and the high-interest mortgage rates are nothing but lemons. But one startup company has found a way to turn the lemons into lemonade.

Assumable mortgages are something that was not uncommon back in the more civilized real estate era. Many conventional mortgages had an assumable clause built into the mortgage, giving lenders another source of potential borrowers. Those days are long gone except for government mortgages, including VA and FHA loans, which usually still contain an assumable clause.

What is an assumable mortgage? An assumable mortgage allows sellers to transfer their mortgage loan to the buyer purchasing their home. An assumable transaction doesn’t replace an old mortgage with a new one, but instead transfers the old mortgage to the new owner. The seller is relieved of the remaining mortgage liability and the balance of the outstanding loan is subtracted from the purchase price. The buyer, of course, must come up with cash to cover the balance of the purchase price.

Roam is the name of a new real estate startup launched several weeks ago in a handful of states, including Florida, who – for a fee – will search out properties with assumable mortgages. They will handle the paperwork and work through the system and the seller’s mortgage company on behalf of both buyer and seller to facilitate the mortgage transfer and property sale. Roam’s goal is to attract lenders and investors who can place new loans for the balance of the selling price, possibly at higher rates to compensate them for holding the assumable mortgage at lower rates. It’s not for a novice but, if successful, could open more available properties for buyers.

There are always good and bad points to anything new to the marketplace. If something looks too good to be true, it may be. Some of the pros for purchasing an assumable mortgage are lower interest rates, an obvious benefit for the buyer. Having an assumable mortgage gives significantly more exposure to a seller’s property. Closing costs will be lower and no appraisal is necessary, saving more money, and the buyer is assuming less debt.

The negative side of an assumable mortgage is a larger down payment, which is fine if a buyer has a lot of home equity or cash. Buyers still need to meet the lender’s credit and income requirements, and the buyer does not have a choice of lender.

Buyers who are assuming a VA-backed mortgage won’t be entitled to another VA loan until the assumed loan is paid off. Therefore, if you are getting VA benefits you may need to wait a while to qualify for another loan.

You may also be required to carry mortgage insurance depending on the amount of loan assumed and the loan-to-value ratio.

As I pointed out, this is a balancing act and not for everyone. Assumable mortgages could work great if you’re buying from a family member. If you don’t want a federal loan and are more comfortable with a conventional mortgage, it won’t work. Sellers with an assumable mortgage who may be having a problem selling their property could benefit by using it to make their home more desirable and advantageous to buyers.

Lemons or lemonade, the yin and yang of the real estate market. Just one more thing to add to the confusion.

Homes are shrinking, but not on AMI

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

Well, here we go with another everything old is new again story. This time it’s about the size of the average American home.

The homes most of us, certainly my generation, grew up in were small relative to the average family home today. We shared bedrooms and bathrooms, and the whole family sat together in the only family living room to watch the only family TV. According to the census data, some of that is coming back.

Census data shows that the median square footage of floor area for new construction single-family homes in the U.S. peaked at 2,519 during the first quarter of 2015. This has since dropped 13% to 2,191 as of the second quarter of 2023. But don’t think that because the amount of square footage has been declining the cost is also declining. According to John Burns Research and Consulting, the cost per square foot has accelerated to 13% in 2021 and 10% in 2022.

So, what are the builders eliminating from their newly-built properties to produce tighter, more efficient living spaces? First, they are axing dining areas, bathtubs and separate living rooms. Secondary bedrooms and loft spaces are shrinking and frequently disappearing. Much of this downsizing is the result of the COVID-19 pandemic and everyone’s focus is on saving energy and conserving our natural resources.

To compensate for the lack of formal dining and living rooms, they are increasing the size of multi-use rooms like kitchens and great rooms. Some families are opting to use the kitchen island as the primary dining area and expand their outdoor space for entertaining. Shared bathrooms are back in style and bathtubs with all the water jets and seating areas are gone along with the extra expense of building them.

Since formal dining is gone, so is the formal dinnerware, glassware, starched linens and the glass-faced cabinets formerly used to store them and show them off. Your grandmother would not be happy. Instead, builders are giving their customers more practical storage for wine racks, appliance drawers and roll-out shelving.

Unfortunately, most of this type of downsizing is not helping the prices. The overall price may be less, but the price per square foot is not, so you’re paying more for less. Nevertheless, first-time homebuyers are likely happy with the compromise just to be able to get into a home.

Home size may be shrinking but you would never know it riding around Anna Maria Island.

The new construction homes look bigger than ever, and they are. However, these multi-bedroom fun palaces are not designed for families to live in, they’re designed for investment owners to rent. Homes on the Island are being repurposed and converted into rental properties at the expense of owners who are either full-time or seasonal.

Rest assured, Anna Maria Island is not alone in the world with this problem. A recent article I read talks about Venice, Italy being out of control with tourists chasing out residents from the island city. Venice’s resident population is in steady decline, dropping below 50,000 last year for the first time in more than three centuries. This is down from 66,000 two decades ago and 175,000 in the early 1950s.

Smaller homes with fewer bedrooms and baths may not be happening on Anna Maria Island, but families who live in less of a tourist area are reconsidering their priorities. You may not like the demographic change for the Island but at least we’re in good company.

Market in the eye of the beholder

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

To some people, our national real estate market is downright awful, but to others, it may be the best of real estate times. It’s all in the eye of the beholder.

Don’t believe everything you read and, believe me, I read it all. Yes, it’s true that buyers, especially first-time buyers, are having a terrible time finding an affordable house. Yes, indeed, sellers aren’t moving out of their 1,200-square-foot starter house because they have a 3% mortgage. But it’s also true that sellers who want to sell are in a pretty darn good financial position and they’re as happy as can be.

Home prices were declining for five consecutive months but all of that has reversed itself quicker than the housing economists expected. The surprisingly quick recovery suggests that the residential real estate downturn is turning out to be shorter than many housing economists expected. Even if the number of sales keeps going down, sale prices are unlikely to fall significantly. In popular regions, including Florida, bidding wars are breaking out again, reliving the insanity of the 2021 market.

A byproduct of higher selling prices and fewer sales is, of course, the fear of low appraisals. If the buyer is planning on obtaining a mortgage based on the contract price the lender will be looking for a satisfactory appraisal for at least the purchase price. If the appraisal comes in too low, that will affect the loan-to-value ratio and could easily sink the transaction.

Sellers in today’s competitive market may remove the appraisal contingency from the contract. This means that no matter the amount of the appraisal, the buyer is legally bound to complete the transaction and better have the additional cash available.

Facing a low appraisal in an escalating market is not uncommon and can be a shock to buyers. Again, they will need to come up with more cash to close the gap to proceed with the transaction. Parties to the transaction like the broker and/or attorney can ask for consideration on the appraisal if they determine that one or more of the comparable properties were not valid, however, getting appraisers to change appraisals is nearly impossible.

Time to look at Manatee County’s August sales as reported by the Realtor Association of Sarasota and Manatee for the month of August:

Single-family homes closed 6.9% more than last August. The median sale price was $525,000, the same as last August. The average sale price was $715,711, up 9.2% from last year. The median time to contract was 33 days, compared to 13 days last year. The month’s supply of properties was 2.8 months, compared to 2.5 last year.

Condos closed 0.8% less than last August. The median sale price was $358,990, up 1.8% from last year. The average sale price was $393,727, down 2.6% from last year. The median time to contract was 50 days, compared to 13 last year. The month’s supply of properties was 3.3 months, compared to 1.8 months.

The Realtor Association feels that our prices are steady, and Florida is enduring in its desirability among out-of-staters. The fact that new listings and pending inventory are up for both single-family and condos is encouraging. Single-family had 8.6% new listings and 8.4% pending inventory. Condos had 18% new listings and pending inventory at 16.1%.

My eye beholds further adjustments, not a downturn, and once buyers get comfortable with 7.5% interest rates, they will forget all about the 3% their friends have. This is the way the economy rolls; it can’t be timed, it can only be faced head-on.

Castles in the Sand

Property owners with equity may tend to overpay

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

Feeling pretty flush, are you? Most of us who have owned property for several years are pretty happy with the equity we have accumulated. But if you are selling and purchasing another property, be careful. That equity can slip through your fingers at lightning speed.

A recent study by UCLA Anderson School of Management discovered that for every dollar of equity gain that a seller receives, he or she overpays by 7.9 cents on the next home purchase.

There are a few theories about why this is happening, one of which is that with higher equity comes lower capital constraints, allowing buyers to consider larger homes they are willing to pay more for. Also, a buyer with a nice equity cushion can offer more and sometimes will pay more to avoid a time-consuming search for a new home or to place themselves at an advantage above other buyers. Either way, these actions are driving offers higher than they should be.

Naturally, overpaying contributes to escalating housing costs, compounding the effect of fewer homes on the market and pushing up selling prices. This is more bad news for buyers who are competing with high equity buyers who are cornering the market with a lot of equity and cash bidding up prices.

Buyers who overpay for a property are risking that the property values will stay high when the time comes to resell. If a buyer is in the property for the long haul, it might be a smart risk to take for a property you want. However, if a buyer is looking at a short-term purchase they could get caught in an unexpected downturn of the market.

With residential mortgage interest rates approaching 7.5%, not only are buyers caught in the vice, but banks are also starting to see their profit margin caught in the same vice. Applications for home purchase mortgages dropped to their lowest levels since 1995 a few weeks ago, according to the Mortgage Bankers Association. Buyers aren’t buying because of low inventory and high rates and potential sellers aren’t selling and giving up their ultra-low mortgages – a perfect storm in a not-so-perfect real estate market.

But there are still high-end buyers who are jumping into the real estate market. The only difference is the jumbo loans these buyers typically are looking for are not as available as they once were. A jumbo loan is a non-conforming loan that exceeds the conventional loan limit set by the government housing authorities. The limit is currently set at $726,200 or higher in some high-cost areas in the country. For instance, Hawaii would be considered a high-cost area. These loans typically were considered low-risk loans the banks kept on their books that attracted wealthy customers, many of whom used the same bank for additional business transactions.

These loans usually carried lower rates than regular mortgages. However, the lower preferential rates for jumbo loans have reversed in recent months and now the jumbos are also approaching 7.5%, forcing home buyers to reconsider their financial options or even whether it’s a good time to buy. Since we’re living in an area with many high-end properties for sale, these higher rates could influence our market.

Whether you’re buying a car or a pair of shoes, it’s the same. If you have more, you pay more and if you pay more, you borrow more. Americans love the best of the best. Be careful that the money doesn’t slip through your fingers.

Castles in the Sand

Some homeowners ‘going bare’

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

Florida homeowner’s insurance is one of our favorite cocktail party conversations here on the coast. People who don’t live on the coast think we’re nuts to risk all just for great views and beach access. But we’re not the only homeowners who are being charged more for getting less coverage; it’s the new norm.

If you notice a drone over your roof, don’t be surprised, insurance companies are checking roofs for condition before renewing homeowner’s policies. In an effort to recoup some of their losses in recent years, insurance companies are raising deductibles, requiring new roofs and denying coverage on older homes without strong wind mitigation. With the Gulf waters overheated, we can expect more storms and higher premiums.

The national average for home insurance has gone up 20% from 2022, according to Bankrate.com. As unbelievable as it may seem, 12% of homeowners in the country don’t purchase homeowner’s insurance. About half of them have annual household incomes of less than $40,000, according to a survey by the Insurance Information Institute.

Florida is not alone in experiencing double-digit insurance increases. Companies are raising rates or completely leaving Louisiana and California in addition to Florida. There is, however, a solution for some homeowners who have the funds and nerve.

The insurance industry has a phrase for homeowners who choose not to buy homeowners insurance – it’s called “going bare.” If you own a home with a mortgage, you can stop reading right now, you don’t have the option of going bare since your mortgage lender will require you to carry sufficient coverage to repair or replace your property in the event of a major disaster.

Your lender may also require you to escrow for insurance as part of your monthly payment and then they pay the annual premium. This is, of course, to ensure that the premium is paid and their asset – your home – is insured. If this is an arrangement you have with your lender, it’s possible to ask them to allow you to pay your insurance without having to escrow for it monthly. Usually, you have to have owned your home for several years and have demonstrated a good credit score and your ability to pay your mortgage payment consistently on time.

However, if you’re a gambler, you can “self-insure,” assuming your bottom-line savings will outweigh any repairs you might have to undertake in the event of a storm or fire. Wealthy people say they have enough money saved to rebuild or move even if their house is destroyed, but for the average homeowner, it’s a bit more of a challenge.

A standard insurance policy typically covers the cost of replacement of the home and some of its contents in the event of damage or theft. Some average homeowners who have satisfied their mortgage choose to drop their insurance and bank the annual premium. Sometimes they come out ahead, especially if they have the ability to invest the money not paid for premiums at a good return, but it’s a risk not everyone can or should take. In addition, some homeowners who live in vulnerable waterfront locations are pushed into going bare when their policies are dropped and/or are renewed at a very high rate.

The increased cost of homeowner’s policies is hitting the real estate market heavily. Potential buyers can’t afford the double whammy of higher interest rates and higher insurance premiums, freezing the real estate market further. Pay the price or go bare – no good options.