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Tag: Anna Maria Island real estate

Castles in the Sand

Fear is in the air

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

Welcome to a new real estate year. Unfortunately, the new year looks a lot like the old year.

With interest rates and inventory levels fluctuating, a general feeling of confusion is spreading among both buyers and sellers – you might even call it fear.

The November Manatee County sales statistics are below average and confirm what most of us know – that sales are down and prices have also been trending down in recent months. However, the Realtor Association of Sarasota and Manatee stated, “median sale prices continue to show year-over-year increases, while other factors point towards more typical market conditions.” In other words, selling prices are up compared to last year and more properties are available for sale which indicates a more normal market.

By the way, these numbers came out on Dec. 21, the day I was boarding a ship in Fort Lauderdale for a holiday cruise. Therefore, I apologize for the late reporting.

Nevertheless, the numbers don’t lie, but they do tell us that Florida in general is still in one of the better real estate sales positions in the country. In fact, per Redfin.com, an online brokerage, reports that out of the top 10 relocation choices, the state of Florida has captured five of them. They are #3 Miami; #5 Tampa; #7 Cape Coral; #8 North Port-Sarasota and #10 Orlando. The other five are in Sacramento, Las Vegas, San Diego, Phoenix and Dallas, in that order.

So where is everyone relocating from? It’s likely you’ll find familiar names in this list, as all big American cities are all bleeding population. The number one city people are leaving is San Francisco and they go down in this order: Los Angeles, New York, Washington, D.C., Boston, Chicago, Detroit, Denver, Seattle and Philadelphia.

Redfin says that nearly 25% of the properties searched on their site are from cities where the person doesn’t currently live. This is up roughly 10% from 5 years ago.

Let’s see what happened in Manatee County for the month of November reported by the Realtor Association of Sarasota and Manatee.

Single-family homes closed 35.6% fewer properties compared to last year. The median selling price was $506,655, up 12.5% from last year, and the average selling price was $636,674, up 7.3% from last year. Median time to contract was 29 days, compared to 6 days last year, and active listings are way up at 246.2%, translating into a 3 months’ supply of properties.

Condos closed 36.4% fewer properties compared to last year. The median selling price was $358,108, up 19.4% compared to last year, and the average selling price was $391,320, up 14.3% from last year. Median time to contract was 18 days, compared to 9 days last year, and active listings were also way up at 266.7%, translating into a 2.7 months’ supply of properties.

Interestingly, cash transactions are down from last year for both single-family by 45.6% and condos by 23.2%. Likely a reflection of the economy in general.

Predictions for the new year are all over the place. Part of the reason no one can figure it out is the speed of last year’s mortgage rate increases gave everyone whiplash. And the Federal Reserve chairman has virtually promised more to come during his December speech raising the prime rate by 0.5%. The sad thing is most prospective buyers can still qualify for loans even at the higher rates but are afraid to buy in such an unpredictable market.

Real estate is still a good investment and Florida is one of the best markets in the country. So, don’t let fear rule you in the new year, do your due diligence and make informed decisions. Welcome to 2023.

Castles in the Sand

Building for rent, not sale

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

The American dream of single-family home ownership, according to certain builders and financial wizards who are paid to know these things, is on the decline. Well, maybe not a decline but certainly a shake-up in the way single-family home living is viewed.

If you haven’t heard of SFRs, which is short for single-family home rentals, don’t feel uninformed since I too just stumbled on it myself. Apparently, while almost everyone was consumed by the escalating single-family home market, the SFR snuck in and is now a hot area in the real estate market. So hot, in fact, that entire communities are being built by enterprising builders comprised of all single-family homes strictly for rent.

The National Association of Home Builders indicate that the $4.4 trillion SFR market is one of the fastest-growing sectors in real estate. They go on to say that single-family built-for-rent homes account for 11% of all single-family home construction in the housing market. This market share is way more than the 3% that was typical over the last several decades.

The demand for single-family rental homes fills a gap on several different levels. With interest rates going up and the price of homes going up, buyers are having a much more difficult time finding a home. So here comes brand new single-family home communities of smart homes with amenities and upgraded fixtures without any of the home ownership hassle. This has a lot of appeal to remote workers who may be transitory and may be more interested in holding on to their cash while still living in a home. Not to mention seniors who have sold their larger properties to cash in on their equity and don’t want to make another financial commitment.

This trend is happening even though rents on single-family homes have risen 10.2% year-over-year through September 2022 due to inflation, per CoreLogic’s single-family rent index. The most recent information is that the median rental cost for a three-bedroom, single-family, detached home is $1,900 per month nationally. Compare this to mortgage payments on a comparable home that have increased 50% since the beginning of the year. Buyers are doing the math and have determined that renting is a lot more cost-effective than owning in today’s market with interest rates double what they were two years ago.

There are a handful of companies around the country that are constructing built-for-rent communities and quite a bit of information is available on the internet about these companies and their homes. In Florida, I did find a few built-to-rent communities in Palmetto, Plant City and Wesley Chapel near Tampa, but so far Florida has not caught the built-to-rent bug on a grand scale.

We all know the benefits of owning your own home – building equity, pride of ownership, freedom to do what you want with your property and the consistency of neighborhoods not always guaranteed in rental communities. However, despite this, buyers are sitting out buying and waiting for what they think will be a single-family correction to the market. Investing their down payment money in high-interest savings accounts and waiting to see if the dust settles on the housing market has become a real development.

Real estate is always dynamic and hard to predict. Every buyer’s family and financial situation is unique so if SFRs works for you this might be the time to dive in. However, you may think interest rates are high, but historically under 7%, where they are now, is a good rate so if that’s the only thing stopping you from buying, think about it. Happy New Year!

Castles in the Sand

Do you need a mortgage button?

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

The tradition of a mortgage button is a little scrimshaw button mounted atop a stairway’s newel post, as a symbol the mortgage was paid off. This is something I saw for the first time on Nantucket Island where my uncle and his wife retired many years ago. Ever since then, I’ve been fascinated with the concept of a mortgage button. Now, however, paying off your mortgage may not be as impressive as in times gone by for every homeowner.

In today’s world, there are many forms of retirement, or not retiring at all. Because of Zoom, inflation and interest rates, many individuals who would have retired even 10 years ago are postponing retiring. If your choice is to retire, are you planning to pay off your home’s mortgage with other assets or will you keep your mortgage in place? Retiring with your home “free and clear” was a goal of previous generations and many homeowners still strive for this, but financial managers may want to have a further discussion about the real benefits.

Even if you decide to give up work or work part-time, many have calculated that carrying a mortgage is a better choice. This is especially true if you have a low-rate mortgage because of either owning your home only a few years or, like many people, having refinanced your existing mortgage when rates were ultra-low. According to the Federal Reserve, nearly 58% of those ages 65-74 had mortgages or home-equity lines of credit on a primary residence in 2019. This is up 22% from 1989 based on available statistics.

Even if you can afford to pay off your mortgage before retiring, does it make sense to deplete your cash or investments for this use? A financial advisor will look at all of your income and assets and make a recommendation designed specifically for you, including safe, low-risk investments.

In addition, your tax consultant needs to be in the loop since tax ramifications must be considered. Although the 2017 tax overhaul significantly raised the standard deduction, there are still homeowners who will benefit from a home mortgage interest deduction.

Finally, keeping a low-rate mortgage frees up equity that you otherwise would not have access to. After retirement or switching to part-time work, your family income is obviously reduced, which would make it difficult to qualify for a new mort-

gage or home equity loan should you need it for a health emergency or other reason. Or just having the money available for a new car, dream vacation or to help out a family member may be enough of a reason not to pay off your mortgage.

Paying off your mortgage and retiring with no debt certainly gives you peace of mind, and that’s something to be proud of and a reason to get a mortgage button. The mortgage button can also be called a brag button indicating there is no lien on the property. Part of the mortgage button’s myth or fact is also another little-known aspect that the mortgage, when paid off, is stored in the newel post at the base of the home’s stairway before the mortgage button is installed.

Historians have debated the truth about the mortgage button for over a century. As for me, it’s a great story, true or not, and a special memory from my first trip to a magical island. Happy holidays!

Castles in the Sand

How big is too big?

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

Sometimes what seems like a great idea may not be in the long run. Kind of like that Jaguar you had to have when you were 18; it looked pretty, but it was always in the expensive foreign car repair shop.

Last week’s big financial announcement from the federal government was the increase in Fannie Mae and Freddie Mac’s mortgage loan eligibility. What does that mean? It means that the federal government is now backing mortgages for over $1 million for the first time. Remember that Fannie and Freddie don’t make loans. The companies are under government control and have been since 2008 for a good reason. They buy mortgages from lenders and package them into securities that are sold to investors. In 2008, when loose lending practices created a bubble of foreclosures, these investors lost big time, crashing the stock market and almost our economy.

Fannie and Freddie’s mandate when the government programs were established was to guarantee middle-class mortgages and make housing more affordable for the average buyer. Because of this, not everyone in the financial community is on board with the government insuring even larger home loans geared more to the wealthy and further increasing taxpayer liability.

Fannie and Freddie’s loan limit, which is known as the conforming loan limit, will now be a high of $1,089,300 in high-cost areas, up from $970,800, and $726,200 up from $510,400 in other parts of the country. The high-cost areas are mostly the California and New York coastlines with some pockets in other areas of the country. All Florida counties with the exception of Monroe County, which encompasses the Keys, are at the $726,200 limit.

Loan limits are determined every year using a formula that factors in the average housing prices. This year, about 100 counties in the country are determined to be high-cost markets out of approximately 3,000 counties. The increases in the loan limits may make it easier and cost less for borrowers purchasing single-family homes. Conforming loans usually have lower closing costs and can require lower down payments than residential mortgages that go over the loan limits.

With higher mortgage rates and higher asking prices for homes, many prospective buyers have been unable to qualify for loans or had to reevaluate their buying criteria. Fannie and Freddie argue that raising the loan limits is necessary in order to reflect the higher home prices and the higher interest rates. They view their job as needing to keep pace with home prices to address affordability.

Anna Maria is obviously a high-cost area of Florida even though our buyers are not benefiting from the increase in loan limits. Many buyers of our multi-million-dollar homes are either coming in with all cash, finding private funding or applying for a jumbo loan, which is over the federal loan limit.

As much as I sympathize with high-cost buyers in theory, I still question the benefit of large loan limits in our economy, especially when Fannie Mae and Freddie Mac were designed initially to help the middle class. Nevertheless, far be it from me to compare a bad automobile choice to the federal government, but I can’t help remembering the financial crash in 2007- 08. Remember the one that we almost didn’t survive based on the foreclosures of non-conforming home loans backed by the federal government? Just saying!

Castles in the Sand

Are there any houses without flaws?

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

“A mark, fault or other imperfection that mars a substance or object.” That, my friends, is the definition of a flaw. If you think you can find a house that doesn’t fit this description, you’re probably dreaming.

Every home built or lived in has flaws; it’s up to the buyer and seller to decide
if the flaw is serious enough to repair or serious enough to not buy the home. Here are some things to think about on both sides of the transaction.

Buyers need to be aware of many things when first viewing a home. If you have young children, or are just sensitive to noise, be aware of traffic or boat noise at various times of the day. Sometimes homes on main roads are priced better but may not work for your family.

Naturally, obvious structural issues like sloping floors or cracks in the walls should raise a red flag.

Water is a problem if leaks get out of control in a home. Question water stains, mold, peeling paint or blisters on the paint and an overall musty odor. Look under sinks for water dripping and run faucets to see if they leak.

Check to see if the floors are maintained. Scratches on hardwood, cracks on tile and worn carpeting could be an indication of an overall maintenance issue in the home.

Look carefully at the appliances and see if they’re rusty or have dents and look worn out. It’s perfectly legitimate to ask if the appliances are in working order and ask their age. Any hanging wires or broken fixtures could indicate a worse electrical problem and should be questioned.

Finally, landscaping and the entire exterior of the home will give you an im- mediate negative or positive impression the minute you step out of the car. First impressions do count.

If you’re selling, sometimes rather than take on a major renovation of a kitchen
or bathroom it’s just as productive to use a little elbow grease. Even though there is still a shortage of inventory in most markets, buyers are frequently turned off by little things. Any type of odor, whether it’s musty, pet, gym shorts or baby, needs to be corrected. When you’re putting your house up for sale, the best favor you can do it is investing in a deep cleaning. The second-best thing you can do is enhance your curb appeal. Remove the bikes, toys and half-dead plants. Paint peeling on outdoor trim and dirty windows are a no-no.

If your home needs more than a good clean-up, fresh paint may not be as dramatic as a new bathroom, but it will do that first impression a lot of good. Refinishing hardwood floors or putting down an inexpensive piece of carpeting in the kids’ rooms will more than pay for itself. Other small fixes that buyers love are new doors and custom closets, many of which you can do yourself. Think about what appeals to you when you look at Realtor pictures of homes for sale. It could be as simple as new throw pillows and bed quilts. I once bought a $300 new sofa for my family room after my dog made the old one his home. It worked perfectly. The buyers even wanted to buy it from us.

Homes aren’t the only things that have flaws. Most of us can look in the mirror and see a long list of things that need fixing. Just remember, there are no perfect homes and no perfect people. A good lesson to keep in mind.

Castles in the Sand

Let’s talk turkey

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

So, after the turkey is consumed, the pies are half gone and the dishwasher is running its first load, it’s time to talk turkey. And what’s everyone’s favorite dinner conversation – real estate.

Let’s start with one of the mysteries of the ages, why mortgage rates go up and down. If you think you’re going to get an understandable answer from me, guess again. Some mysteries are never solved.

As of this writing, the average rates are 6.89% for a 30-year, fixed-rate mortgage and 6.26% for a 15-year, fixed-rate mortgage. Adjustable-rate mortgages are 5.52%, not too much better but could put borderline buyers in the range of qualifying. These rates have actually ticked down a little from 7% a few weeks ago in spite of the Federal Reserve upping their rate by 0.75% again.

Nationally, home sales typically go down when rates go up since fewer potential homeowners qualify for a loan. Despite the sharp decline in sales, home prices are rising on a year-over-year basis, in part be- cause supply remains low. Unfortunately, a slower housing demand affects other goods and services. Furniture, appliances, lumber and plumbing sales declined in September due to less demand for those products, slowing down the overall economy.

Not surprising, the future predictions are all over the place. The Mortgage Bank-
ers Association thinks mortgage rates are expected to end 2022 at 4.8% and to decline gradually to 4.6% by 2024. Good news, if you believe it, for buyers who are trying to decide between an adjustable-rate mortgage and a conventional one.

The National Association of Realtors kind of agrees with the above, saying that all in all, the 30-year, fixed-rate mortgage is likely to hit 5.3% by the end of the year, and that 5-year adjustable-rate mortgages will be at 4% by the end of the year.

Finally, a senior economist at Zillow says that competing dynamics suggest that there will be little reason for mortgage rates to decline anytime soon.

As far as pricing is concerned, the National Association of Realtors expects prices to post year-over-year declines starting next year.

Let’s just see what the Manatee County market did for the month of October according to the Realtor Association of Sarasota and Manatee.

Single-family homes closed at 22.5% less than last October. The median price was $549,444, up 29.3% from last year and the average price was $711,358, up 25.8% from last year. Median time to contract was 24 days compared to 6 days last October and the month’s supply of properties was 2.8 months versus 0.8 last year.

Condos closed 22.5% less than last October. The median price was $368,700, up 32.6%, and the average price was $388,103, up 17.4%. Median time to contract was
22 days versus 7 days last year and the month’s supply of properties was 2.3 months compared to 0.6 last year.

The trend of fewer sales and raising inventory is continuing. Some real estate analysts feel the market is leveling off with less of a bounce to higher values. A lot of this as it relates to Florida is impacted by hurricanes, interest rates and inflation. And we’re not alone. Just coming over one of my news feeds is a report that home sales nationally fell for a ninth straight month in October, according to the National Association of Realtors.

I hope this gives you some debatable information to discuss at the Thanksgiving dinner table. Just remember that when it comes to talking turkey, you probably know as much as anyone. Happy Thanksgiving.

Castles in the Sand

Zoom towns

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

They call them “Zoom towns” because so many of the new residents are working remotely and have given up their city and suburban lifestyles for a more relaxed environment in smaller communities. It’s no secret that this massive lifestyle change evolved because of COVID-19, but even now, when the danger of serious infection is substantially reduced, Zoom towns are still popular.

A recent National Association of Realtors survey reported that buyers who purchased homes in the year that ended in June moved a median of 50 miles from their previous residences. This is the highest distance on record, going back to 2005 when the median was a consistent 15 miles. This may not seem like a lot of mileage difference, but 15 miles from Boston, for instance, is still part of the city, but when you go 50 miles, you’re in real country. In New York City and other large metropolitan areas, however, you would need to go a little further than 50 miles to really be getting away from it all.

In the same survey, smaller communities were more popular, with buyers purchasing 48% of the homes. Again, this is a record and is up from 32% a year earlier. By comparison, traditional suburban home purchases dropped to 39% from 51% the previous year and only 10% of home purchases were in urban areas, down from 13% the year before. Naturally, the increased cost of homes and now the increased cost of financing has certainly influenced buyers.

Home buyers who are getting close to retirement are another influence on the popularity of small communities. Many who have the ability to work remotely chose to relocate now rather than after their retirement date. This gave them an edge before mortgage rates and prices went up further and set them up for easing into retirement.

Confirming further the demand for homes in smaller communities, The Wall Street Journal/Realtor.com Emerging Housing Markets Indexes came out at the end of October. It reports that the demand for homes in low-cost cities with strong local economies is, in their opinion, “robust.” This annual survey incorporates economic and lifestyle data, including real estate taxes, home appreciation, unemployment, wages and commute time in their 300 biggest metro area rankings.

This survey places the North Port, Sarasota and Bradenton region at number four in the top 10. Unfortunately, as we all know, North Port has taken a big hit from Hurricane Ian since this survey was completed, so in next year’s survey it will be interesting to see where that area is placed.

The other Emerging Housing Markets were in this order: Johnson City, Tennessee; Visalia-Porterville, California; Elkhart-Goshen, Indiana; Fort Wayne, Indiana; Lafayette-West Lafayette, Indiana; Columbia, South Carolina; Columbia, Missouri; Raleigh, North Carolina; and Yuma, Arizona.

Danielle Hale, chief economist at Realtor.com, said, “These more affordable markets continue to offer some opportunity. It doesn’t mean that they’re not seeing a slowdown in their housing markets, but they’re better positioned generally.” In other words, they had faster home sales and lower unemployment rates than the market as a whole, which is attracting buyers in an otherwise difficult housing market. Further, according to an economist at Nationwide Insurance, the trend toward less expensive housing markets looks like it will continue even if home prices start trending down.

I guess all of Florida needs to be considered a Zoom town based on the number of people who have relocated to our state in the past two years. We’re still a state with a lot of smaller, cozy communities, access to waterfront amenities and a friendly business environment. I believe our new diverse residents will only enhance those attributes. Time to pack your laptops and zoom your way to the Sunshine State!

Castles in the Sand

Is the Earth moving under homeownership?

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

As I’m reading that mortgage rates have topped 7% for the first time in 20 years, I can’t help wondering how all the events of the past two years will affect homeownership. As the affordability of purchasing a home deteriorates, will it take homeownership along with it?

I recently became aware of a book called “Crabgrass Frontier: The Suburbanization of the United States,” written by historian and Columbia University professor Kenneth Jackson in 1985. The book focuses on the history of single-family homeownership in the United States and goes all the way back prior to the Civil War. However, my interest and probably yours was what happened to American homeownership after World War II.

Although the book outlines the history of how the suburbs developed, it also explains the psychology of why people want to own their own home and the piece of ground under it. It’s all about the “American Dream” and how for generations, owning a home represented the fulfillment of that dream and the success that it symbolized. Immigrants who came through Ellis Island at the beginning of the 1900s couldn’t believe their children could actually own their own homes and appreciated how important that was to their lives.

The economics of owning a home for most would-be homeowners was less important than the desire to own a home, regardless of whether the future math made sense. Find the home you want in the area you want and find a way to get it without really considering its future worth. Fortunately, the future worth of real estate has consistently risen since the early 1950s when the suburbs outside of major cities grew and grew and grew.

All we have to do is look to the last couple of years when home values in the United States have risen 36% since 2020, which is twice as large as any other two-year increase on record. Even the real estate crash of 2007 hasn’t changed anyone’s minds about the value of homeownership. All the value that was lost has returned and most people and economists feel that what happened then was just a blip on the real estate radar, not a trend. There has consistently been a 60% homeownership rate since the early 1960s.

The COVID-19 epidemic has certainly changed where people live almost as much as the advent of affordable automobiles and highways did. It gave citizens the ability to live far from their job’s home offices and “commute” via their laptops, pushing up the value of homes in areas of the country no one ever considered moving to until retirement, like Florida. This has unfortunately widened the gap between the wealthy white-collar professionals and everyone else. That combined with the rise of inflation and mortgage rates has locked a lot of middle-class people out of the market.

Nevertheless, history predicts that what we’re living through now will not be long-term and homes will continue to appreciate. Eventually, new buyers will find a way into the market. Florida has been one of the major beneficiaries of this unusual real estate trend and, although our market is going through a slight correction, don’t bet on it collapsing.

Since the Federal Reserve just passed another rate hike at a recent meeting, we can anticipate mortgage rates to continue going up. As the Earth keeps moving under the real estate market, the average buyer just doesn’t know what to do, so many are doing nothing. It’s a sad state of affairs for the country, but hopefully one that will not stick around for long.

Castles in the Sand

The death of old Florida

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

Florida’s changed a lot in the over 20 years I’ve lived on the Gulf coast, and it’s changed even more as a result of COVID-19. But the biggest change to southwest Florida and the entire coastline south of Tampa may come as a result of Hurricane Ian.

Now that the flood waters are receding and everyone is assessing the damage from the storm, we’re starting to get a feel for the damage to real estate values. Feedback from brokers is that the investors and buyers are now out in force looking for properties to buy in as-is condition. One broker from Englewood predicts that home prices will increase for at least another 12 to 18 months because of the additional demand.

Buyers from out of state have not changed their minds and are motivated to buy before prices increase further because of the anticipated additional shortage of properties to buy in the aftermath of the storm. In addition, they have not been discouraged by the increased costs associated with fortifying homes against wind and flooding.

The fallout from the insurance companies is still unknown, but anyone purchasing a coastal home now is calculating that additional cost into their affordability factor.

Of course, Anna Maria Island and other barrier islands on the coast that did not have major damage will be looked at by buyers and seasonal renters. This could prove to be an even busier rental season for Anna Maria Island with higher price tags for rentals and purchases alike.

Assuming all of the above, where does that leave the average buyer who wants to live on the coast? Unfortunately, many will be forever priced out of coastal living because of a combination of building codes and the increased costs of flood and homeowners’ insurance.

The most recent update to Florida building codes from 2020 includes provisions to seal roof decks, as well as longer standing requirements to install impact-resistant windows or shutters and an update to stronger connections between the roof, walls and foundation.

As previously stated, homeowner’s insurance companies are requiring condos and single-family homes to install new roofs before they will provide an insurance policy. This is happening even if there are currently no leaks or damage to existing roofs, if they are over a certain age.

According to a recent report by CoreLogic, there are nearly 33 million homes at risk of hurricane-force wind damage along the Gulf and Atlantic coasts in Florida, so the amount of property updating required is substantial.

When Hurricane Michael hit the Panhandle town of Mexico Beach, it didn’t take long for the area to recover with high-end homes, gated communities and beachfront condos supplanting the original old Florida cottage nature of the area. This is certainly going to happen in parts of southwest Florida where many homeowners do not have flood and/or homeowner’s insurance and are planning not to return. Just to prove that “deep pocket” money isn’t afraid of storms, The Ritz Carlton Residences on Estero Bay, located just south of Fort Myers Beach, is breaking ground next year with units starting at $2.8 million.

I still have my crystal ball handy from Halloween and it’s telling me Florida’s real estate values are strong and may actually get stronger because of Hurricane Ian. The downside is will “old Florida” be gone forever? The crystal ball is saying, “Why are you asking that question? You know the answer.” Unfortunately, I do.

Castles in the Sand

Higher mortgage rates affect everything

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

Think of an octopus – the head of the octopus is the housing market and the tentacles are all of the industries dependent on the housing market. Too much of a stretch? You get the idea.

Anyone who has ever purchased a home goes into it knowing that there will be a lot of out-of-pocket expenses, during the first year at least. New appliances, decorating, paint, furniture, lawn maintenance and a full litany of other homeownership necessities are just a few of the expenses homeowners can expect. Some of these projects are done by the new owners but many are performed by professionals who may see the demand for their services eroding if home sales slow down. Not to mention the effect slower home sales are having on the mortgage industry. Lenders and their employees, many of whom work on commission, are having their own personal recession.

Higher interest rates affect virtually every corner of the economy, but it affects the housing market the most. The higher the rates, the higher homebuyers’ monthly payments are, adding hundreds of dollars every month. This is exactly what our over-inflated economy doesn’t need right now. What it also doesn’t need are homeowners with low mortgage rates making the decision to stay in their homes with their ultra-low mortgage interest rates instead of moving up or out and taking on a loan rate double what they are currently carrying.

The higher the rates go, the less inventory there is or will be on the market. You don’t have to be a Harvard-educated economist to recognize that the supply and demand law is alive and well in the United States housing market. Some economists are calling this the golden handcuffs, tying homeowners to their low mortgages and just sitting on their property even if they want to move. A lot of homeowners are waiting for rates to go down before making their move, but is that really in the foreseeable future? Certainly, some people will still need to move because of personal life events, but those who have the option to not move probably won’t.

Because rates haven’t climbed this rapidly in decades, it’s almost impossible to predict how much the increase in mortgage rates could reduce home listings. Mortgage rates rose for five consecutive weeks in September, reaching the highest level since the financial crisis. Per Lawrence Yun, The National Association of Realtor’s chief economist, “I really don’t see inventory rising.” That’s a really scary open-ended statement. Does he mean the inventory will never improve?

Back to the law of supply and demand, the lack of inventory is one of the major reasons home prices have remained near record highs. Sales are declining, inventory is being suppressed and interest rates going up make for the perfect storm for selling prices to also keep going up.

As far as Florida is concerned, here’s one little tidbit that the Census Bureau reported in 2019, “Florida had the most domestic in movers, with 566,476 people moving from another state within the past year.” That was almost three years ago. I would love to know that number now but, based on the fact that over 321,000 people moved to Florida from the beginning of this year, it will likely be enormous. This could explain why you can’t get a doctor’s appointment lately.

The poor octopus has been called a sea monster but they’re not to blame, especially when the economists don’t really know anything either. The housing market is also a monster in many ways and how the housing market goes, so goes the economy. Buckle up, things aren’t changing anytime soon.

Castles in the Sand

Credit scores can spoil deals

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

You finally found the house, negotiated a price and the contract is signed. What can go wrong from this point? Plenty.

You may have read about a little glitch involving credit scores back in August. At that time, it was reported that Equifax, one of the three agencies that monitor credit scores, reported inaccurate credit scores for millions of would-be borrowers over a three-week period from March 17 to April 6. The problem was reported to lenders in May.

Equifax reported that some people who may have been applying for mortgages, auto loans and credit cards may have had their scores lowered or increased by 20 points or more. A 20-point error in a credit score could easily lead to mortgage applications being rejected. This is one of those unfortunate errors that affect borrowers who may have done their homework prior to making an offer on a home and who are sure what their credit score is and their ability to go forward with a real estate transaction.

Mortgage lenders typically pull credit reports from all three agencies: Experian, TransUnion and Equifax. The lenders take a look at all three scores and from there create a combined score, according to the executive chairman of Inside Mortgage Finance. This is when the lender is able to determine whether or not to approve the mortgage application and what interest rate to offer. Since only Equifax was affected, the impact may not have resulted in a lot of people being turned down for mortgages. However, it could have influenced the interest rate offered on a loan, resulting in higher mortgage payments.

If you think a recent loan may have been affected by this error in credit score reporting, the first thing is to contact the lender. They need to review the application process and determine if an Equifax credit score was used in the underwriting process and if the Equifax score was lower than the others used. From there, your lender will determine what exactly this means to the outcome of your loan.

This is a great lesson for anyone planning on applying for a loan in the coming months. It would be beneficial to set up alerts with each of the three credit reporting companies, so you know quickly if there is something unusual on your credit report. Ultimately it is your responsibility to pull credit reports on a regular basis and go over them with a fine point, looking for postings that do not apply to you. You always have the ability to challenge anything that looks like an error.

Equifax’s position is that there was no shift in the vast majority of scores during the three-week time frame. For those consumers who did experience a score shift, their initial analysis indicates that only a small number of them may have received a different credit decision. If you feel you need to make a correction on a credit report or score, contact the Consumer Financial Protection Bureau, which can provide you with a list of instructions and a sample letter that will assist you in filing a claim.

I can’t say enough times that the process of purchasing a home, frequently the biggest investment of a lifetime, has a lot of moving parts. It is up to you as the borrower to
be proactive every step along the way. As we’ve seen too many times, large financial institutions make mistakes, so keep checking your credit reports and scores, especially if you’re looking for a home.

It’s not over ‘til it’s over, and heaps can go wrong before it is.

Castles in the Sand

Crashing real estate waves

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

We don’t have a lot of serious wave activity here on the Gulf coast; most of the big rollers are on the Atlantic Ocean side, especially north of Florida. However, if you’re talking real estate wave activity, we certainly have those, but not nearly as erratic as other states are experiencing.

According to the Core-Logic Case-Shiller National Home Price index for the year ending in June, prices rose 18%, down from 19.9% for the prior month. Most economists are saying the housing market has cooled in recent months and nationally, existing home sales have fallen for six straight months through July.

The blame here rests with higher mortgage interest rates, which is adding additional pressure on buyers when they attempt to qualify for mortgage loans. As of this writing, the fixed-rate mortgage average was 5.99%, looking like it will likely go over 6%. This is pushing 3% more than it was a year earlier, accounting for many buyers to be hitting the pause button on home purchases.

Keep in mind that 6% is not a terrible interest rate and should not in and of itself keep buyers from purchasing a home if they can qualify. Nevertheless, sellers are starting to think they may have missed their best opportunity to sell by waiting too long. The reality is that there is a slight downward movement in sale prices and the days of bidding wars and sellers getting over asking price are likely over. This doesn’t mean that sellers are still not making a lot of profit on homes they have owned for even three years, it’s just a little more competitive and adjustments to their marketing plan need to be addressed.

All of this said, Florida so far seems to be inoculated from any serious price reductions. There is a slight downturn in median selling price, but not as much as other areas of the country. Tampa was ranked ninth overall in July based on data received from Florida Atlantic University. The average home selling in Tampa was 58.5% more than the expected price. Fort Myers came in third and Lakeland was seventh. In addition, every city in Florida increased slightly from June to July.

However, Lei Wedge, a professor of finance at the University of South Florida College of Business, said she believes Tampa real estate prices have already peaked. She points out that statistical models often lag behind what is actually happening in the market. Not every financial guru agrees with this, and points to the large influx of buyers from out of state who will prevent prices from dropping as radically as we’re seeing in other parts of the country.

The other potential problem for buyers looking for mortgages in a changing market are where the appraisals will come in. The appraisers and the lenders who hire them are very careful with their final appraisal, which the mortgage amount may be based on. In an escalating market, it is sometimes hard for appraisers to project what the value of the house is without sales comps to support their numbers. In a declining market, it could work to the buyer’s advantage, depending on how the appraisers view and project the market. Either way, appraising is an art, not a science, and appraisers almost always stand by their appraisal numbers, particularly for buyers who are putting down the minimum amount of cash.

Missing the wave isn’t always a bad thing. It gives you a chance to reposition yourself and get ready for the next one. It’s impossible to predict mother nature or the real estate waves.

Castles in the Sand

Real estate websites changing our lives

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

In the good old days of the late 1980s when the state of New York told me I was now capable of selling residential real estate, I knew they had no clue. Of course, I also had no clue, but that was part of the challenge.

That was before the internet and cell phones when every real estate office had a receptionist at the front desk who took messages and buyers and sellers had the good manners to wait until you returned their call. In that era, real estate was mostly confined to print advertising and labor-intense manual systems. Picture this: Listings were collected in three-ring binders for potential buyers to look through. Once they found the perfect home at the perfect asking price in the perfect area, it was out to the realtor’s car for an in-person tour of the home.

Once the multiple listing services were created, realtors could access available properties on the computer, assuming the computer was up and running and the little blue-haired lady who was selling real estate for 100 years could learn the process. And then of course, only licensed realtors could access multiple listing services.

That was then and this is now. In the real estate world of today, every available property for sale is at everyone’s fingertips, controlled by websites all competing for your eyeballs. Here’s a breakdown of the top sites:

The number one site and by far the largest real estate website in the country is Zillow. Zillow or “Zillow Surfing” is without a doubt addictive and provides listings from both the multiple listing services and for sale by owner. The site is free to buyers and sellers and at last count averaged 68 million monthly visitors.

The next most popular site is realtor.com (my personal favorite). The app allows you to search for homes, view pictures and video tours, compare neighborhood criteria like noise levels and provides information on flood zones. Listings are in real time and generally reflect all multiple listing properties.

Next up is Trulia, which focuses on local information and allows for personalized alerts with links to pre-qualified financing and financial calculators. Trulia may be a little too technical for the average property surfer but good to use when you have narrowed down your favorite location.

These are the most well-known and the most popular, but there are plenty more like apartments.com, FSBO.com and Homes for Heroes. There are also several home-buying websites that come and go on a regular basis. Zillow tried their hand at this, but their timing was off, starting when home prices were on a sharp rise. They have since dropped out but there are two others who are active – Flyhomes.com and Homelight.com.

Something that just came to my attention is a website called Roofstock.com, which provides listings and data for investors interested in rental properties to buy. Small investors are actively purchasing properties frequently out of state and are becoming “Laptop Landlords.” They claim they’re the number one platform for small and large remote investors looking to purchase rental properties.

The National Association of Realtors reports that approximately 51% of buyers found the home they purchased on the internet, only 28% found their home through their realtor and 4% from yard signs.

The good thing about the 1980s was the pace was considerably slower than today, which made it a lot easier to learn and bluff your way through situations you haven’t yet had the time to learn. Every day was a challenge and a learning experience, and so much more fun. Our lives may be different now, but I still miss those binders.

Castles in the Sand

Is Florida the new New York?

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

What’s happened in the last two years with the rise of COVID-19 has changed our culture, our housing and our geography so much that it’s hard to wrap your brain around it.

Everything we do has the cloud of the pandemic over it in small and big ways. But eventually, those changes will fade and some of the cultural changes will also start to fade. What then?

The way I view it through my real estate-soaked brain is that remote work has been the number one factor in the shifting real estate market. The fortunate people who had jobs that could be performed remotely were encouraged, and in some cases mandated, by their employers to leave the office. Many of these white-collar workers moved out of major metropolitan hubs and into small towns or small cities, increasing the population substantially. According to an economist at the Federal Reserve Bank, people migrating from high-cost, large metro areas to small cities, towns and rural areas was about 15% higher during the four quarters ending in March compared with the average for the three-year period preceding the pandemic.

All of this increase in population based on remote work also reshuffled the housing markets. Home values went up, new businesses were started, school enrollments increased and workers who said they would never leave major cities suddenly found themselves filling the bird feeders in the morning instead of waiting in line for their coffee.

We all know that Florida has been one of the major beneficiaries of this reshuffling, with real estate values increasing to unprecedented levels. According to the U.S. Census Bureau, the population of Florida increased by over 200,000 new residents between July 2020 to July 2021 and, of course, this does not include what the increase has been since July of last year.

Unincorporated Manatee County, Bradenton and the three towns on Anna Maria Island were always considered small towns. There is no doubt that right in our own backyards we can see the benefit of remote work and how it has impacted our real estate market.

Now it’s time to look at the July Manatee County real estate statistics recorded by the Realtor Association of Sarasota and Manatee. I’m sorry I’m a little late with this report, which came out while I was away.

The median sale price for single-family homes was $521,000, up 21.2% from last year. The average sale price was $689,490, up 21.7%. New listings were up 49.8% and closed sales were down 22.2%.

The condo median sale price was $354,500, up 41.8% from last year, and the average sale price was $409,848, up 32.3%. New listings were up 11.3% and closed sales were down 20.9%

Both single-family and condos had a median time to contract of nine days.

We’re still seeing double-digit increases in sale prices with condos jumping ahead of single-family homes. But the real story is the increase in inventory and the decrease in sales. The supply and demand ratios are shifting, so watch those sale prices eventually take a hit.

Being someone who was born and worked most of my adult life in New York City, I can’t believe that the major cities are dead. Cities offer culture and energy that is hard to find outside of that environment. They don’t, however, offer beaches, mountains or small-town life.

How long will this new lifestyle last – who knows? I can’t help thinking that eventually, you start thinking there’s more to life than filling the bird feeder.

Castles in the Sand

Waterfront home buyers have lots to learn

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

To say that waterfront living is not for the faint of heart would not do justice to fainting. It’s more like a daily swoon, especially in storms or high tides. But even just plain old daily living can be daring.

Do you think you’re ready?

As soon as you walk through the front door of a Gulf-front home, your first instinct is to get out your checkbook. But buying on the water is not as conventional as buying inland. You need to do a lot of research about the expenses and consequences of water intrusion when you live in a flood zone.

Also, don’t think just because your home isn’t direct waterfront that you’re safe; chances are if you’re living along the west coast of Florida, you’re still in a flood zone. Remember that all of Anna Maria Island and the waterfront areas of Cortez are considered at high risk of flooding, as well as riverfront properties in Manatee County. Waterfront properties in flood zones will have required elevation regulations put in place by the county, state and FEMA for new construction and major renovations.

Finally, flood insurance and homeowner’s insurance are seriously impacted by living in a flood zone. FEMA’s flood insurance is capped at $250,000, which requires most homeowners in a flood zone, and certainly on Anna Maria Island, to purchase additional private flood insurance.

Buyers need to be especially vigilant when buying waterfront properties because of everything from minor corrosion to seriously impaired bulkheads on canal front properties. The average cost to replace seawalls in Florida runs between $500 to $1,200 a linear foot. Even if your seawall is only 60 linear feet, assuming an average price of $800 a linear foot, you’re looking at somewhere in the range of $40,000 to $50,000. There are federal loans available to repair seawalls, which may be the only ray of sunshine if your bulkhead fails.

The point here is that if you’re buying waterfront, you don’t just need a home inspection, you also need a structural engineer experienced with bulkhead and possibly dock inspections and pilings. In addition to the structure, the dock area needs to be inspected for mold, termites and other wood-boring insects.

Just to make life on the water more interesting, you can expect your appliances as well as air conditioning systems to have a reduced life due to salty air and wind exposure, even getting into the interior of your home. The best way to stay on top of this is to set up a schedule to inspect your home regularly for evidence of corrosion, rust, mold and little buggers. This is where hiring a manager for rental properties becomes important and worth the price.

If you live in a waterfront condo, most of the inspection process and replacement of association-owned infrastructure are taken care of. That doesn’t mean you won’t pay for it, but it does take the responsibility off your shoulders and the cost is spread around.

Notice I haven’t said one word about the threat of hurricanes. It goes without saying that hurricanes can be the biggest test to waterfront living and require organization and preparedness.

Living on the water is both a challenge and a blessing. Would you trade the cool evening breeze for a suffocating landlocked property and just a little peace of mind? Or do you want to be one of those people who walk outside every day and marvel at the view and can’t believe how lucky they are? Not even close.