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Castles in the Sand

Are home sales starting to slip?

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

It’s a new year and signs are pointing to the possibility that there may also be a new real estate market. We have been enjoying a high number of sales and increasing sales prices for practically all of 2020, but we may be starting to see a slight crack in the market.

According to the National Association of Realtors, November national home sales have started to slip. Nationally, existing home sales in November fell 2.5% from October for the first time in six months. Manatee County also saw a decline in the number of closed sales in November from October of just under 7%.

As reported last week, however, Manatee County closed 40.3% more single-family homes in November 2020 compared to November 2019. Nationally, the single-family home market rose 25.8% in November 2020 compared to November 2019.

And, as far as home prices, the NAR has reported that the median existing home price rose 14.6% in November from a year earlier to $310,800. Manatee County’s median home sale price in November was $350,700, up 7.2% from a year earlier.

As usual, the biggest problem we – as well as the entire nation – have is a lack of inventory. Nationally, the NAR reported that the supply of homes on the market at the end of November was the lowest on record going back to 1982. At the end of November, Manatee County had only a 1.6 month supply of available single-family homes; nationally the number was 2.3 months’ supply, which probably accounts for the national number of sales being higher than our area.

Unfortunately, while we are still subject to the fear of contracting the virus, many homeowners don’t want to put their homes on the market, especially in the northern part of the country where they struggle with cold weather. We in Florida have a significant advantage because of warm temperatures and what is typically a good selling season, but will that improve the available inventory? We don’t know at this point.

With the hope of an influx of people flocking to our beaches and looking for a property to purchase, I did a little survey of where exactly new buyers are migrating from. The result was a surprise to me and may be to you as well.

I focused on the approximately six-week period from Nov. 1 through Dec. 15, based on sales recorded on the Manatee County Property Appraiser’s Office website. Most recorded sales show former addresses for new owners.

The city of Anna Maria had nine sales to Florida residents: Five from Tampa, one from Lakeland, one from Miami Beach, one from Eustis and one from Doral. There were two sales from Illinois, one from Oklahoma, one from Georgia, one from Tennessee and one from Arizona.

The majority of the combined cities of Bradenton Beach and Holmes Beach’s new residents came from the state of Florida; eight from Tampa and eight from Sarasota. There were two from Illinois, two from Georgia, two from New York and the balance split between Pennsylvania and Ohio.

Cortez had sales to new homeowners from Tennessee, Massachusetts, Florida and New York, one for each state.

I was somewhat surprised by this little survey. I just assumed that more people were moving here from the northeastern states, but even the New York sales were not from the city of New York. I guess Florida’s east coast is accommodating these new residents.

Statistics are a funny thing; you can interpret them in a variety of different ways, but there is no way to misinterpret our level of inventory. It’s low all over and unless and until that number improves, we’re headed for a slow-down. Stay safe.

Castles in the Sand

Merry mortgage rate Christmas

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

It’s Christmas, and many of us in the country are spending the day much quieter than in years past. We can only hope that the vaccine they have promised us will bring our world back to normal and next Christmas will truly be a time to celebrate. But there is still much to be celebrated, and historic low mortgage rates may very well be at the top of Santa’s list.

The 30-year fixed-rate mortgage fell below 3% in July and stayed there. On Dec. 10, the 30-year fixed rate hit a low of $2.71%. So far, the low rates are holding steady at between 2.5% and 3%, but there are signs that those rates may not hold into the new year, so there is a lot of scrambling around to lock in this month.

According to industry research firm Inside Mortgage Finance, during the first nine months of the year, lenders extended $2.8 trillion in mortgages. And it didn’t slow down in the last quarter of 2020 with a predicted volume exceeding the prior record of $3.7 trillion in 2003. It is forecasted by industry firms that more than 9 million homeowners saved money by refinancing this year.

Like so many other byproducts of the COVID-19 pandemic, home lending has surged, producing record low interest rates. With the economy seriously impacted by the pandemic, homeowners were looking to lower their monthly payments or pull some equity out of their homes for needed renovations. The timing was perfect, with homeowners having the time to work through the documents required for a mortgage refinance, and the mortgage industry more than willing to find a way to do paperwork and closings digitally to accommodate homeowners.

However, if you haven’t done a refi or a new mortgage since the financial crisis, the Dodd-Frank Consumer Protection Act enacted in July of 2010 may be a bit of a shock. There are pages and pages of disclosure forms for the borrower to read and agreed to. Fortunately, they are all available digitally and every lender is doing their best to get this required information out to their clients as quickly and easily as possible. Still, don’t be surprised if you feel your eyes starting to cross halfway through.

In addition to homeowners taking advantage of low interest rates, many are moving, as we’ve reported before. Leaving cities to work virtually in the suburbs has been an ongoing trend for white collar professionals who are requiring more space indoors and outdoors resulting in a demand for more expensive homes. According to the National Association of Realtors, nearly one in four homebuyers between April and June bought houses priced at $500,000 or more. This is up from 14% of buyers during the preceding nine months.

And, if you’re a renter, that’s going to cost you more as well. In September, single-family home rentals climbed an average of 3.8% from a year earlier across 63 markets in the country. This increase is being accelerated for the same reason that buyers are moving, leaving cities for suburbs and wanting more space.

Wishing everyone happy holidays and good health. Hopefully, this will all be over soon; stay safe.

Castles in the Sand

FEMA not the last word on flood risk estimates

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

We’re getting close to the official end of hurricane season and the accompanying flooding that comes with hurricanes. Every homeowner reading this column already knows they live in a flood zone or very close to one. Nevertheless, there is some new technology that is able to provide more flood information for homeowners and potential homeowners.

According to First Street Foundation, a non-profit research firm, nearly six million properties across the United States have a substantial risk of flooding that isn’t disclosed by the federal flood maps. The foundation released their own flood maps in June compiled by researchers, modelers and scientists who are advocates for providing homeowners with more information about flooding and climate change.

The Federal Emergency Management Agency’s (FEMA) flood maps outline flood zones and have long been used by homeowners and developers to determine which properties have at least a 1% annual risk of flooding. The First Street analysis suggests that millions of American homeowners could be more vulnerable to flooding than FEMA’s maps indicate. They go on to say their maps show more properties with a 1% flood risk than FEMA because they include parts of the country that FEMA hasn’t mapped and use current climate data and rainfall-related flooding.

Their position is their maps do not conflict with FEMA’s, rather they complement one another and give homeowners a more accurate picture. First Street projects that by 2050 the total number of contiguous U.S. properties with a 1% annual flooding risk will increase to 16.2 million, or 11.4% of total properties.

Since mortgage lenders require homeowners to purchase flood insurance based on FEMA’s flood zones, this is important information for the real estate industry. Millions of American homeowners could be more vulnerable to flooding than they realize and may not have the option to purchase flood insurance or have the resources to rebuild in the event of a flood.

The former chief executive of the National Flood Insurance Program agrees that FEMA’s maps are a snapshot in time that can change with time. Also, in the past three years, more than 40% of flood claims have been for properties that are not mapped by FEMA or are outside FEMA’s annual risk zones.

Although First Street Foundation’s analysis is meant to help homeowners and insurers, not all floodplain experts around the country agree with their research methods and conclusions. Nevertheless, the First Street Foundation’s findings are now a part of realtor.com’s website. Properties listed on realtor.com now display a “Flood Factor” indication providing FEMA’s flood zone for the property as well as other information regarding flooding.

This is the first of its kind flood data on realtor.com and will give home shoppers and existing homeowners easy access to information that previously was not as available about the flood risk of a specific property. There is more information on First Street Foundation’s website, which is helpful to those of us living in existing flood zones, as well as a further explanation of their research. It’s estimated that 23% of all properties have a major to an extreme risk of flooding, and that flooding risk will increase by almost 800,000 properties during the next 30 years, much of it due to new construction along the country’s coasts.

We live here and we understand flooding, but there are many areas around the country that border lakes, rivers and creeks that have the potential of flooding. Many of these property owners aren’t aware of the risk until it happens, so any additional information that can be provided to them can only be a good thing. Stay dry and stay safe.

Castles in the Sand

Mortgage protection in the time of COVID

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

As we keep moving along down this never-ending pandemic road, hardly a day goes by when there isn’t another major hit to our nervous system. Buried in all of this bad news and extraordinary events there have been a few government programs that are helpful to citizens and homeowners. Mortgage forbearance is one of those things, assuming you can work your way through the system.

The COVID-19 pandemic has made it harder for millions of homeowners to pay their mortgages. To reduce the risk of widespread foreclosures, Congress passed the Coronavirus Aid Relief and Economic Security Act (CARES) in March. The CARES Act gives some borrowers temporary protection from foreclosure both by establishing a foreclosure moratorium and offering homeowners forbearance of mortgage payments.

Forbearance allows homeowners to suspend their monthly payments for 180 days with another 180-day extension for qualified homeowners who are impacted directly by the virus. The Cares Act is now extending the foreclosure moratorium at least until the end of 2020. New mortgage servicing guidelines also contain other changes to existing foreclosure and forbearance practices.

Unfortunately, about a third of all borrowers are not covered by the act. Those covered must have home mortgages backed by Fannie Mae or Freddie Mac, the U.S. Department of Veterans Affairs (VA) or the Federal Housing Administration (FHA). Therefore, about 1 million homeowners have fallen through the safety net that the CARES Act provides.

According to the mortgage-data firm Black Knight Inc., about 1.06 million borrowers are past due by at least 30 days on their mortgages and are not in a forbearance program. Out of this number, about 680,000 borrowers have federally-guaranteed mortgages and would qualify under the CARES Act. The balance has loans that aren’t backed by a government program and do not qualify for forbearance, though many of the lenders are attempting to work with these homeowners.

Navigating the waters of mortgage lending is never easy and some qualified homeowners either aren’t aware of the forbearance program or just can’t face the complex nature of what needs to be done. And they’re sometimes right, contacting mortgage servicers, which is the first step alone, is a challenge. Frequently you can’t get through, calls are dropped and/or sent to voice mail and no response is forthcoming. And frequently, just like applying for an original loan, the lenders will keep asking for additional documents and the merry-go-round keeps going.

There are government agencies that have set up websites to help educate borrowers about their rights and procedures as well as consumer advocates and housing-policy experts looking into a national campaign to make borrowers aware of available benefits. However, more needs to be done to help homeowners before they fall into foreclosure or have accumulated so many back payments and fees that they will never catch up until the property is eventually sold, cutting into the equity that most Americans consider their biggest asset.

Even after a safe and effective vaccine is created and distributed, we’ll have years of financial hardship ahead of us, and for some homeowners and business owners, it could be devastating. Congress needs to take an additional look at the millions of homeowners both with government-backed loans and others who will need help. If nothing is done to help and advise these people, we could have a serious flood of foreclosures down the road, hurting both the real estate market and the financial markets.

Stay positive and stay safe.

Castles in the Sand

Homeownership still a great deal

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

Benjamin Franklin was the author of many memorable sayings, and one of the most memorable is, “There are only two certainties in life – death and taxes.” In spite of the very volatile times we’re living through, I’m adding one more: “Homeownership is still the best financial investment for the average person.” It also offers the best tax breaks, not to mention the best way to build equity.

There is a fire raging in the real estate market all over the country. With mortgage interest rates under 3%, those who have secure jobs are racing to either buy a home, if they can find one, or refinance their existing home.

This is happening even though the 2017 tax overhaul made the mortgage interest deduction irrelevant for many homeowners. These individuals have calculated that the standard tax deduction is more advantageous than taking their mortgage interest deduction, even adding in their previous state and local tax deduction.

Nevertheless, there are still plenty of deductions available for homeowners. Even though many homeowners are opting for the standard deduction, which is now $24,880 for a married couple filing jointly, getting to that number with 3% mortgage interest is difficult unless you’re purchasing in a higher price range and have other deductible expenses.

The problem with higher price point mortgages is the cap placed on them. For new mortgages issued after Dec. 15, 2017, homeowners can deduct up to $750,000 on mortgage interest debt. For mortgages issued before then, the cap is $1 million of mortgage debt, which is grandfathered. This rule also has stipulations regarding second homes and unmarried homeowners, so check with an accountant before making decisions.

Refinancing now is also very attractive, but if you refinance and cash out a portion of the new mortgage, you may not be able to deduct all of the interest, unless you can prove the extra cash was used as a home improvement. Home equity loans also fit into this category and interest deductions can only be used for substantial improvements to your home. Again, this could be a moot point if you are opting to use the standard deduction.

With a lot of people moving from cities, boat and RV loans are also getting popular. So, can the interest on these be deductible? Well, like everything IRS-related, it depends. In order for these to qualify for a deduction there must be cooking, sleeping and toilet facilities, then of course the interest deduction is still subject to the two homes requirement.

Home office and home remodels because of working from home are also something that seems relevant now. Home offices are not deductible if you are employed by someone else. However, if you are self-employed, you can make a deduction for a space in your home that is used on a regular basis and used exclusively for your business. Don’t ask how this is verified should you be audited. Interest for remodeling for a business you run from your home can be deducted, but like any business, it can affect the cost basis of the house when it is sold.

Finally, there are some new regulations regarding IRA and 401(k) withdrawals. Congress has loosened the rules for people affected by the pandemic, allowing a withdrawal up to $100,000 without paying the 10% penalty right now. This cost can be spread over three years or pay it back in full at a time when your finances are in a better place. Although this does not directly affect your home, it could improve your overall financial position until after the crisis.

Homeownership can still ease your tax liability and will probably be the best investment you ever make – even now. Stay safe.

Castles in the Sand

Buy a yard for your Zoom

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

If you look at a lot of waterfront advertising, you see a commonly used phrase – “buy your boat a home.” Now with COVID-19 influencing almost everything in our lives, pretty soon you’re likely to see this phrase, “buy a yard for your Zoom.”

There has been a lot of chatter, including in this space, about the trend of big-city dwellers giving up their small expensive apartments and hitting the trail for the suburbs or moving out of state. Now that owning a single-family home is back in vogue, it’s also realigning itself as one of your top assets.

Since the 2008 financial crisis burst the housing bubble, it’s taken a long time for housing values to return as well as housing preference to return for younger generations. It took COVID-19 to bring both those aspects of the housing market back into play, pushing up values as a new generation is looking at single-family homeownership as an appreciable asset and a more comfortable form of shelter.

The COVID-19 housing bubble that some economists are worried about is different, however, than the one that built up before 2008. This one is driven by the need for more working space to accommodate working and learning remotely for now and for many going well into the future, in addition to recognizing the personal liabilities of living shoulder to shoulder with strangers and the ability to expand geographically where you live and where you work.

The housing bubble prior to 2008 was based strictly on making good investments and turning a quick profit. Homeowners used their homes as cash registers, maxing out their equity, and investors bought up new construction and resales with an eye to flipping for profit – not a place to live. This housing expansion has firmer legs as buyers are literally changing not only their residences but their lifestyles.

Because of this trend, buyers have a different list of wants for their homes, per a survey done by Redfin. The top item they’re looking for is space to work from home and space for children to learn from home, generally a larger home in all areas. They also want more recreational space and a yard, and if they’re giving up their city life they want to pay less. All of this change comes with a more workable floor plan, which now includes gathering areas for the family who may all be working individually in their respective spaces.

Summing up Redfin’s survey of home buyers, 21% of buyers want space to work from home, another 21% said they want more outdoor space and 7% said they want a place for children to learn from home. This is substantially different from the formal dining rooms and living rooms from the past that were ornamental rather than functional.

The real estate market will continue to shift until this virus is beaten, but it will leave radical changes to the market. Right now, sales are way up, inventory is way down and mortgage rates are ridiculously low. We do risk future foreclosures for some homeowners who can’t get on their feet after the virus is gone but there is little doubt the remaining real estate market will look different.

So, if you’re doing a lot of Zoom meetings, kick it up a notch and buy a home with a nice yard as your background, it may also turn out to be your best financial asset. Stay safe.

Castles in the Sand

There’s almost never a free ride

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

If it sounds too good to be true, watch out. The coronavirus has caused many homeowners to lose jobs or take substantial cuts in income as the economy of the country shrinks. Government programs have helped, but not without consequences for homeowners and banking institutions.

The federal government has mandated that lenders give a break to consumers on some of their outstanding loans including mortgage loans, auto loans, credit cards and private student loans. Federal student loan payments are automatically suspended under the laws passed in late March.

Part of the problem with these pauses in required payments is that it can still negatively impact your credit score even though the law was written with the intention that this doesn’t happen. But as we know, there is no simple black and white when it comes to laws written in Congress, especially during such a complicated time.

For instance, if your mortgage was current when you received payment relief, chances are your credit rating will not be dinged, however, if you were experiencing late payments or skipped payments prior to the pause you will probably see your credit rating go down. Same with other types of loans since credit reports reflect anything that is not consistent in your credit history no matter what was indicated in the law. Also, you can assume there will be plenty of errors made to credit reporting companies during this time so when the dust settles, review your credit report and advise the appropriate credit reporting company of discrepancies.

A recent piece of good news extended the moratorium on evictions and foreclosures to Aug. 31 from June 30 for single-family and condo mortgages backed by Fannie Mae or Freddie Mac. However, like everything else financially-related during this time, some of these homeowners may unfortunately be putting off the inevitable as well as creating a problem for financial institutions down the road.

Manatee County’s May sales transactions as reported by the Realtor Association of Sarasota and Manatee are another mixed bag compared to last May, but here they are:

Single-family homes closed 38.7% fewer properties from last year. The median sale price was $325,000, up 1.6%, average selling price was $409,038, up 5.2%. The median time to sell was down 22% to 84 days, new pending sales were up 10.9% and new listings were down 11.7%. Month’s supply of available properties was down to 3 months, up 21.1%.

Condos closed 49.2% fewer properties compared to last May. The median sale price was $229,950, up 9.5%, average sale price was $261,466, up 6.1%. The median time to sell was down 10.3% to 96 days. New pending sales were down 8%, new listings were up 7.8% and month’s supply of available properties was up 4.8% to 4.4 months.

Overall better than I expected, but we’re still in an adjustment period with sales numbers lagging from before the shutdown. A lack of inventory continues to be the biggest problem for our market.

It’s hard to say what June is going to bring us, but Florida, in spite of higher infection rates, is starting to dig out of their financial hole at a good pace. The unemployment rate is down to 12.9%, slightly better than the national rate of 13.3%, and better than many other states.

However, the Federal Reserve reported that household net worth fell by 5.6% in the first quarter from the previous three months. Net worth includes home equity and investments, both of which have a direct impact on a buyer’s ability to purchase homes.

Have a happy July 4th, good luck in your search for fireworks, and as always, stay safe.

Castles in the Sand

Mortgage forbearance can lead to foreclosures

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

Sometimes when something looks too good to be true, it is, and this may be one of those times for mortgage forbearance. Just to be clear, the definition of forbearance is a pause, not a termination, not a deferral, just a pause, and in this case, it’s a pause on mortgage payments.

As part of the bill passed by Congress in March called the Cares Act, homeowners whose mortgage loans are backed by Fannie Mae, Freddie Mac, the Federal Housing Administration (FHA) or the Veterans Administration (VA) are permitted to suspend payments for up to a year. As of the end of May, 4.75 million people took advantage of this “pause” which they were allowed to do without giving proof of any actual hardship.

There are several unintended consequences of depleting the mortgage market of over $1 trillion in unpaid principal to date, without providing any way for homeowners to pay back the money, leaving it to lenders to figure out. This is in addition to homeowners who may not really need the pause because they are still employed, taking the extra funds to use for other reasons or no reason at all.

Also, with low interest rates, about 3.3% for a fixed-rate conventional mortgage – the lowest level on record – you would think it’s a great time for buyers looking for a new home and mortgage. But not so fast, mortgage availability has tightened as lenders impose tougher income, credit score and down payment conditions and fewer mortgage options. Minimum of 20% down payments and credit scores of 700 are back in vogue with big lenders upping their requirements. Part of this is the economic devastation caused by the pandemic, but much of it is an interruption of the normal cash flow into the mortgage market. This could easily threaten the mortgage market’s recovery and housing in general.

Complicating things even further is the pre-pandemic policy of Fannie Mae and Freddie Mac to not guarantee new loans for individuals who had a forbearance on their record. Fannie and Freddie now have to take a look at modifying those policies in order to keep the mortgage market flowing.

The criteria for jumbo loans have contracted the most. Jumbo loans have no government backing and are for mortgage loans above the confirming limit of $510,400 typically insured by the federal government. There are higher conforming limits in certain high-cost areas of the country. Forbearance for jumbo loans was not addressed in the Cares Act, however, certain lenders are extending forbearance to their jumbo loan customers.

All this said, mortgage applications rose 6% in mid-May nationally, indicating buyers are coming back at some level. There is pent-up demand left over from before the national shutdown and now with states starting to slowly reopen, viewing available properties and conducting business will be somewhat easier. In addition, as I’ve previously stated, there is what appears to be a desire to leave over-populated urban areas trending in the country.

It’s too soon to tell whether the forbearance flexibility will achieve the intended purpose of avoiding a wave of defaults down the road. Probably safe to assume there will be mortgage defaults leading to foreclosures when all of this is over. Sadly, some homeowners will never be able to catch up. Stay safe.

Castles in the Sand

It’s June – do you know what that means?

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

Here we are again – the official beginning of hurricane season. But as every Floridian knows, hurricane season is a moving target, as are hurricanes. One week you’re basking in the glow of sunshine and warm Gulf waters and the next week you’re putting up storm shutters and buying mechanical can openers. Nevertheless, it is what it is and we must not only prepare for winds and lack of electricity but also floods.

The definition of a flood is an excess of water on land that is normally dry. These are scary words for those of us who look out our windows and see water or know that one block in either direction you’ll find it. This is why even homeowners who are not that close to the water need to know what flood zone they’re in, so here is an overview of flood zones dictated by the Federal Emergency Management Agency (FEMA):

  • Zone A (blue) – special flood hazard area that is high risk for flooding and typically requires flood insurance. Does not have a base flood elevation established.
  • Zone AE (lavender) – special flood hazard area that is high risk for flooding and typically requires flood insurance. Does have a base flood elevation established.
  • VE (green) – special flood hazard area that is high risk for flooding and typically requires flood insurance.
  • X (no color) – low risk area that does not typically require flood insurance.
  • 500 Year Flood Zone, X (shaded) – moderate risk area that does not typically require flood insurance.
  • D (shaded) – possible but unknown risk. Flood insurance should not be required.

Rest assured that anything on Anna Maria Island or in waterfront areas of Cortez are in Zone A with a high risk of flooding. These properties will require flood insurance by lenders for properties that have a mortgage.

If you’re not sure what your flood zone is, look at the mymanatee.org website and you’ll find an interactive map of flood zones where you can simply put in your address and it will tell you exactly what your flood zone is outlined in the corresponding color. You will also be able to access the elevation certificate for your area if available.

Flood insurance is purchased through the National Flood Insurance Program and has historically offered subsidized rates. In more recent years, the Biggert-Waters Flood Insurance Reform Act changed many aspects of program eligibility, including non-primary structures. Your rates and eligibility for insurance should be carefully reviewed with an insurance broker authorized to sell policies through the National Flood Insurance Program.

Here again, mymanatee.org is a wealth of information about all aspects of flood insurance, answering many questions you may have. In addition, you can obtain a booklet from FEMA that outlines in detail what flood insurance covers, including condo flood policies.

Maybe future generations won’t have to worry as much about flood-prone areas. There are creative developers in different parts of the world who are designing hotels, homes and office buildings that float. In flood-prone cities like Miami, this could be a potential solution. Rotterdam is already building a 54,000-square-foot floating office building and a developer in the Persian Gulf has plans for 16 hotels, all floating. Think of the possibilities.

The day I was writing this column I received in the mail Manatee County’s “Flood Hazard Area Guide,” sent to all homeowners who live in properties that are located in or near a special flood hazard area. It’s a nice little tri-fold brochure which everyone should keep with other hurricane and evacuation material that I hope you all have ready in the event of a storm.

I guess the only thing good about hurricane season is that it takes our mind off coronavirus for a while, you think? Stay safe.

Castles in the Sand

Does anyone have a clue what’s going on?

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

Just like the coronavirus predictions about numbers of infections and deaths have been off the mark, so too are the predictions about the future real estate market. There are a whole range of conflicting opinions out there, all from reputable sources saying exactly the opposite things; what’s a girl to do?

So far, in spite of the shrinking economy and evaporating jobs, in the housing market values are stabilized and, in some regions, even higher. This of course has to do with the classic supply and demand dynamic that we’ve been experiencing for a long time, only now supply is contracting even faster.

The National Association of Realtors (NAR) reported that the March median home price nationally rose 8% from March of 2019. Manatee County’s March median sale price was also up by 2.4%. They also reported that buyer demand fell 8.5% nationally for March compared to last year but at the same time, supply is at a five-year low.

The NAR says homeowners are waiting to list their homes either because they have decided not to move, or they are worried about letting buyers into their homes during the pandemic. Many homeowners say that until the lockdowns are lifted, they will just take a “wait and see” attitude to selling. In addition, homes that are currently on the market are not cutting prices. According to Realtor.com, by the end of last month, only 4% of sellers cut their prices, indicating buyers haven’t viewed their homes in person. Nevertheless, buyers are out there still looking for a bargain and could possibly trip on a situation where homeowners absolutely need to sell because of coronavirus fallout.

Mortgage applications were also down by 20% at the end of April compared to a year earlier. The fear here is that down the road, values could drop when the forbearance period ends, and homeowners cannot keep up with the payments.

The way it stands now is some economists expect home sales to crash this year while some say prices and sales will climb slightly or hold flat. Fannie May said in April that it expects the median existing home price to tick up to $275,000 this year from $272,000 last year while CoreLogic calls for a nationwide home price increase of 0.5%. Zillow says home prices are likely to drop 2% to 3% compared to last year. The more you read about these predictions the more you realize no one really knows.

Let’s look at the April sales numbers in Manatee County reported by the Realtor Association of Sarasota and Manatee comparing April of this year to April of last year.

Single-family closings for this April compared to last year were down 21.2%. Median sale price was $340,000, up 7.9%, and average sale price was $406,699, up 4.1%. New pending sales were down 36.7% and months supply of available properties was 3.3 months, down 17.5%.

Condo closings were down 30.9%. Median sale price was $212,000, up 7.9%, and average sale price was $236,764, up 0.3%. New pending sales were down 53.3% and months supply of available properties was 4.4 months, down 6.4%.

All of the negative figures are no surprise relative to what we have been living through. However, the average and median sale prices are up, much like the trend around the country. Keep in mind that sales statistics are a lagging number frequently based on negotiated contracts that may have been in the pipeline prior to the shutdown.

All we can do is keep watching the numbers and hope that as businesses open more sales will be booked. At this point it’s anyone’s guess what’s going to happen with the virus or with the real estate market. Stay tuned and stay well.

Castles in the Sand

When the real estate market sneezes, it infects everyone

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

The last thing anyone wants these days is for someone next to you in line at the market, the bank or in our slowly-opening restaurants to sneeze near you. But if the real estate market starts to get seriously infected from the effects of the coronavirus, it may start to sneeze all over related industries.

The American housing market is such a major influence on the country’s economy that even a slight downturn could have a very big effect on goods and services generated from buying, selling and building new homes. Right now, there are large portions of the country where the real estate market is at a total standstill because of lockdowns. Properties cannot be shown to prospective buyers, sellers are taking their homes off the market and construction of new homes and apartments has mostly stopped.

Obviously, there are hundreds of industries related to the real estate market that are losing money and jobs. The construction industry is being particularly impacted per the Commerce Department which reported a 22% decrease in new home construction in March from February. The Northeast region is experiencing the most pronounced decrease in new home construction with a 42.5% decline during this period.

New construction generates a plethora of jobs – carpenters, plumbers and electricians in addition to support and office staff. The materials alone needed to build range from lumber to sheetrock to paint to concrete and roofing not to mention heating and air conditioning systems.

Sales of existing properties are also down across the country as they are right here in Manatee County. If and when this will turn around as we in Florida start to open our economy, we just don’t know. But what we do know is that a slow real estate resale market touches so many other areas of the economy.

When someone purchases a home, they spend money preparing that home for the specifics they need and require for their family. Even the lack of simple renovations like new flooring, appliances, landscaping and paint will have an effect on the economy. This is in addition to major renovations to existing homes that have been sold or aren’t even on the market yet. The fallout from homeowners holding up on renovations can’t be calculated but inevitably will be substantial.

And what about the financial part of all this? Job loss is now measured in the millions, impacting tax revenue at every level of national, state and local governments. Much of this loss will ultimately be traced back to the real estate market, including the hard-working real estate professionals whose income and careers have been upended.

The one bright light for the real estate industry has been its ability to pivot to electronics to market and close properties. Agents all over the country are running virtual open houses and creating video tours for available properties. Video chats are taking the place of conference room meetings and available digital mortgage platforms can remotely verify employment and assets. A decade ago, the housing market would have been completely shut down during a situation like this; now at least everyone can move forward, even if at a slower pace.

So, no sneezing in public – we all have to do our part. As far as the real estate market, we don’t really know what the future is and neither does anyone else. Stay safe and wear a mask.

Castles in the Sand

What’s bad for New York may be good for Florida

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

I am a New Yorker, I was born in New York City and worked for 25 years in the city. Until I moved to Florida over 20 years ago, I lived my whole life in either New York City or its surrounding suburbs. I love New York City. I have never found another city anywhere in the world where I have traveled to match New York’s vibrant energy, diversity and culture; it is simply one of a kind.

However, now I fear the best of what the city has to offer may be gone. What the 911 terrorists could not do, an uncontrollable virus may very well complete. What does this mean to us now comfortably living in Florida and about to open our businesses, beaches and stores? It could mean a lot especially as it relates to real estate.

New York state has been losing residents for a long while; as of mid-2019, it lost almost 77,000 residents from the previous year. A combination of out-of-sight state and local taxes along with overpriced real estate has made it almost impossible for young families to exist in New York City and many of its suburban communities within commuting distance to the city. Now, because of the pandemic, a large percentage of employees and their companies are finding out that working remotely is possible. They are realizing they may not need to be in an office in the middle of a city, they can live wherever they want and enjoy a higher quality of life for them and their families.

Because of the virus, existing home sales fell nationally in March by 8.5% as expected. This is unfortunate after February’s growth was at the highest level in more than a year. The national real estate market was perfectly set up for a big spring buying season with low unemployment and low mortgage rates, making buying a home ideal, but now all of that is on hold. The lack of sales could have a negative effect on price growth combined with the loss of jobs, but that remains to be seen.

However, Florida – with our low taxes, low regulations and balanced budget in addition to a variety of housing options all more favorably priced than the northeast – is increasingly becoming a big draw. I read a recent interview with a realtor in southeast Florida who reported that in recent weeks he has seen a significant jump in inquiries for available properties. In the past he said he typically got one or two leads a day from the northeast. Now, he is averaging about 10 per day from the suburbs of New Jersey, Manhattan and Long Island as well as other parts of the northeast that have been hardest hit by the virus. Northeast buyers are telling him that they see a second wave of retirees relocating to Florida full time, much of it based on not only financial advantages but also lack of density.

There you have it. I cannot fall out of love with New York City, but I can see how it is changed and may no longer be the best fit for many. Residents of northeastern states may have had it paying for the privilege of living on top of each other and are ready to social distance permanently. My advice to Florida realtors is market to the northeast, especially those areas considered the tri-state – New York, New Jersey and Connecticut. My feel is there are a lot of people who have been simmering with thoughts of a change for a while and this pandemic may have put simmering over to boiling. Stay safe.

Castles in the Sand

Lockdown creativity

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

We are so living during a time when creativity can make the difference between just getting through it or getting through it with a bit of flair, and real estate purchasing is opting for the latter.

Back in mid-March just six weeks ago, I read about a couple of real estate financing startups. Since that time, the startups, as well as our lives and the lives of all real estate professionals, have changed drastically. Nevertheless, someday it will all be back, so I thought it was worth taking a look at.

Homebuyers who are unable to get traditional financing frequently lack the 20% down payment, don’t qualify based on income and assets or are being shut out of the market by cash buyers. As an alternative, one San Francisco startup created a system where buyers can put down only 10% and the company provides the rest of the purchase price in cash. A deed of trust is established, and the buyer is mandated to pay the taxes and insurance and gives the company a monthly payment used to build equity and ultimately buy out the house.

Another startup also based in San Francisco is using what was previously called “rent with an option to buy,” where an individual homeowner rents to a buyer and a portion of the rent goes towards the ultimate purchase of the home. The company buys the house, assesses a $10,000 nonrefundable fee and sets up a program of monthly payments designed to build equity even allowing for some credit if the home is not purchased.

This is a very short version of more complicated plans, and like any type of creative financing this can either fill a need for housing for individuals who don’t have the cash or qualifications, or it can be a dicey arrangement. However, it’s still nice to keep your options open.

Well now it’s time for the March sales numbers in Manatee County reported by the Realtor Association of Sarasota and Manatee comparing March of this year to March of last year:

Single-family properties are as follows: Median sale price $319,500, up 2.4%, average sale price $390,674, down 0.5%. New pending properties down 33.4%, new listings down 3.3%, pending inventory down 21.7%, active inventory down 14.1% and month’s supply of properties down 19% to 3.4 months.

Condos are as follows:  Median sale price $215,000, up 5.7%, average sale price $251,136, up 4.2%. New pending properties down 32.5%, new listings down 5.2%, pending inventory down 26%, active inventory down 3.8% and month’s supply of properties down 8.3% to 4.4 months.

The numbers are much as has been predicted since basically all business is at a standstill. Closings are still in positive territory, but they reflect transactions that have been in the pipeline for a while. Unfortunately, we can expect more of this in the months ahead.

And as a reminder, Florida is the third most populated state in the country based on July 2019 records. We make up 6.47% of the population of the United States coming in at 21.5 million and are only surpassed by California and Texas. We have passed New York state in population by 2 million and currently have the same number of congressional representatives making Florida one of the major political players. This gives me encouragement for the future of our real estate market.

As always, stay safe and be creative in these stressful times.

Castles in the Sand

Changes in the pandemic age

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

If the pandemic taught us anything, it’s how quickly everything can change, and the real estate market is no exception. We went from a blow-out real estate market, overflowing restaurants, planning high school and college graduations to hoarding toilet paper, wearing face masks and checking daily infection counts in less than a month.

What’s ahead for the real estate market, both local and national, is anyone’s guess; unfortunately, there are likely dark clouds on the horizon. With businesses closed, employees laid off and people unable to move around the country, buyers and sellers may have to take a pause. Even with continuing historically low mortgage interest rates, if a buyer can’t qualify because of job loss, it will take a toll on the health of the markets. In addition, available inventory may eventually be impacted because homeowners don’t want strangers coming into their homes and will opt not to list properties for who knows how long.

Meanwhile, homeowners who have lost jobs are struggling with impending mortgage payments, flooding their mortgage companies with requests for help. In addition, they’re having trouble getting through waiting on the phone for hours to reach a real person who may be working from home and having their own personal and technical difficulties.

The stimulus legislation says homeowners hurt by the coronavirus or its fallout can ask their mortgage servicer for a so-called forbearance. This means their monthly payments are interrupted for up to six months and an additional six months can be requested after that. They don’t have to prove they have been hurt by the coronavirus since, if the loan is backed by the government, the mortgage servicer is generally expected to grant the request. Since about 70% of U.S. mortgages are backed or insured by a federal agency like Fannie Mae, Freddie Mac or FHA, this will be a non-issue for most borrowers.

What is not specified in the law is when borrowers have to make up the missed payments. Some homeowners are assuming that they don’t have to make up the payments ever, certainly incorrect. But even when they understand this, there’s still confusion as to how the funds will be made up. The Department of Housing and Urban Development told servicers that holders of FHA mortgages can compile the missed payments into a second, interest-free home loan for borrowers to pay off after the original mortgage.

However, for Fannie Mae and Freddie Mac loans, which represent about half of the country’s mortgage market, that offer was not made. Instead, federal regulators have instructed servicers to work with borrowers and to consider letting them tack their missed payments on to the end of their loan, but are not mandating it.

Lenders, like everyone else, are operating in the dark with no way of predicting the scope or duration of the pandemic and shutdown. Economist Mark Zandi with Moody’s says as many as 30% of Americans with home loans, about 15 million households, could stop paying their loans if the economy remains closed through the summer or beyond.

Are we in for a big wave of foreclosures similar to the housing bubble bursting in 2008? Let’s hope not, but since our real estate market was so strong and so much in demand, it’s not a bad calculation to assume it will be one of the first to come back even in a big downturn. Chin up and stay safe.

Castles in the Sand

Locked up in paradise

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

As I write this, outside is the first non-perfect spring Florida day in about three weeks. It just makes me more thankful for living in paradise even if we’re locked down. You can still walk out your front door, smell the fresh warm air and take a short walk or bike ride to renew your soul.

But what about the souls of the poor people caught in the limbo of a pending real estate transaction?

According to the National Association of Realtors, pending home sales rose 2.4% in February from a month earlier. Since pending sales generally predate closing by one or two months, you can assume there were a lot of pending sales in the pipeline when the coronavirus hit and business started to shut down.

So, what happens to those transactions and the buyers and sellers on either end of the transactions? There are a lot of steps in getting a home sale to the finish line. Even after a contract is negotiated and signed, you have home inspections, lender appraisals, termite inspectors and, of course, the closing.

According to the International Association of Certified Home Inspectors, many home inspecting companies are reluctant to send their staff into homes. Some are attempting to work with drive-by appraisers using exterior photos and county records, obviously slowing down that piece of the transaction. Naturally, all other inspections that may be required are facing the same stumbling block, as are bank appraisers.

Closings are another topic. Although the technology to close properties has been around for a long time, the slow-moving real estate community mostly continues to operate on paper and fax machines. You can bet that’s another system that can anticipate drastic updating in the years ahead as a result of this virus with electronic signing of documents becoming more widespread.

Now, however, the closing culture in many regions of the country is still a sit-down closing. With buyers, sellers, real estate agents and sometimes attorneys around a closing table where it can get pretty crowded, certainly not in line with CDC regulations. But committed real estate professionals are doing their best to get the properties out of limbo and into heaven by closing homes any place where they can avoid close encounters and big crowds. Not an easy and quick process, and hopefully all parties to the transactions are keeping their anxieties in check.

The Realtor Association of Sarasota and Manatee reported the following pending transactions at the end of February: Single-family homes (968 properties) up 12.3% from last year, and condos (393 properties) up 10.1% from last year. That’s a lot of transactions to get closed while navigating through a pandemic, and when the March pending statistics are available in a few weeks we’ll see where the pending numbers are.

If you’re one of the limbo dwellers, help the professionals as much as you can to get the transaction done without jeopardizing anyone’s health. There could be a good story here to pass on to the next generation when we all start laughing again.

To the people in other parts of the country who are locked down without the benefit of perfect weather and the ability to get outdoors, my thoughts are with you. As always, stay safe.