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Tuesday, July 5, 2022

Florida Condos Start to See Impact of Surfside Collapse

The tragedy rattled a Florida insurance industry that was already struggling. One Palm Beach condo complex expected a 25% increase – but coverage rose by 82%.

WEST PALM BEACH, Fla. – The specter of Champlain Towers South came in an email alert this month for residents of a West Palm Beach waterside condominium. Insurance on the 12-story building across from the Lake Worth Lagoon increased 82%, requiring a special meeting to hike the budget and jack up dues. It was a blow for the association, which had planned for just a 25% rate jump on top of a 25% increase the previous year.

“Everyone is shocked,” said Mary McSwain, who bought her one-bedroom unit in the 51-year-old Portofino South Condominium in January. “I’m just getting near retirement and I thought this was going to be my dream place but I’m getting priced out.”

McSwain, 67, said her dues are going from $914 a month to $1,347 – a monetary burden that means she will work more and longer instead of scaling back her job as an attorney.

While it’s impossible to tease out exactly how much of the insurance increase was a reaction to the collapse in Surfside, Portofino property manager Robert Gardner said “of course” some of it is a consequence of the tragedy that killed 98 people in the early morning darkness of June 24, 2021.

Insurers in general statewide were already on the ropes before the tower fell, the collapse was a knock-down punch.

Gardner had just three companies willing to give him a quote after the association got notices its insurance would not be renewed under the same terms. The reasons for denials ran the gamut – the building’s too old, it has cast iron pipes, there’s no sprinkler system, the roof is 21 years old.

“It goes on and on,” Gardner said. “It’s just nuts right now.”

And it’s likely to get more expensive for owners under the new condo law approved during a special legislative session. The new law took effect when Gov. Ron DeSantis signed it May 26, but most safety provisions do not kick in until late 2024. It requires maintenance accountability measures on older condos three stories or higher, such as engineering inspections and dedicated reserves to pay for fixes.

For the 140-unit Portofino South, the insurance pinch is first.

And it comes as the Portofino owners are looking at another hit, too. Unrelated to the Champlain Towers collapse, Portofino also must by law install a sprinkler system by Jan. 1, 2024 – an expense that will cost at least $7 million.

The new, post-Champlain law requires a structural integrity reserve study to determine how much money is needed for future major repairs to be completed by Dec. 31, 2024. Following completion of the report, condo boards must reserve funds for projects identified in the report and cannot use those reserves for other purposes.

West Palm Beach attorney Michael Gelfand, who served on the Condominium Law and Policy Life Safety Advisory Task Force set up after the Surfside collapse, said there is a concern people will not be able to afford what is coming.

Years of lax state oversight, weak regulations, and volunteer condo boards reluctant to levy heavy dues on their friends and neighbors have allowed buildings to deteriorate, he said. Champlain Towers South had about $706,000 in its reserves as of January 2021, according to a review the year before by the company Association Reserves. But it needed more than $10 million for projected repairs.

“After decades, the real cost of housing will be recognized for those who actually own and occupy condominiums,” Gelfand said. “If people can’t afford it, they will have to move. That is not an easy thing to say, but that is what it comes down to.”

The end of some condominiums?

He suspects some condominiums will vote to sell out to developers in lieu of paying millions of dollars in assessments. The process, called condominium termination, isn’t new but may attract developers with plans to demolish buildings and replace them with new construction. With the real estate market still humming in South Florida, beachfront properties are in high demand.

An April Wall Street Journal article notes that a handful of Miami-area condos have already sold to developers.

“We are going to see the vultures come in, and in some situations, they will make an offer that can’t be refused,” Gelfand said.

With the insurance market in shambles, some condominiums have turned to the state-run Citizens Property Insurance Corp. for coverage. In Palm Beach County, the number of condominium associations covered by Citizens in buildings 40 years and older increased 64% (from 402 to 662) between April 2021 and May 2022. On buildings younger than 40 years, policies increased 70% (from 144 to 244) during the same time period.

Portofino South was able to find private insurance this year, and Gardner hopes the insurance legislation passed during the special session will help next year. “But I have no idea what’s going to happen,” he said.

Some Portofino residents are paying more for their individual unit insurance as well as the association increase. Vicky Ross, 79, was canceled from her private carrier earlier this month and had to enroll with Citizens, which included a $500 rate hike. In addition, her association dues will go up $433 a month.

Throughout Palm Beach County, the number of personal residential condominium policies written by Citizens increased 61% in buildings 40 years old and older between April 2021 and May 2022. In buildings younger than 40, it went up 43%.

“All I know is at the end of the month, I won’t have the little surplus I had before,” Ross said.

Portofino South condo owner Margaret Daley, 82, has been a full-time resident of the building for eight years but has been visiting it since it opened in 1971 when her parents bought a unit there. A former association vice president, Daley said the building has been well maintained, was just painted and recently completed a restoration project.

She’s had no concerns about its safety, even after the Surfside collapse. While she doesn’t like the higher costs, she’s not overly concerned.

Still, Portofino association President Gregory D’elia is nervous about how owners on fixed incomes will pay for the increases, and he’s angry with lawmakers for letting boards get away with putting off repairs for so many years. He’d like to install new elevators, but instead he has to budget for the sprinkler system, which was originally required to be completed by the end of 2019 but had its deadline extended to the end of next year.

“My frustration is the Legislature turned a blind eye to this,” he said. “Where were you all this time so that Champlain didn’t happen?”

The unknown is what scares others, including McSwain, who said for now she’ll dip into her savings to pay the extra costs.

“I just don’t know how many more increases or special assessments there can be,” she said. “A couple of people in our building are on fixed incomes and they said they just can’t absorb this.”

© Copyright 2022 Palm Beach Newspapers, Inc. Kimberly Miller is a veteran journalist for The Palm Beach Post, part of the USA Today Network of Florida.

Friday, July 1, 2022

Congress targets investors and asks a question: “Where have all the houses gone?”


U.S. House Focuses on Institutional Investors: committee looked at the impact on first-time buyers and minorities – and the real estate industry – if a high percentage of traditional family homes become rentals.

WASHINGTON – Congress targets investors and asks a question: “Where have all the houses gone?”

The pace of single-family rental home purchases by hedge fund-backed investors has risen in recent years, according to data submitted by the companies to the U.S. House Financial Services Committee.

During a June 28 committee hearing on the own-to-rent industry, witnesses called for expanded protections for renters, more public housing, limits to local zoning rules that prevent new housing from being built, and other federal laws to help bridge generational wealth gaps.

In 2011, no single investor-owned over 1,000 U.S. homes. However, the five biggest investors owned a combined 280,637 as of October 2021, adding 76,325 homes to their portfolios between March 2018 and October 2021.

Q3 2021 institutional investor homes

  • Invitation Homes – 83,512
  • Progress Residential – 71,930
  • American Homes for Rent – 56,077
  • FirstKey Homes – 35,899
  • Amherst Residential – 33,219

“These homes would likely have been bought by first-time home buyers, low- to middle-income buyers, or both,” said U.S. Rep. Al Green (D-Texas), chair of the Financial Services Subcommittee on Oversight and Investigations.

Meanwhile, a memo submitted to the committee indicated that home builders may turn to institutional investors to buy more of their product as more buyers get priced out of the market.

According to witness testimony before the committee, institutional investors target minority communities and prevent them from building generational wealth through homeownership.

According to Green noted, lower-income buyers are losing out to institutional investors that buy homes with cash. “This all has the troubling effect of displacing residents of color and leading to gentrification of these communities,” he said. He also called the companies “very poor landlords,” citing steep rent hikes and evictions, including during the COVID-19 pandemic.

Jenny Schuetz, a senior fellow at the nonpartisan Brookings Institute, said it’s a “long-term problem caused fundamentally by the fact that we’re not building enough homes.”

Source: Inman (06/30/22) Anderson, Taylor

© Copyright 2022 INFORMATION INC., Bethesda, MD (301) 215-4688

Tuesday, June 28, 2022

Most Popular Home Trends by State

A look at the latest trends across the U.S. show that residents in 32 states, including Florida, favor a modern style at home. Ranked at No. 2 is farmhouse chic.

NEW YORK – What’s trending and where?, a home insurance resource, took its annual look at the latest trends for homes across the U.S.

In New Mexico, residents are loving Japanese home-inspired styles (like white walls and “zen” finishes) while Maine, Massachusetts and New Hampshire residents are showing more favor for Tuscan styles (with terracotta, iron finishes, stone and tiles).

Fourteen states show a preference for farmhouse chic, ranging from southern states like Alabama, Mississippi and Tennessee to Montana, Wyoming and Vermont. This look shows a more relaxed style – expect to see rustic furniture, natural materials and real comfort in a farmhouse home.

However, the overall favorite among the states, including Florida, is modern, defined by monochromatic color palettes, clean lines, minimalism, and natural finishes. The report found residents in 32 states prefer the modern look.


Home Affordability Hits 15-Year Low

Monthly mortgage payments in April took up 28% of a recent homebuyer’s monthly income, near the 30% threshold generally considered as “affordable,” says Zillow.

TALLAHASSEE, Fla. – Monthly mortgage payments in April took up 28% of a recent home buyer's monthly income, which is near the 30% threshold generally considered an upward bound of affordability, according to a new Zillow report. That’s the highest share of income devoted to mortgage payments since at least 2007.

Zillow has dropped its forecast for home-price growth over the next 12 months as buyers grapple with the most unaffordable landscape in at least 15 years.

In the months since those numbers from April were recorded, mortgage rates and home prices have only continued to climb, even as wage growth has flattened out. As mortgage rates moved upward, the typical mortgage payment after a home purchase in early June would amount to $2,127 per month. That number has climbed 36% since the start of the year alone.

By Zillow’s count, the number of for-sale listings that went under contract last month was slightly lower than in May 2019 – before the pandemic began. Home sales activity declined 20% over the previous 12 months to pre-pandemic sales levels. Home values posted 20.9% year-over-year growth in May, down from 20.7% in April.

While prices are still expected to rise, Zillow has downgraded its forecast for the upcoming year from 10.4% growth to 8.8% growth.

Source: Inman (06/22/22) Houston, Daniel

© Copyright 2022 INFORMATION, INC. Bethesda, MD (301) 215-4688

Tuesday, June 21, 2022

Top U.S. Relocation Destinations? Miami and Tampa

 By Kerry Smith

Two other Florida metros – Cape Coral and North Port – are also in the top 10 Redfin report, with New York City and Chicago top feeder markets.

SEATTLE – Homebuyer migration remained at an all-time high in April and May, with 32.3% of users nationwide looking to move to a different metro area, according to a new report. The percentage is unchanged from a record set in the first quarter but up from about 26% before the pandemic began.

Homebuyers aren’t just chasing preferred destinations, they also make moving decisions based on an area’s housing costs.

Florida destinations hold top spots

Miami and Tampa topped the list of most popular destinations for homebuyers moving from one metro to another in April and May measured by net inflow – the number of searchers looking to move into an area rather than out of that area.

Miami has topped the list all year, but Tampa just passed Phoenix for the number-two spot. Phoenix had held the number-two spot since last fall; now it comes in at number three.

Two other Florida metros also made the list with Cape Coral at No. 6 and North Porth at No. 7.

Tampa is more popular with relocating homebuyers largely because it’s relatively affordable, with the typical home selling for $370,000 in April. Although Tampa prices rose nearly 28% year over year, they were still well below the national median of $424,000. It’s the only metro on the top-five list where that’s the case. The typical home sells for $475,000 in Miami, $480,000 in Phoenix, $605,000 in Sacramento and $445,000 in Las Vegas.

Migration into Tampa has steadily ticked up since the pandemic began. Tampa had a net inflow of more than 11,000 homebuyers in the first quarter, up from roughly 7,600 a year earlier and about 4,000 two years earlier.

Top 10 metros by net inflow

  1. Miami – 33.8% of searches from outside, top feeder market is New York
  2. Tampa – 50.3% of searches from outside, top feeder New York
  3. Phoenix – 36.6% from outside, top feeder Los Angeles
  4. Sacramento – 42.6% from outside, top feeder Los Angeles
  5. Las Vegas – 46.5% from outside, top feeder Los Angeles
  6. Cape Coral, Fla. – 67.4% from outside, top feeder Chicago
  7. North Port, Fla. – 67.4% from outside, top feeder Chicago
  8. San Diego – 31.5% from outside, top feeder Seattle
  9. San Antonio – 42.7% from outside, top feeder Los Angeles
  10. Dallas – 25.1% from outside, top feeder Los Angeles

© 2022 Florida Realtors®

Friday, June 17, 2022

Mortgage Rates: Highest Weekly Jump in 35 Years

 By Matt Ott

The rate for a 30-year, fixed-rate mortgage jumped over half a percentage point in one week – from an average 5.23% seven days ago to this week’s 5.78%.

WASHINGTON (AP) – Average long-term U.S. mortgage rates made their biggest one-week jump in 35 years, one day after the Federal Reserve raised its key rate by three-quarters of a point in bid to tame high inflation.

Mortgage buyer Freddie Mac reported Thursday that the 30-year rate climbed from 5.23% last week to 5.78% this week, the highest it’s been since November of 2008 during the housing crisis.

Wednesday’s rate hike by the Fed was its biggest in a single action since 1994.

The brisk jump in rates, along with a sharp increase in home prices, has been pushing potential homebuyers out of the market. Mortgage applications are down more than 15% from last year and refinancings are down more than 70%, according to the Mortgage Bankers Association.

Those figures are likely to worsen with more Fed rate increases a near certainty.

The Fed’s unusually large rate hike came after data released last week showed U.S. inflation rose last month to a four-decade high of 8.6%. The Fed’s benchmark short-term rate, which affects many consumer and business loans, will now be pegged to a range of 1.5% to 1.75% – and Fed policymakers forecast a doubling of that range by year’s end.

Higher borrowing rates appear to be slowing the housing market, a crucial part of the economy. Sales of previously occupied U.S. homes slowed for the third consecutive month in April as mortgage rates surged, driving up borrowing costs for would-be buyers as home prices soared.

On Tuesday, the online real estate broker Redfin, under pressure from the cooling housing market, said that it was laying off 8% of its workers.

Homeownership has become increasingly difficult lately, especially for first-time buyers. Besides staggering inflation, rising mortgage rates and soaring home prices, the supply of homes for sale continues to be scarce.

The average rate on 15-year, fixed-rate mortgages, popular among those refinancing their homes, rose to 4.81% from 4.38% last week. A year ago, the rate was 2.24%.

Copyright 2022 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without permission.

Wednesday, June 15, 2022

An Adjustable Rate Mortgage Saves a Typical Buyer $15,000 Over 5 Years

 By Kerry Smith

In exchange for that savings, however, buyers accept risks. Adjustable rates reset at a future point, and interest rates could be uncomfortably higher when they do.

SEATTLE – When the average 30-year, fixed mortgage rate hit record lows over the past few years, adjustable-rate mortgages (ARMs) seemed to have completely disappeared. But as rates rise, more buyers are considering ARMs as a way to offset higher costs.

According to an analysis by Redfin, the typical homebuyer could save an estimated $15,582 over five years – roughly $260 per month – by taking out an adjustable-rate mortgage rather than a 30-year-fixed-rate mortgage (FRM).

In savings terms, it’s the largest amount of money since at least 2015.

For the analysis, “typical” is based on estimated monthly mortgage payments for a median-asking-price home during the four weeks ending May 12, comparing the 30-year fixed mortgages and 5/1 adjustable-rate mortgages (ARM).

A 5/1 ARM offers a fixed interest rate for five years, and then a varying rate that adjusts once per year, usually for a 30-year loan. However, ARMs vary. A 7/1 offers a fixed rate for seven years, though the initial guaranteed rate is likely higher than the one for a 5/1 ARM.

The typical monthly payment for buyers who took out a 5/1 ARM was an estimated $2,164 during the four weeks ending May 12 – roughly 11% ($260) lower per month than the $2,423 estimated payment for buyers who took out a 30-year FRM.

The week of May 12, the average interest rate on a 5/1 ARM was 3.98% compared to a 5.3% average rate on a 30-year FRM. It’s a spread of 1.32 percentage points, or just shy of the 1.36 percentage-point spread during the week ending April 21, which was the largest since 2014.

About one in 10 (10.8%) of loan applications as of May 6 were for an ARM, up 3.1% from the start of the year and the highest percentage since 2008, when a lack of ARM regulation helped contribute to the housing crash.

In the early 2000s, scores of borrowers were drawn to ARMs offering low initial “teaser rates” and sometimes a 0% down payment. But when those ARMs later reset to a higher interest rate, many of those borrowers could no longer afford their monthly payment. Today’s ARMs are generally safer, in part because federal regulations grew tougher following the Great Recession, and lenders today learned a lesson from those mistakes.

Still, ARMs come with a big risk: No one can predict where interest rates will be five years in the future. If they’re significantly higher, it still might be harder for borrowers to cover their monthly mortgage. For certain types of ARMs, borrowers may even face fees or penalties if they refinance or pay off their loan early.

“Adjustable-rate mortgages can work really well for homebuyers who plan to stay in their home for less than 5 to 10 years and have the means to cover higher payments when the loan resets,” says Arnell Brady, a senior loan officer Bay Equity Home Loans.

© 2022 Florida Realtors®

Beware of Summer Rental Scams

 By Kerry Smith

Criminals don’t just post fake home sales or apartment rentals online. They also advertise fake summer rentals. Take safety precautions before making a deposit.

NEW YORK – Scammers don’t take the summer off, says New York Attorney General Letitia James in a release. Vacation fraud happens every year, but there are ways to protect yourself from getting burned.

Steps to avoid vacation rental fraud

  • Verify the host. Make sure the renter or host has a valid address and phone number.
  • Confirm the listing has reviews and read them. Be wary if listings on websites like Airbnb or VRBO don’t have any reviews listed. Also, when reading reviews, look for red flags. Multiple reviews that seem to repeat the same phrases could be a sign the reviews are fake.
  • Check the photos. Make sure they haven’t been stolen from another website. Use a reverse image internet search of the photos to find out if they also appear on another website.
  • Communicate only through the listing site before booking. One way scammers try to trick consumers is posting a listing on a legitimate site like Airbnb or VRBO. Once a renter expresses interest, however, the rental owner than requires them to communicate directly outside the website or app to book the property. James also suggests that potential renters should never share their email address or phone number with a host before a booking has been accepted.
  • Use a credit card or debit card. Verified payment sources, such as a major debit or credit card, can be traced in case something goes wrong. One additional advantage of a credit card is that it offers some protections under the Fair Credit Billing Act, which allows users to dispute unauthorized charges.
  • Make payments through the listing site. If using a known legitimate site such as Airbnb or VRBO, make all payments through the site. They may be able to refund you if you’re later defrauded.
  • Never make wire payments or cash payments. On the flipside, never make a payment where the money can’t be traced, such as a wire transfer or money transfer service like Western Union, Money Gram, Zelle, CashApp or Venmo.
  • Rent security deposits. Generally, you cannot be required to pay more than one month’s security deposit. The owner can apply the security deposit to cover any damages caused by you or for unpaid rent, but otherwise must return the deposit to you at the conclusion of the rental.
  • Know your rights. It’s illegal for a host to deny a vacation rental based on race, religion, national origin, sex, sexual orientation, gender identity, military status, disability or marital status.

© 2022 Florida Realtors®

Wednesday, June 8, 2022

Mortgage demand falls to the lowest level in 22 years

 By Diana Olick - CNBC


  • The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) increased to 5.40% from 5.33%.
  • Applications for a mortgage to purchase a home fell 7% for the week and were 21% lower than the same week one year ago.
  • Refinance demand dropped 6% for the week and was down 75% year over year.
  • Mortgage rates are back on the upswing, after a brief decline in May, and the housing market is still suffering from a lack of listings. As a result, mortgage demand continues to drop.

    Total mortgage application volume fell 6.5% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. Demand hit the lowest level in 22 years.

    The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) increased to 5.40% from 5.33%, with points rising to 0.60 from 0.51 (including the origination fee) for loans with a 20% down payment.

    Refinance demand, which is most sensitive to weekly rate moves, fell another 6% for the week and was 75% lower than the same week one year ago. The vast majority of mortgage holders now have rates considerably lower than the current one, and even those who would like to pull cash out of their homes are choosing second mortgages, rather than refinancing their first liens.

    “While rates were still lower than they were four weeks ago, they remained high enough to still suppress refinance activity. Only government refinances saw a slight increase last week,” said Joel Kan, an MBA economist.

    Applications for a mortgage to purchase a home fell 7% for the week and were 21% lower than the same week one year ago.

    “The purchase market has suffered from persistently low housing inventory and the jump in mortgage rates over the past two months. These worsening affordability challenges have been particularly hard on prospective first-time buyers,” Kan said.

    Mortgage rates moved even higher to start this week, according to a separate survey by Mortgage News Daily. Rates have been in a narrow range for several weeks after moving decidedly higher in the previous months.

    “There’s some chance that the upper boundaries of that range end up being a ceiling for rates, but that will depend on inflation and other incoming economic data,” wrote Matthew Graham, chief operating officer at Mortgage News Daily. “With a key inflation report set to release on Friday morning, the potential for volatility remains high.”

Most Baby Boomers Say ‘We’re Not Moving’

2 out of 3 (66%) adults 55 and older plan to stay in their current homes in a break from their parents who largely downsized or moved to adult communities.

WASHINGTON – Baby boomers hold the majority of real estate wealth in the U.S., and two out of three don’t plan to give that up. As they age, more plan to stay put in their current homes, with 66% of adults aged 55 and older saying they expect to age in place, according to a Freddie Mac survey.

However, non-moving boomers could exacerbate the housing supply shortage, which has dropped to record lows over the past two years.

It’s also a generational change. Unlike many of their parents, baby boomers are veering from traditional patterns of selling later in life and downsizing to a smaller home or moving to assisted living.

Thanks to rapidly rising home values, boomers’ financial gains over the past five years may better equip them to stay in place, too, the survey says.

Still, baby boomers acknowledge that their home will require some renovations to make the space more appropriate for aging in place. But they feel confident that their personal savings and long-term retirement and investment accounts will allow them to afford to do so.

A 2021 survey conducted by AARP found that many homeowners would need to modify their current home so they or a loved one could live there:

  • 79% say they need to modify bathrooms with grab bars or no-step showers
  • 71% say their home has inside and outside accessibility issues
  • 61% say they need an emergency response system
  • 48% say they need smart-home devices like a voice-activated home assistant or a doorbell camera

Over the next two decades, the number of households headed by people aged 65 and older is expected to increase from 34 million to 48 million, according to Urban Institute data.

Source: “Majority of Aging Adults Likely to Age in Place,” Freddie Mac (May 23, 2022)

© Copyright 2022 INFORMATION INC., Bethesda, MD (301) 215-4688

Housing Market Shift and South Florida Real Estate


By Roy Oppenheim

There is new market research that indicates that home price listings throughout the United States have been reduced 24.1% over the past few weeks. Why? With increased demand and short supply of homes, many sellers have been able to place their homes on the market for much higher prices with buyers willing to pay over their asking price. However, with increased inflation, mortgage rates rising, and workplace layoffs there may be, overall, a shift in the housing market. Add to those conditions that most people according to the latest public opinion polls are pessimistic about the economy and stock and crypto markets that have fallen dramatically this year.

What about South Florida Home Prices?

Picture courtesy Altos Research

Yet, the question remains as to whether home prices in South Florida will begin to slow down. Home sales and prices are still high here, and housing inventory remains tight. Why? Our climate is one factor. Another is that favorable tax laws draw people and businesses from higher-tax states such as New York and California. However, with rising inflation, higher mortgage rates may prevent purchasers from buying. Further, with inflation, building supplies for new construction has led to higher home prices. Other factors that impact the South Florida housing market include global markets and the decrease of investment in South Florida due to the Ukraine/Russia conflict. Additionally, a strong dollar prevents foreigners that want to purchase real estate in the United States, making such purchases even more expensive for them.

Zillow predicts that annual home sales will gradually slow through January 2023 due mostly to increased inflation.  As we indicated in an earlier blog, increasing mortgage rates is a reason for the slowdown. The forecast is that 30-year fixed mortgages will average  4.5%— up from 3.1% in 2021.  Such higher interest rates place pressure downward on the housing market as some potential purchasers will now be ineligible for the loan amounts they want, while others will simply price out some home purchasers.

Picture courtesy Luixlifemiamiblog

What does this all mean?

Change is in the air as a reduction in home prices will perhaps open the market to more people who are currently unable to purchase homes, assuming that inflation is kept in check. In South Florida, the need, however, for affordable housing still remains, and the overall demand for housing outweighs the supply.  As we have stated previously, the result is an inevitable disruption the current housing market.

Tuesday, June 7, 2022

Housing Market Is Strong – but Time to Sell?

 By Don Magruder

Housing remained resilient – Florida more than many states – but signs suggest a slowdown in price increases. Still, investors moving away from stocks may be a wild card.

NEW YORK – The Florida and national housing market remain very strong by every metric, but the overall health of the United States’ economy, inflation worries, interest rate hikes, and the downward spiral of many investment markets are starting to create some buts in the housing forecast long-term.

The overall economy will affect housing especially with regard to increased interest rates, but through the first quarter of 2022, housing has been very resilient.

In March, per the United States Census Bureau, United States housing starts hit an annual seasonal rate of 1,873,000 which was 0.4% higher than February, and 6.7% above the previous year.

Within those numbers, single-family homes cooled by almost 5%, but multi-family housing bolstered the sector to an increase. Because of the COVID-19 pandemic, multi-family housing projects have been delayed, but with the current rental demand, most expect multi-family housing to grow.

The dirty secret about these numbers is that starts would have been higher if not for supply chain woes. Housing starts and production are being suppressed because of serious supply chain issues throughout the country.

The Monthly New Residential Sales report from the Census Bureau tells a different story, which may suggest interest rates and the economy may be slowing new home sales. Sales were 763,000 units which is 12.6% below the previous year, but the median price rose to $436,700 with a 6.4-month supply at current sales volume.

The buyers remain in the market, but many are being priced out by higher interest rates and soaring prices for homes. This may be an inflection point in which home sellers will have to start reducing the prices to attract buyers since the low interest rate environment is going away.

Some point to the fact that a late winter weather surge could have hampered sales in March and getting buyers back in the market may soon become a priority for sellers. In short, housing prices coupled with higher interest rates are too much for many buyers.

Florida’s housing numbers are somewhat robust as compared to the national housing markets. Florida Realtors® reports that first quarter sales of housing were down 2.6% compared to the previous year, but housing inventories across the state were down to 1 month or a 10.2% drop as compared to the previous year.

This indicates sales were subdued because there were simply not enough houses in the market for sale. Additionally, the median sales price jumped 21.3% from the previous year to $385,000 while new listings for the quarter were flat from the year before.

Here is another key fact; homes on the market were down to 53 days as compared to 64 days a year ago. The Florida housing market remains red hot, and builders simply cannot build enough units timely with all the supply chain disruptions.

Two other big facts about Florida’s housing market that cannot be ignored are the percentage of cash sales for new homes and the rate of foreclosures. For the first quarter, cash buyers made up 33.5% of all the homes sold while foreclosures across the state were down 34.8% to a measly 362 units, which is nothing for a state of 23 million people. It seems money is moving out of Wall Street and other investments to real estate, and that most homes are in good shape financially.

With all these first quarter numbers and economic data, where does the housing market go the rest of 2022? First, the Florida market will probably be one of the most robust markets in the country, but all markets, including Florida’s, will start seeing some capitulations in housing prices.

Low interest rates have shielded sellers for some time, and with a forecasted rise in interest rates in June and July of half points on top of the May half point increase, something has got to give on pricing.

What about Wall Street investors?

Here is the big but: Do large amounts of money flow out of riskier investments on Wall Street and cryptocurrency find a safe haven in real estate? That is a possibility as builders and investors build rental housing for a population dealing with a lack of housing.

Unlike some of the funny money investments on Wall Street, housing does provide one huge advantage as a tangible investment that delivers real value like a place to live and a nice tax advantage, plus there is a genuine need for more housing in America.

It appears housing will cool some in other parts of the country, which should help ease supply chain disruptions. Additionally, pricing overall will moderate, probably knocking out the over-exuberance; but in Florida, unless the economic conditions deteriorate significantly, expect housing to remain strong.

If you are a home seller, the environment suggests you sell sooner rather than later.

Copyright © 2022, Daily Commercial, all rights reserved. Don Magruder is the CEO of Ro-Mac Lumber & Supply Inc., and he is also the host of the “Around the House” Show which can be seen at AroundtheHouse.TV.

Florida Realtors economist: Most Florida home sellers accepted offers at or above their asking price – and 1 in 5 (20%) Fla. sellers get at least 5% more.

 ORLANDO, Fla – Homes are a hot commodity. For homeowners that decide to list, the lack of supply is working in their favor, and many accept offers of their asking price or more.

In the past year – since April 2021 – the median percent of the original list price received for Florida single-family homes was 100%. The median represents the halfway point: Half of the homes sold received at least 100% of their list price, while the remainder received 100% or less.

More than 50% of sellers have been getting their list price or higher recently, but that percentage has risen over the past few months. In April 2022, it was up to 67%.

Graph showing increasing percentage of sellers getting their asking price or more

It may seem like the norm now, but the number of sellers who receive at least their asking price has grown significantly since the start of the pandemic. Between 2012-2019, typically 20-28% of sold homes received their list price or more. Today, that figure has more than doubled.

Even compared to last year’s figure of 57% in April 2021, we have a 10-percentage point difference.

For some sellers, it isn’t a couple hundred or thousand over asking – the gain can be quite significant. Roughly 20% accepted an offer 5% above the list price. On a home listed for $400,000, that’s an additional $20,000!

Higher interest rates and inflation are shifting demand. Although we don’t anticipate sellers leaving the driver’s seat any time soon, they may need to adjust their expectations.

Realtors® understand their local market area and can create a comparative market analysis (CMA) to help a seller determine an appropriate list price for their home. Although over asking will likely put a smile on your client’s face, be sure to understand their other goals with the home sale, such as timing, to best serve their needs.

Erica Plemmons is an economist and Director of Housing Statistics

© 2022 Florida Realtors®

Wednesday, June 1, 2022

Sellers Waiting for Market Peak Think It’s Here

 NEW YORK – Some homeowners with a yen to sell have a growing concern that they may miss out on the buyer frenzy. Signs of a slowing real estate market are growing across the country – existing-home sales and new-home sales are falling as well as pending home sales.

The inventory of homes for sale rose 9% last week compared to a year ago, according to®. New listings are rising nearly twice as fast in the past four weeks as they did a year ago.

“Rising mortgage rates have caused the housing market to shift, and now home sellers are in a hurry to find a buyer before demand weakens further,” says Daryl Fairweather, Redfin’s chief economist.

Pending home sales fell for the sixth consecutive month in April and are now at the slowest pace in nearly 10 years, the National Association of Realtors® reported Thursday.

Home sellers also see less competition from buyers. An index that measures buyer demand based on Redfin requests for home tours and home buying services was down 8% annually for the week ending May 15 – the largest decline since April 2020, when the pandemic put everything on pause.

Further, nearly one in five sellers has dropped their asking price, the highest rate since October 2019, Redfin reports.

“We used to get 10 to 15 offers on most houses. Now I’m seeing between two and six offers on a house, a good house,” Lindsay Katz, a real estate broker at Redfin in the Los Angeles area, told CNBC.

Source: “Home Listings Suddenly Jump as Sellers Worry They May Miss Out on the Red-Hot Housing Market,” CNBC (May 26, 2022)

© Copyright 2022 INFORMATION INC., Bethesda, MD (301) 215-4688

Case-Shiller: May Home Prices Up More than 20%

"Tampa (34.8%) and Miami (32.0%) showed large increases among the 20-city index. Those waiting for slowing prices “will have to wait at least a month longer.”

NEW YORK – Home prices in the United States continue to see significant increases, with an industry report Tuesday saying that they were up more than 20% over the past 12 months.

The S&P CoreLogic Case-Shiller Home Price Index said home prices were up 20.6% over the past 12 months that ended in March – the highest rate in more than three decades. The year-over-year average is slightly above the 20% gain in February, the index said.

The annual increase for the index’s national 10-city composite was 19.5% in March, which was up from 18.7% in February – and the 20-city composite showed a 21.2% year-to-year increase, up from 20.3% the month before.

Tampa (34.8%), Phoenix (32.4%) and Miami (32.0%) showed large annual increases among the 20-city index.

“Those of us who have been anticipating a deceleration in the growth rate of U.S. home prices will have to wait at least a month longer,” Craig Lazzara, managing director of the S&P Dow Jones Indices, said in a statement. “For both national and 20-city composites, March’s reading was the highest year-over-year price change in more than 35 years of data, with the 10-city growth rate at the 99th percentile of its own history.”

Lazzara said 17 cities in the 20-city index showed increases, a signal that the housing market has not yet been affected by the Federal Reserve’s boosting key interest rates.

“Mortgages are becoming more expensive as the Federal Reserve has begun to ratchet up interest rates, suggesting that the macroeconomic environment may not support extraordinary home price growth for much longer,” Lazzara added.

“Although one can safely predict that price gains will begin to decelerate, the timing of the deceleration is a more difficult call.”

Copyright 2022 United Press International, Inc. (UPI). Any reproduction, republication, redistribution and/or modification of any UPI content is expressly prohibited without UPI’s prior written consent.

Owners Weigh Options – Decide ‘Stay’ Is Best

Americans like to sell homes and move, but current owners look at today’s frustrated buyers and their low-interest rates and think, “I’m fine right here for now.”

NEW YORK – U.S. homeowners are sitting on the lowest mortgage rates in modern history as renters face steep inflation. The result: Both groups find “looking for a new home” discouraging.

“All of this is suggesting that America may be stuck in place,” says National Association of Realtors® Chief Economist Lawrence Yun.

With rents seeing unprecedented growth, tenants usually face smaller price increases keeping with their current lease rather than signing a new one, largely because landlords want to avoid the costs of finding new tenants and property turnover.

However, RealPage Chief Economist Jay Parsons says higher moving costs are not the only inhibiting factor – buildings with the most unfilled units are currently the most expensive ones.

Meanwhile, with 4 in 5 mortgage-holders having an interest rate under 5% and half with a 4% or lower rate, many cannot afford to move if current mortgage rates remain at higher levels. Moreover, the most prosperous regions also have the costliest housing, which discourages people from moving to places with better jobs and limits economic growth.

Source: New York Times (05/27/22) Badger, Emily

© Copyright 2022 INFORMATION INC., Bethesda, MD (301) 215-4688

Tuesday, May 31, 2022

Fannie Mae: Housing Crisis Will Last a Decade

 WASHINGTON – Fannie Mae has issued a new analysis of the residential single-family home market, where it stated that: “the demand for entry-level single-family homes should remain high for the rest of the decade.”

The government-owned mortgage firm found that between 2018 and 2020, the shortage in homes increased nationally from 2.5 units to 3.8 units. The declining supply of entry-level (or starter) homes is driving the home shortage.

Fannie Mae defines a starter home as having less than 1,400 square feet. In the 1980s, 40% of all homes built were starter homes. By comparison, in 2019, only 7% of homes built were starter homes.

The influx of 27 million millennials into the housing market has pushed this shortage even further. In the period from 2018 through 2020, the COVID-19 pandemic and systemic housing trends caused a 52% decrease in the supply of homes. The combination of low supply and high demand resulted in a 12% increase in home prices.

As younger workers continue to enter the market, the demand for starter homes will continue to rise. Fannie Mae anticipates that affordability will remain an issue for the next decade, “especially when it comes to down payments.”

Copyright © 2022 BridgeTower Media. All Rights Reserved. © Copyright, 2022, Idaho Business Review (Boise, ID)

Census Finds Big City Losses, Sunbelt Gains

 By Mike Schneider

8 of the 10 largest U.S. cities lost population during the first year of the pandemic, though reasons varied from housing costs to jobs, births, and deaths.

NEW YORK – Ko Im always thought she would live in New York forever. She knew every corner of Manhattan and had worked hard to build a community of friends. Living in a small apartment, she found her attitude shifting early in the pandemic. After her brother accepted a job in Seattle in the summer of 2020, she decided to move there too.

“It was fine until it wasn’t,” said Im, 36. “The pandemic really changed my mindset about how I wanted to live or how I needed to live.”

Eight of the 10 largest cities in the U.S. lost population during the first year of the pandemic, with New York, Los Angeles and Chicago leading the way. Between July 2020 and July 2021, New York lost more than 305,000 people, while Chicago and Los Angeles contracted by 45,000 residents and 40,000 people, respectively.

The population estimates released Thursday by the U.S. Census Bureau capture a time early in the pandemic and don’t reflect changes since last summer. Whether the virus has permanently changed the urban landscape of America remains an open question.

San Francisco suffered the largest rate of decline, losing almost 55,000 residents, or 6.3% of its 2020 population, the highest percentage of any U.S. city.

Among the 10 largest U.S. cities, only San Antonio and Phoenix gained new residents, but they added only about 13,000 people each, or less than 1% of their populations, according to the bureau’s 2021 vintage population estimates.

Justin Jordan’s move to Phoenix a year ago was motivated by a job offer paying him more money than the one in Moundsville, West Virginia, where he had been living. He has had to adjust to 110 degree Fahrenheit (43.3 degree Celsius) temperatures and unwieldly traffic.

“I love the weather, the atmosphere, and all the stuff to do,” said Jordan, 33, a senior operations manager for a business services firm.

Among the largest U.S. cities, Austin and Fort Worth in Texas; Jacksonville, Florida; Charlotte, North Carolina; and Columbus, Ohio also registered modest population gains.

In March, the Census Bureau released estimates for metro areas and counties showing changes from mid-2020 to mid-2021. The estimates released Thursday offer a more granular perspective. For instance, the March data showed metro Dallas had the largest population gain of any metro area in the U.S., adding more than 97,000 residents, but Thursday’s estimates show the city of Dallas lost almost 15,000 residents. The growth occurred in Dallas suburbs like Frisco, McKinney and Plano.

Reasons for population changes vary from city to city, driven by housing costs, jobs, births and deaths. The pandemic and the lockdown that followed in spring 2020 made living in a crowded city less appealing for a time, and those who could leave – workers who could do their jobs remotely, for example – sometimes did.

Brookings Institution demographer William Frey said he believes the population declines in most of the largest U.S. cities from 2020 to 2021 have been “short-lived and pandemic-related.”

Daniel Akerman, a New York real estate agent, said the Census Bureau data, which doesn’t go past July 2021, fail to capture how people have returned to the city in the past year. He said real estate transactions have skyrocketed and available rental apartments have dropped.

“People have definitely returned to the city. There are a lot more people on the streets,” Akerman said. “In July 2021, people were still guarded about COVID and a lot of that has gone away. People are a lot more free. They are out and about, going to restaurants.”

When it came to growth rates, as opposed to raw numbers, the fastest-growing cities with populations of at least 50,000 residents were in the suburbs of booming Sunbelt metro areas. They included Georgetown and Leander outside Austin; the town of Queen Creek and the cities of Buckeye, Casa Grande and Maricopa, outside Phoenix; the city of New Braunfels, outside San Antonio; and Fort Myers, Florida. They had growth rates of between 6.1% and 10.5%.

As metro Austin has grown by leaps and bounds, so has Georgetown, located more than 25 miles (40 kilometers) north of the Texas capital, said Keith Hutchinson, the city’s communications manager. The city grew by 10.5%, the most in the nation last year, and now has 75,000 residents.

“It’s not really a surprise,” Hutchinson said. “People are moving here for jobs.”

The estimates also showed population declines of 3% to 3.5% in New Jersey cities outside New York, such as Union City, Hoboken and Bayonne. Similar declines occurred outside San Francisco in Daly City, Redwood City and San Mateo, as well as Cupertino in Silicon Valley.

Lake Charles, Louisiana, which was devastated by Hurricane Laura in 2020, lost almost 5% of its residents, the second-highest rate in the U.S. behind San Francisco.

Though the Category 4 storm was the driver there, elsewhere, the pandemic created opportunities to move. Andrew Mazur, 31, had been wanting for some time to leave Philadelphia for South Florida where he grew up, and the chance to work remotely in his job at a large professional services firm arrived in November 2020. He joined almost 25,000 residents who left Philadelphia between 2020 and 2021.

Although he now needs a car to get around, Mazur loves golfing every weekend and going to the beach. He recently moved out of his parents’ home, getting his own apartment in Fort Lauderdale. He made the move official three weeks ago by obtaining a Florida driver’s license.

“I’m not going back. It has been great,” Mazur said. “Philly, New York, Chicago – tons of people from there are moving down here.”

Copyright 2022 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without permission.