House-hunting Blues

 By Alexandria Mansfield

Many buyers in Florida and across the U.S. are feeling the impact of a lack of inventory, competition from investors and rising prices during their home search.

JACKSONVILLE, Fla. – The process of buying a house can put your life on pause.

There are so many things you can’t do when going through the process of buying a new home. Free time can be absorbed by scrolling through Zillow listings or touring places with real estate agents.

If you are relying on financing, you are advised not to make any other big purchases – like a car or furniture – during the buying process or open a new line of credit because it may affect your credit score.

For Abby Denmark, she found herself wary of making any major changes while house hunting. She even postponed planning her wedding to her partner of four years, Ryan Norton, in order to focus their energy and financing on securing a place to live.

That was a year ago.

Denmark’s story is similar to many in the country, but particularly those looking to buy homes in the Jacksonville area.

Part of this trend is a lack of inventory on the market, according to Florida Housing Coalition CEO Jaimie Ross. Between labor shortage and supply chain issues, homes aren’t being built as fast as they were in 2019 or 2020.

Another part of the equation, however, is the record-setting rates at which investors and investment companies are buying homes.

Last year, investors bought nearly one in seven homes sold in America’s top metropolitan areas, the most in at least two decades, according to a recent Washington Post report.

In the Jacksonville metro area, 22% of homes purchased were bought by investors. This is double the rate of the 11% of homes purchased by investors in 2015.

Jacksonville is the No. 4 metro area in which investors bought the highest percentage of homes, following Atlanta and Chicago, at 25% each, and Miami at 24%.

To those in the Jacksonville Real Estate Investors’ Association (JaxREIA), an education and networking nonprofit with over 400 active members, it’s a good time to be buying and flipping homes, said JaxREIA President Mike Grandjean.

“For a lot of investors, the strategy is dictated by the time and the property,” Grandjean said. “Now is a pretty good time to be flipping property. You’re still going to be having some people buying and holding [to rent], but I think the times kind of dictate that a little bit.”

Grandjean said investors are selling and renting at about a 50-50 rate right now, whereas in a more “stabilized market,” he typically sees closer to a 70-30 or 60-40 split in favor of investors buying property to rent it.

“Now is a good time to be flipping,” he said, “and that’s not a bad thing for those first-time homebuyers.”

Grandjean described real estate investors as enhancing current inventory on the market so houses that might not qualify for financing meet the necessary standards.

“It refreshes the market,” he said.

Unfortunately for those buyers, real estate is appreciating at nearly 20% a year, which can easily price people out of the market.

Ross described investment purchases as “a big part of the affordable housing crisis.”

“The best thing you can do is to get into stable housing,” Ross said. “I think it’s only going to get harder. [Renting] is just not very stable.”

A year in the making

As a first-time homebuyer, Denmark, 28, said the competition she experienced in the market had her teetering back and forth between wanting to purchase a home or settling on renting in order to live with her partner, Norton, who moved in with his parents after being priced out of his apartment in Riverside in December 2020.

Denmark, a patient care technician at Ascension St. Vincent’s Riverside Hospital, said it felt impossible to compete in the housing market at times because she and Norton work full time and couldn’t tour homes fast enough.

“It was disappointing too because Jacksonville is such a cool place and people who want to enjoy the culture and they’re being priced out of it,” Denmark said. “You could be the cruddiest house in the nicest neighborhood or the nicest house in the cruddiest neighborhood.”

At one point, the couple was so disheartened by the housing market that they considered finding a place to rent together instead and delaying their dreams of homeownership but decided against it because it would cost them more money in the long term.

“The only way for middle-class Americans to accrue wealth is to buy a home and own property,” said Norton, who works for a specialty medical equipment company. “And renting for $2,500 a month... you’re just never going to own that, you know?”

Denmark said she found it hard not to take being priced out of potential home purchases personally.

“It’s money,” she said. “Like this is our future, this is money to consider for my daughter. It’s not like we’re deadbeats, and somehow this market isn’t wanting people like that to succeed.”

Norton said they looked in the Fruit Cove, Lakeshore and Ortega areas to find a family-friendly home with enough space for their artistic hobbies. He estimated that, on an average week for the last year, they would see 15 or 20 houses of interest and most of them were off the market again before they could even schedule a showing.

“The few experiences we had where we were getting close were just so disappointing,” Denmark said. “The house before this last house was like a bad breakup. Like no one compares to that house, and I don’t even want to date anymore.”

A year after starting their home search, Denmark and Norton hope to close on their first property at the end of the month.

Grandjean said he could see a clear effect this market and investment purchases were having on first-time homebuyers.

“You’re competing with not just mom and pop investors but Wall Street investors for the inventory that is out there,” he said.

The sheer number of investment companies doing business in Florida is inflating the market and driving up the costs while also being more competitive than individual buyers are able to be for the houses that do go on the market.

Duval County Property Appraiser Jerry Holland noted these sales affect overall values by creating “a greater demand for homes when they are for sale.”

“It drives the price up,” Holland said. “The investor market is definitely paying into higher prices because of the demand.”

San Francisco-based Opendoor, a digital residential real estate company that makes cash offers on homes to repair and resell, is one of these types of investment companies. The company has purchased 413 homes in Duval County alone since 2020.

Low inventory breeds more competition

A Sept. 1 Comprehensive Market Analysis for Jacksonville from the U.S. Department of Housing and Urban Development labeled the supply of homes for sale as “tight,” noting supply fell to about a 1.4-month inventory during August 2021, “down from 2.4- and 3.2-month supplies during August 2020 and August 2019, respectively.”

Grandjean estimated the supply is closer to under one month now.

“We’re looking at low inventory,” Grandjean said. “In a stable market, there is about six months’ worth of inventory, and we’re below one month. I think it’s just as hard for an investor to compete as well.”

New and existing home sales increased 9% during the 12 months ending August 2021, the HUD report also said, with an average price increase of 17%.

“First-time homebuyers can’t compete with investors,” Ross said. “That doesn’t mean there are no opportunities. I wouldn’t want people to give up hope. Now is a good time for homebuyers because interest rates, although they’re going up, are low comparatively ... Even though the interest rates have risen, they’re around 4%. My first home was about 11% in the ‘70s.”

Ross said first-time homebuyers have other advantages and opportunities they can take advantage of, including the State Housing Initiatives Partnership (SHIP) program, which she said will have more funding than last year, and downpayment and closing cost assistance programs, among others.

“Prices are only going up at this point,” Holland said. “If you are on the fence and want to purchase, now is the time to purchase. It may be another five or six years or more before you see another dip in the prices.”

Investors target lowest-income areas

Overwhelmingly, the north and west areas of Jacksonville experience the highest rates of investor purchasing, with the 32209 ZIP code seeing 54% of homes going to investors. The area encompasses neighborhoods like Moncrief, Grand Park, Mid-Westside and New Town.

Most of the homes in this ZIP code have some of the lowest-income residents in Jacksonville with a median annual income of just over $25,000, compared to a city average of about $55,000, according to the most recent U.S. Census Bureau data.

Other investor-heavy areas for buyers include Arlington, Ortega, Springfield and West Jacksonville.

“When investors own your property, these are big corporations,” Ross said. “They really aren’t looking at you as a family or individuals. They’re just looking at the market. It’s very hard for a family in a rental unit owned by an unnamed corporate entity to have stability and to know that they are going to be able to afford a lease next year.”

As Jacksonville’s population steadily increases, apartment occupancy follows, and rental prices increase, too. This makes people want to get into the market, Holland said. And the cycle of competition continues.

“People are willing to offer more to be able to get the home, and sellers are very interested in cash sales,” he said. “A lot of the investor market is cash sales and being able to buy the home quicker.”

For the appraiser’s office, this means home values are changing more frequently as a result of the supply and demand.

“At some point, the market will, as it always does, take a dip,” Holland said. “We’re not anticipating any time soon, but if interest rates go up, the demand may go down, and that may dip.”

Copyright © 2022 The Florida Times-Union. All rights reserved.

2022 Feb South Florida Housing Market Numbers SFH and Condos

 

Housing Values Doubled Since Great Recession

Analysis: 2021 price increases were “eye-popping,” and in one year, Florida’s share of the U.S. market grew from 6% (2020) to 6.4% (2021).

NEW YORK – Home values in the U.S. gained a record $6.9 trillion in 2021, nearly doubling what was previously the largest annual gain of $3.7 trillion in 2005. The full U.S. housing stock is now worth $43.4 trillion, according to a new Zillow analysis.

Strong demand met limited supply in 2021, driving home values up more than ever before. Home values grew 19.6% last year, an all-time high in Zillow’s data, which dates back more than 20 years. That remarkable rise means U.S. housing is now worth twice what it was a decade ago, in the midst of the Great Recession. Zillow economists expect another strong year in 2022.

“Even in the context of a year in which several housing records were topped, the scale of the housing market’s growth in 2021 is eye-popping,” said Zillow senior economist Jeff Tucker. “Not only did prices rise faster than ever, but more homes were built than in any year since 2007 as builders raced to meet demand. Skyrocketing home values may be celebrated by longtime homeowners, but are daunting for those trying to buy their first home. This year is likely to be less competitive for buyers, but it will continue to be a sellers’ market.”

Nationally, the top one-third of highest-valued homes make up 60.8% of the total market value, while the lowest-valued one-third accounts for 12.8%. Put another way, the top tier of homes is worth nearly five times more than the bottom tier.

More than one-fifth (21.3%) of the nation’s housing value is in California. The state’s housing stock gained $1.4 trillion in 2021 and is now worth a total of $9.2 trillion, more than the combined value of the bottom 30 states.

The housing market surpassed the $1 trillion milestone in four states last year: Colorado (now worth$1.2 trillion), North Carolina ($1.1 trillion), Georgia ($1 trillion) and Arizona ($1 trillion). There are now 14 states with more than $1 trillion in housing value.

Florida, Texas and Colorado gained the most ground relative to the rest of the country in 2021. Florida’s share of the housing market grew from 6% in 2020 to 6.4% in 2021, while Texas’ share grew from 5.9% to 6.1%, and Colorado’s share grew from 2.6% to 2.8%. New York lost more market share than any other state, falling from 7.8% of the U.S. market in 2020 to 7.3% last year while climbing from a total value of $2.8 trillion to $3.2 trillion.

Los Angeles area homes gained more value than any other metro in 2021, but the New York metro area remains the nation’s largest housing market, worth $3.5 trillion. Los Angeles ($3.3 trillion), San Francisco ($2 trillion), Boston ($1.1 trillion) and Washington, D.C. ($1.1 trillion) round out the top five.

The number of homes in a metro has, of course, the biggest influence on how much the value of the total housing stock increases, but there are a few notable markets that outperformed their size. Phoenix, for example, gained $171 billion in housing value last year, more than the entire state of Pennsylvania gained. Austin’s housing market gained more than nearby Houston’s despite having less than one-third of the number of homes.

Copyright © 2022 BridgeTower Media. All rights reserved; also Copyright © 2022 The Mecklenburg Times (Charlotte, NC)

Florida Home Median Prices Rise and Supply Tight is in February

 By Marla Martin

Florida Realtors: 

Florida’s single-family median price is up 21.1% to about $381,500. 

Condo median price up 24.3% to $290,000. 

Sales down due to tight supply, rising rates.

ORLANDO, Fla. – The lack of housing inventory, rising mortgage rates and home prices continued to impact Florida’s housing market in February, slowing closed sales and pushing median prices to increase compared to a year ago, according to Florida Realtors®’ latest housing data.

“February’s statewide housing data follows the same trend we’ve been seeing for months: a limited supply of for-sale inventory, high buyer demand, and rising prices,” says 2022 Florida Realtors President Christina Pappas, vice president of the Keyes Family of Companies in Miami. “Home prices continue to be impacted by this shortfall in inventory. When homes are available for sale, they’re going under contract very quickly. The median time to contract statewide for single-family existing homes in February was 12 days compared to 21 days during the same month a year ago. And the median time to contract for existing condo-townhouse units was 14 days compared to 38 in February 2021.

“In fast-moving market conditions like this, the expertise and knowledge of a local Realtor can help home buyers and sellers successfully navigate the process.”

Last month, closed sales of single-family homes statewide totaled 23,661, down 1.2% year-over-year, while existing condo-townhouse sales totaled 10,975, down 3.6% over February 2021. Closed sales may occur from 30- to 90-plus days after sales contracts are written.

According to Florida Realtors Chief Economist Dr. Brad O’Connor, over the past four months, single-family home sales have been about the same as they were the year before. Still, the level of sales remains quite high by historical standards: Total closed single-family home sales last month were 14% higher than the sales level of two years ago.

He says, “Why has single-family home sale growth slowed down? Several factors are in play, but primarily it’s a result of our continued lack of inventory, in combination with rising mortgage rates and home prices. There’s still no shortage of housing demand, but affordability is becoming a bigger challenge for potential buyers as each month goes by. Although a fair number of homes are still being listed for sale, we are falling way short of where we need to be on the supply front. This problem isn’t going to go away overnight. In the long run, we simply need more housing to be built. For now, though, prices continue to rise rapidly.”

The statewide median sales price for single-family existing homes was $381,481, up 21.1% from the previous year, according to data from Florida Realtors Research Department in partnership with local Realtor boards/associations. Last month’s statewide median price for condo-townhouse units was $290,000, up 24.3% over the year-ago figure. The median is the midpoint; half the homes sold for more, half for less.

In the face of higher mortgage rates, price growth is expected to eventually slow, says Dr. O’Connor. “Sales growth may slow, as well. New pending sales of single-family existing homes were down 12.6% year-over-year in February while new pending sales of condo-townhouse units were down 17.1%, which might indicate this has already begun. If that’s the case, we should expect sales next month to be below last year’s levels, but still well above pre-pandemic levels. Slower price growth may follow in the late spring. But there’s still a lot of uncertainty here – the timing is hard to predict.”

He adds, “The crystal ball remains hazy, but as of right now our baseline expectation is for higher mortgage rates to cool down the market somewhat throughout the year. Sales in 2022 are currently expected to be somewhat lower than last year but still above the totals from the pre-pandemic years of 2018 and 2019. Price growth should eventually slow as well but will remain above historical growth rates.

“Therefore, even if we have a decline in the total number of sales, we still expect the sales volume for 2022 in terms of dollars to be like that of last year. The dollar volume of sales in February was up 15.5% year-over-year for single-family homes and 14.8% for condos and townhouses, despite the decline in closed sales for both categories.”

On the supply side of the market, inventory (active listings) continued to be limited in February. Single-family existing homes were at a severely limited 0.9-months’ supply while condo-townhouse inventory was at a 1.2-months’ supply.

According to Freddie Mac, the interest rate for a 30-year fixed-rate mortgage averaged 3.76% in February 2021, significantly higher than the 2.81% average during the same month a year earlier.

Older Condo Residents Impacted by Stricter Rules

 By Joey Flechas

After the condo collapse in Surfside, officials increased oversight of older condos with safety issues. In Miami-Dade that included evictions pending improvements.

MIAMI – Virginia Ponce hasn’t been able to return to her fourth-floor condo in Flagami since leaving her home of 21 years in August under a city-ordered evacuation, after inspectors determined the eight-story tower was unsafe due to damaged columns.

Ponce, 77, moved in with her daughter in southwest Miami-Dade. Months later, she’s hoping an overhaul of the condo association’s leadership and a fundraising campaign might help bring residents closer to moving back into their homes.

“If you could imagine, I feel destroyed,” she said Thursday. “Every time I think about it, it feels less and less likely.”

Those who evacuated the 49-year-old building at 5050 NW Seventh St. hope a GoFundMe campaign can help pay for what is expected to be hundreds of thousands of dollars in repair work necessary for the building to clear inspections so that residents can move back in.

Ponce still has to pay a mortgage and condo fees for her unoccupied unit, expenses that she says are already tough on a monthly Social Security check of about $850. There are several other residents like her who are not sure how they would handle an assessment to pay for the fixes. The work could cost an estimated $250,000, according to the GoFundMe page.

“Some people don’t have the money to pay the assessment,” said Juliana Pavageau, a condo owner.

Condo owners ousted the previous board of the homeowners association in January. New board president Denise Perez said the previous board had looked at one contractor’s proposal to make the repairs for $800,000. The new board acknowledges it will be a six-figure sum, but they’re weighing other proposals. The repair work is expected to lead to an assessment for a community with many older, retired owners.

“Our community is mostly elderly. They live off of Social Security,” Perez said. “There’s no way they can afford to do all those repairs.”

Owners are also locked in a lawsuit against the building’s previous management. A group of owners have accused the previous board of neglecting to maintain the building, which is eight years behind on its 40-year recertification. The suit is pending in Miami-Dade circuit court.

The condo tower was one of many buildings inspected in the weeks following the collapse of Champlain Towers South in Surfside, a disaster that killed 98 people and sparked a rush of building inspections across Miami-Dade County. When city officials told the Flagami’s building management that multiple columns on the first floor needed to be shored up, contractors began unpermitted work that city officials say made matters worse.

Officials ordered the building’s evacuation immediately, and since then, people have been allowed to retrieve belongings only by appointment, with city building officials monitoring and only allowing a few people in at a time. Residents say conditions have worsened inside, with leaks, broken elevators and mold.

Among the displaced was Gus Fagundo, who evacuated that night with his pregnant wife and toddler. The situation pushed the family to make a move they’d been considering out to Coral Springs, where they are now living in a home they bought. Anywhere closer was far out of their budget.

Fagundo said he hopes the new board can help resolve the building’s issues, and he’s grateful his household can withstand the financial strain.

“We’re still paying the mortgage and the association fees, along with a brand new mortgage here,” he said on Thursday. “It’s not drowning us, but we certainly can’t take our Disney trip this year. “

© 2022 Miami Herald. Distributed by Tribune Content Agency, LLC

Homesteaders Compete with Investors for Homes

 By Amber Randall - Sun Sentinel

Investors stepped up their game this year, buying an estimated 16%-27% of single-family homes, often because they have the strongest financial backing.

FORT LAUDERDALE, Fla. – Investor purchases of single-family homes shot up this year, bringing more competition for the average homebuyer in an already tense housing market.

Data from Redfin shows that investors bought anywhere between 16% to 27% of homes sold in South Florida during the fourth quarter of 2021. On a national level, they accounted for 18.4% of homes bought in that same time period, which is a record high. According to Redfin, investors might be individuals, others are registered under LLCs and some are larger multinational private firms.

“The local homebuyer is really in a pinch,” said Sheharyar Bokhari, economist at Redfin. “If someone is coming from New York that has more money and a bigger budget, and there are investors coming buying in cash that will also outbid them, it makes it more difficult for the local buyer to compete.”

In West Palm Beach, 16.1% of homes sold in the fourth quarter went to investors, a 12% increase from the year before. In Fort Lauderdale, the number is 21%, a 44% increase from the year before.

It was similar in Miami. Investors accounted for 27.5% of homes that were bought during the fourth quarter of last year, a whopping 56.4% increase from the year before.

Where are they buying and why

For investors, over 70% of their purchases are single-family homes, Redfin data shows.

Not only are there just more single-family homes available, but the pandemic caused a shift where most consumers preferred single-family homes over condos due to more space and the ability to work remotely almost anywhere, explained Bokhari. For some folks, the goal is to flip the house and move on, but for others, it’s about renting the properties out.

Despite the housing market soaring, purchasing a house as an investor is still a good investment, as the housing shortage is here to stay, Eli Beracha of Florida International University’s Hollo School of Real Estate, said.

“The housing shortage isn’t going away anytime soon. You can still borrow cheaply and it looks like inflation is going to stay higher than average for some time. You can increase rents at a faster pace than you do usually. And it’s a combination that allows investors to get good returns even though prices are not low,” Beracha said.

Also, many inventors believe that it will be a while before the South Florida market starts to cool down, making it a good place to invest, said Kaley Tuning, with Native Realty.

For the most part, investors stay away from purchasing luxury or higher-end homes, instead buying ones that are lower- or mid-price, because the profit margin will be larger.

And it shows in the data: The overall median sale price in the South Florida area is $405,000, according to numbers from Redfin. Yet the median sale price of a home purchased by an investor was lower in all three counties. In Miami it was $360,000; in Fort Lauderdale it was $307,000; and in West Palm Beach it was $365,000.

There could be some benefits for renters who are looking to get into a single-family residence, as many are turned into rental properties at market rate, which opens up the pool of single-family homes that families could get into without having to buy.

“It benefits [renters] in terms of the selection that is available. With so many investors buying up single-family homes, it opens up that market,” Beracha said.

The affordability factor

It’s already hard for some buyers to compete in a market where inventory is dwindling and many out-of-state buyers are offering thousands over asking price. Many of the homes that investors purchased are on the lower- to mid-priced range, which adds more competition for the average middle-class buyer trying to buy a home, first-time homebuyers, and buyers who have spent years trying to save up for a home.

“Investors either already have the cash or they already have the financing in place, and because they have a better chance of closing the deal, and they have a stronger offer with higher deposits and a faster closing, a seller would rather sell to those,” Beracha said.

Seeing a rise in cash offers

Cash deals have taken off during the pandemic housing boom as well. According to the latest numbers from the Broward, Palm Beaches and St. Lucie Realtors, cash deals soared 40% in February in Broward County, while cash offers jumped 13% in Palm Beach County.

For buyers who fall into the lower- or moderate-income range, it’s difficult to compete in a market where cash deals are soaring, making it incredibly discouraging for families who are trying to get into a home, experts said.

Buyers who’ve spent years trying to cobble together enough money for a purchase often aren’t able to get the home they’ve been hoping for, said Kirk Brown, the CEO of HANDY, a nonprofit in Broward County that works to meet the needs of foster care children and those who have been placed in relative/nonrelative care in Broward County.

“They are now forced to live as renters,” said Brown. “I think the common thing is that we are having to send people out of the community to other places.”

Something they are seeing is that many investors are making the units they are buying unaffordable to the people who are living in those neighborhoods.

“When they do rent them, the units just aren’t affordable,” added Linda Taylor, CEO of HOMES in Broward County. “What inventory we do have just isn’t affordable to the people making $40,000 a year.”

© 2022 South Florida Sun-Sentinel. Distributed by Tribune Content Agency, LLC.

What Do Real Estate Brokers Expect this Spring?

 By Kerry Smith

A panel of brokers from across the country shared views on market changes and their expectations. For one, this spring season won’t be a usual one.

MADISON, N.J. – A recent roundtable discussion with several Better Homes and Gardens Real Estate (BHGRE) brokers across the country revealed that historic seasonality patterns have been affected by today’s market conditions – most notably, record low inventory levels.

“As we enter the third spring selling season since COVID-19 emerged, the BHGRE brand wanted to explore what our affiliates were experiencing in different parts of the country,” says Sherry Chris, president & CEO, BHGRE. “The broker panel observed that strict seasonality is seeing signs of change. However, it is important to understand all of the underlying factors contributing to this significant shift in real estate market dynamics. What is clear is that a lack of inventory stemming from stalled new development is setting the industry up for continued disruption. Identifying and overcoming barriers to building new homes will be critical in meeting the incredible demand for housing that now exists in our country.”

Timing trends

The timing of the spring selling season varies by region. In Northern New England, the spring selling season typically kicks off in March, but with only 30 days of supply, there aren’t enough homes to create a seasonal sales “spike” this year. People also appear to be waiting out January and February to see COVID-19 cases go down to reduce potential exposure.

In Portland, Oregon, spring selling season usually starts at the beginning of the year, although the omicron variant surge stalled it this year. Brokers are seeing some traces of seasonality, but it’s not full-blown. People will move as soon as the opportunity presents itself, which means for sellers, there’s never a bad time to sell anymore.

“With just one week of inventory, an uptick in seasonal activity is not possible here in Portland,” said broker Danielle Bade. “Homes sell as soon as they come on the market. People aren’t waiting for a traditional season to enter the market.”

Pricing fluctuations

According to the brokers in Northern New England, prices are still considered moderate compared to urban areas. In Lehigh Valley, Pa., which sits between New York City and Philadelphia, home prices are lower compared to the major cities. In Northern California, prices are flattening out somewhat but still higher than expected due to low inventory. In Portland, prices aren’t expected to come down this year.

Despite double-digit price increases, the brokers interviewed are confident this is not a real estate bubble. Appreciation rates could moderate a bit, but prices won’t come down. Panelists are staying attuned to consumer tolerance for rising prices and seller greed, which could cool the market.

“This is an entirely different dynamic from 2008, which was driven by lax lending,” said broker Chris Masiello. “This is a supply and demand issue that is being guided by demographics: millennials and baby boomers are orbiting the market for the same housing stock. These first-time homebuyers and downsizing buyers are vying for the same properties.”

“There is a potential for prices to plateau and then return to a more normal appreciation rate,” added broker Jack Gross. “We might also see buyer frustration cause people to leave the market because they are tired of not getting a home. But consumer confidence in the housing market is high, which makes them open to overpaying.”

Shifts in buyer mindsets

Brokers interviewed are seeing an increasing sense of urgency from consumers to “win” the home, bidding up the price beyond normal appreciation rates. This means they’re paying now for what a house could be worth in two years. As a result, the phrasing has changed from “I bought a home” to “I won the bid.”

Another shift: People aren’t interested in homes requiring significant sweat equity. Instead, they’re more focused on their careers.

Further, the brokers observed that living with COVID-19 has worn down the psyche. Depending on the region, consumers are either tired of the coronavirus and moving forward with plans or still in a holding pattern created by health anxiety.

“Despite home prices increasing about 30% in Central Florida, the market is not slowing down, although the lack of inventory is discouraging for buyers, particularly first-time buyers who are contending with rising rents,” said Dana Hall-Bradley, broker/owner in Celebration, Fla.

Seller mindset

Participating brokers report that current inventory conditions are giving new meaning to the term “seller’s market.” In some cases, sellers are becoming irrational on pricing, insisting on list prices well above current market values. In other instances, sellers are getting more cautious with pricing too high. However, homes are still getting multiple offers over list price when priced right.

“For most sellers, the biggest deterrent is ‘Where will I go?’,” says broker Chris Masiello.

“We are hearing more from sellers that it’s not always about the highest price – offers with contingencies are less desirable,” said broker Danielle Bade.

© 2022 Florida Realtors®

Condo financing: Fannie/Freddie’s new request for safety info created layers of confusion

Fannie/Freddie’s new request for safety info created layers of confusion. Some boards won’t comply fearing lawsuits and banks won’t lend fearing rejection.

PASADENA, Calif. – Can the condo world live without mortgage giants Fannie Mae and Freddie Mac and their more affordable financing terms?

A fast-developing crisis is hitting condominium association boards and property management companies across the country tasked with filling out Draconian questions required of HOA property management companies.

In consideration of last year’s Champlain Towers condo collapse that killed 98 people, Fannie and Freddie rightfully want to know if America’s condo complexes have deferred maintenance or structural safety issues. To that end, the agencies on Jan. 1 and Feb. 28 instituted new questionnaires for certain applicants regarding the structural integrity of the condo community and whether any code violations are anticipated.

And now a questionnaire boycott of sorts is happening.

“The questionnaire is Draconian. It’s freaking out boards of directors and managers,” said Adrian Adams, founder and managing partner of law firm Adams-Sterling, who advises and represents condo boards. He said several boards have already decided “do not answer these questionnaires. They don’t even want Fannie and Freddie loans.”

Erik Rivera, president and CEO of Manhattan Pacific Management, manages 60 condo (specific) community associations. “Four to five will probably go the (Fannie, Freddie) boycott route,” Rivera said.

The condo questionnaire, it should be noted, is not applicable for certain associations, such as townhouses or planned unit developments, for example. Another exclusion is a single-family neighborhood with a community association.

Beyond the matter of righteous safety matters, other probing questions, such as, “Is the HOA/Cooperative Corporation aware of any deficiencies related to the safety, soundness, structural integrity, or habitability of the project’s building(s)?” may be legal traps, of sorts, to deflect future liability away from Fannie and Freddie.

Recently, Community Associations Institute (CAI) sent a survey to its condo and co-op boards and managers. Early results from 48 respondents indicate 36.8% of mortgage applicants in their HOAs were denied credit because of the new Fannie, Freddie questionnaire. Separately, 31.5% of borrower closings were delayed, according to survey results. Seven of the 48 HOA respondents were from California.

It’s not clear if these denials were purchase loans or refinance applicants. It’s also not clear what information provided in response to the F&F backed questionnaires caused the loan denials, according to Dawn Bauman, senior vice president of government affairs at CAI.

More than 89% of the survey respondents feared exposure to liability because the questions were beyond their knowledge and expertise. Almost 74% of respondents feared exposure to liability for not answering questions (on behalf of the mortgage applicants). From my view, the perception seems to be if the HOA representative does not answer and the lender denies the loan, then the HOA rep and others may be liable to the borrowers.

It’s very early in this new HOA questionnaire world, but Rivera already knows of one lender denial due to the way the HOA answered.

“When an engineering report is pending, for example, and we respond to the questionnaire as such TBD, sometimes that’s not good enough for the lender,” Rivera told me. “Other questions we refer the lender to the association attorney, and they don’t like that, either.”

Fan and Fred have been touting the new questionnaire as optional, not mandatory. I’ve read it on their websites, and I observed it on a webinar featuring Fannie and Freddie condo experts. And they made that claim in a Wall Street Journal article on Feb. 20.

As an alternative, Fan and Fred offer to accept underwriter assertions of several board minutes reviews, engineering report reviews and local government inspector reviews. However, there’s a fat chance any underwriter has the enormous amount of time needed to research (or the expertise) to understand these complicated matters.

And if the underwriter provides this “good to go” assertion and something was missed or was not addressed at all, then the underwriter’s employing lender may eventually be liable.

Lenders I spoke with literally laughed when I raised this Fan and Fred alternative to the HOA questionnaire.

To be fair, about 50% of the loans we run through Fannie and Freddie’s underwriting engines at my mortgage brokerage shop provide for a limited review. For many lenders, this limited review means a much shorter list of HOA questions. These limited review questions may not include the matter of deferred maintenance. But even that topic is getting murkier by the day as lenders worry about these condo safety concerns.

Mortgage lenders are in the business of making mortgages. Every lender I’ve interviewed (all off the record) about this new HOA issue is hopping mad. They complain Fannie and Freddie are providing little clarity and direction. They are leaving it to subjectivity and underwriter judgment when they receive these wonky HOA responses.

Since Fan and Fred have had a long history of making lenders buy loans back later over sometimes nonsense issues, lenders don’t trust the agencies in the abstract. So when in doubt, decline the loan. It’s simply not worth the battle or the expense of the buyback.

“Freddie Mac’s requirements are designed to help ensure residential buildings with aging infrastructure are safe for their residents and the condos and co-ops needing critical repairs have a plan to do so,” said a Freddie Mac spokesperson.

Condos typically represent the most affordable homeownership. The biggest losers in this new, temporary HOA format are folks that need more affordable housing, underserved borrowers, minority borrowers and first-time buyers.

It’s obvious the very important safety and maintenance questions could have been posed on the HOAs in a much less threatening way. Taxpayer-owned Fannie and Freddie are on the inside looking out. They think it’s their gold and it’s their rules. It’s too bad it usually takes a policy crisis for them to pay attention.

“They will likely change (these forms) this summer,” said Robert Nordlund, founder and CEO of Association Reserves who consults with Fannie and Freddie. “They are government entities. They move slowly.”

Fannie and Freddie declined to comment for this column.

© 2022 Pasadena Star-News. All rights reserved. Reproduced with the permission of Media NewsGroup, Inc. by NewsBank, Inc. Jeff Lazerson is a mortgage broker.