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Monday, November 27, 2023

Home Sales Likely to Improve in 2nd Half of 2024

 Fannie Mae researchers: Mortgage rates in 2024 will retreat from recent highs and average 6.8% by year’s end; in turn, home sales will increase modestly over the year.

WASHINGTON, D.C. – Economic growth remains likely to decelerate and ultimately result in a mild recession in 2024, followed by a return to growth in 2025, according to the November 2023 commentary from the Fannie Mae Economic and Strategic Research (ESR) Group.

While the combination of ongoing employment gains and decelerating inflation has increased the likelihood of a soft landing, the ESR group contends that, between a likely slowdown in consumption growth stemming from an imbalance between spending and incomes and the rising real federal funds rate weighing on consumer and business activity, a downturn remains the most likely outcome.

With mortgage rates having previously neared the 8% mark, the ESR Group expects existing home sales to decline further in the near term but bottom out in early 2024.

Regardless of whether the economy manages a soft landing or enters a mild recession, the ESR Group forecasts mortgage rates in 2024 to retreat from their recent highs and average 6.8% by the fourth quarter.

As such, it expects home sales to begin to increase modestly over 2024 but to remain constrained by the likely persistence of the so-called “lock-in effect” and the low supply of homes for sale. New home sales and starts, which have remained comparatively resilient over the past year, are expected to remain so in 2024.

“The economy is now slowing from the otherwise robust first estimate of third quarter growth,” said Doug Duncan, Fannie Mae senior vice president and chief economist. “The slowdown in employment gains has continued, and stress is growing on consumers’ ability to sustain their high levels of spending unsurprising results that we attribute to the often-lagged economic effect of monetary policy tightening.

“At the same time, housing has been and continues to be under serious affordability pressure, resulting in recessionary-level home sales activity. While many current owners with low mortgage rates will likely continue to be discouraged from listing their homes, we expect mortgage rates to trend modestly downward in 2024, which should help kickstart a gradual recovery in home sales into 2025.”

About the ESR Group: Fannie Mae’s Economic and Strategic Research Group, led by Chief Economist Doug Duncan, studies current data, analyzes historical and emerging trends, and conducts surveys of consumer and mortgage lender groups to provide forecasts and analyses on the economy, housing, and mortgage markets.

Note: Opinions, analyses, estimates, forecasts, and other views of Fannie Mae’s ESR group should not be construed as indicating Fannie Mae’s business prospects or expected results, are based on a number of assumptions, and are subject to change without notice.

© Fannie Mae Economic and Strategic Research Group

Thursday, November 2, 2023

Condo Reserve Rules Push Some Toward Foreclosure

 By Anthony Man

Some fixed-income condo residents in older buildings must pay for expensive deferred-maintenance repairs as they watch their property insurance costs rise.

FORT LAUDERDALE, Fla. – The one-two punch of the post-Surfside law designed to require condominium associations to set aside sufficient reserves for structural repairs combined with Florida’s unending increases in insurance costs is threatening to produce a wave of foreclosures.

“People are going to be losing their homes. Foreclosures are increasing,” warned Broward County Commissioner Mark Bogen. “As it looks right now, there are going to be so many people unable to live in their homes.”

The concerns are coming from across Broward County.

Bogen represents northern Broward, including Wynmoor Village, the large condominium community in Coconut Creek. And in his non-elected job, as a lawyer, he does a lot of work on condo issues.

“The condos have been hit hard,” said state Rep. Robin Bartleman, who represents southwest Broward. “You can’t walk into Century Village right now without hearing” concerns.

At another condominium, in Miramar, Bartleman said residents have to pay assessments for roof work, more money for higher condominium association insurance, and assessments to increase reserves.

The ultimate result, she predicted: “We’re going to have foreclosures all across this county.”

The elected officials who discussed the issues at two workshops last week aren’t promising comprehensive fixes – especially not fixes that will produce quick, dramatic change.

As far as easing the impact of the reserve requirements on condominiums, state Sen. Jason Pizzo, chair of the Broward Legislative Delegation, was blunt: “There is not going to be a state bailout as it relates to condominiums at all. There won’t be.”

Surfside changed things

For decades, many condominiums didn’t set aside enough money to pay for future long-term maintenance costs, and the consequences were vividly illustrated by the 2021 collapse of the Champlain Towers South in Surfside in which 98 people were killed.

State law was changed in the aftermath of the disaster. “Surfside was certainly a wakeup call,” said state Rep. Chip LaMarca of Lighthouse Point.

The new law potentially means large payments to boost reserve accounts, which are equivalent to rainy-day funds to cover large, expensive repairs, and probable special assessments to fund major structural repairs. It goes into effect in 2025.

Bogen and County Commissioner Steve Geller said they’d like to see some delay in the ramping up of reserves.

Geller said some changes are needed. “But I hope that those changes would not include repeal of the law, because there really is a problem with these condominiums with their structural soundness,” he said.

Associations have often voted to waive setting aside money for reserves, something the new law prohibits for funding for projects related to structural integrity such as the roof, load bearing walls, electrical systems, plumbing, windows and foundations, among other items.

Geller recalled his time representing Hallandale Beach in the state Legislature in the 1980s and 1990s. Some residents didn’t want to pay at the time for problems they hoped would have to be addressed after they were no longer alive.

“I would go to people and say, ‘You know, you need to stop waiving your reserve….’ They would say, ‘young man, young man, I’m 77 years old. I’m not going to worry about what’s going to happen in 10 years. Let my children worry about it because they’ll own the condo then. And the problem is that we had so many people that just kept waiving and waiving and waiving.”

Geller said he’d like to see some extra time. “You can’t go from 40 years of ignoring it (and) say you must be in full compliance in five years. So I think the solution that makes sense is just to stretch out that period,” he said.

But, he added, the deadline to start saving shouldn’t be pushed off. “If you just extend it for five years, they’ll still do nothing until the fifth year.”

LaMarca said “lengthening the glide path” for repairs issues identified in a condominium’s structural reserve study “would be helpful.”

All of Broward’s elected county commissioners and state legislators are Democrats, except for LaMarca. He’s a member of the minority party in Broward and the overwhelming Republican majority that controls the state Legislature.

Other fixes

Several other steps were advocated by legislators and commissioners.

LaMarca said he expects more money to be devoted to the My Safe Florida Home program, through which the state pays for inspections and subsidies homeowners making upgrades to make them more resilient to storms. Previous funding has already been obligated, LaMarca said.

“We do need to, in my mind, put some more resources there,” he said.

Pizzo, who represents eastern Broward and northeastern Miami-Dade counties, said condominiums should be allowed to invest reserves instead of keeping them in no-interest accounts. And he said more financing options could be explored for financing structural upgrades.


Geller and several other elected officials said they are hearing even more about the impact of ever-increasing insurance costs.

County Commissioner Hazelle Rogers said some are struggling to pay their premiums. She said some older residents who own their own homes outright after having paid off their mortgages are opting against carrying insurance.

State Rep. Patricia Williams, who represents the north-central part of the county, said she, too, is hearing mostly about insurance.

“I get emails after emails every day,” citing one mother of five who said she did not know what she would do after receiving a bill for a 300% premium increase. “At this point, all I can say is we’re working on it.”

The insurance industry and the Legislature have asserted that excessive litigation in Florida is a major factor in driving up insurance premiums. The Legislature responded by restricting people’s rights to sue their insurance companies, but it’s unclear if that will result in any reduction in the rapid increases in premiums.

Pizzo said is unlikely. He said Citizen Insurance Co., the state-backed insurer of last resort, has 1.4 million policies, and 22,000 open litigation cases, which is about 1.7%. He said the notion that litigation is driving insurance premiums is part of a narrative that is “just proving not to be true.”

Combined effects and fixed incomes

Bartleman said the higher condominium costs coming as insurance prices are going up is squeezing many people, especially older people on fixed incomes. Many, she said, can’t afford an extra $100 or $200 a month.

“If you didn’t have the (cost of the reserve) that would be fine. But now put the insurance crisis on top of that and then put having to replace your roofs because you can’t get insurance without replacing our roofs, it’s crippling and we’re going to have foreclosures all over this county.”

The complications could have a ripple effect for the broader South Florida economy, Deerfield Beach Commissioner Tood Drosky, president of the Broward League of Cities, said in a separate workshop with state lawmakers.

“I’ve had residents that have moved to Deerfield Beach from outside the state and they love it here. And they say ‘I didn’t realize it was going to go up so fast and I’m almost regretting coming to Florida,” Drosky said.

“I don’t want that to happen, but we’re going to price out those that have moved here and made Florida their home and the middle class that has been here that we’re going to somehow going to squeeze out and move to other parts of the state.”

State Rep. Daryl Campbell, who represents a central Broward district that straddles Interstate 95, said the outcome for others is potentially even worse. As housing and insurance costs escalate, he said some people are losing their homes and have no place to go.

Campbell said “homelessness is not looking like how we typically would have it in our mind, where you’re panhandling on the side of the road. Homelessness is looking like five, 10 cars outside of one home or apartment complex or couch surfing or even people sleeping in their cars in Walmart parking lot.”

© 2023 South Florida Sun-Sentinel. Visit Distributed by Tribune Content Agency, LLC. Information from Sun Sentinel archives was used in this report.

Citizens Insurance to Transfer 125,000 Policies

 Four private insurance companies received state approval to move policies, though the actual number will likely be lower. Slide will take the most – up to 75,000.

TALLAHASSEE, Fla. – On Tuesday, Florida regulators approved proposals by four insurance companies to take as many as 125,000 policies from Citizens Property Insurance Corp., the state “insurer of last resort,” in January. The number of policies that shift from Citizens to the private insurers likely will be lower than the approved totals.

Insurance Commissioner Michael Yaworsky signed the four orders, part of what is known as a “depopulation” program aimed at shrinking Citizens.

According to information posted on the Florida Office of Insurance Regulation website, the orders allow:

  • Slide Insurance Co. to assume as many as 75,000 policies from Citizens
  • Florida Peninsula Insurance Co. to assume as many as 30,000 policies
  • Edison Insurance Co. to assume as many as 10,000 policies
  • US Coastal Property & Casualty Insurance Co. to assume as many as 10,000 policies

State leaders have long sought to move policies from Citizens into the private market, in part because of concerns about financial risks if a major hurricane or multiple hurricanes hit Florida. Under Citizens, all Florida residents share in the risk should a major event occur.

Citizens saw explosive growth during the past three years as many insurers dropped customers and raised rates because of financial problems.

As of Friday, Citizens had 1.331 million policies, according to its website – but that number is down from 1.412 million earlier in October because five private insurers assumed 99,773 Citizens policies in mid-October as part of the depopulation program.

Regulators also approved a series of proposals by private insurers to take out additional policies in November and December.

© 2023 The News Service of Florida. All rights reserved.