Even Though The Country Is In Trouble, Congress Adjourns Without Extending Flood Insurance Program

If you're on a first name basis with any member of the United States Congress, please ask them this very simple question: How in the world could you be taking your spring recess without having extended the national flood insurance program?

Do you political types have any idea how important that program is to any kind of real estate recovery?

Do you even care?

Here is the simple fact: Without flood insurance, many real estate transactions can not close.

True, congress is scheduled to take up the renewal of flood insurance when it comes back into session on April 12th. But in the meantime, properties requiring flood insurance can not close because no new flood policies can be written. Sure, it's only a two week delay (we hope), but a lot can happen in a real estate transaction in two weeks -- and many of those things are not good.

This is the third time in the last few months that the flood insurance program has temporarily expired. The reason? Political wrangling. This time it is because the renewal of the flood insurance program is connected to some new legislation that extends programs for the unemployed.

I'll make you a bet. I'll bet that support for the legislation is divided along party lines. Seems like everything in Washington comes down to party lines, doesn't it? In Washington, even if something is a good idea, if one party supports it the other party will oppose it without offering anything better in its place. Who suffers? The American people.

Well, here's my two cents worth. Congress should make the national flood insurance program a permanently funded program that is always part of the national budget. Don't give legislators a chance to muck around with it or play politics with it anymore. Without flood insurance it is very hard to sell property in places that have beaches, rivers, lakes, ponds, creeks, rain, or even drainage ditches. And after all, we are trying to make real estate recover. So, make flood insurance a permanent program and make its funding permanent.

That's as far as I'm willing to go in writing about a politically sensitive matter. I don't want to get anybody upset with me.

Happy Selling!

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Tampa Bay Area Home Prices Still Falling

In the last year, I don't know how many home owners have told me that they have decided to wait for the market to recover before placing their homes on the market. In their mind, its just a matter of time.

Well, time is not on their side.

By waiting, their Tampa Bay property is most likely going to be worth even less than it is now.

Want proof?

The latest S&P/Case-Shiller home price index reports that Tampa Bay homes fell another 7.4 percent for the twelve months ended January 2010. Only Las Vegas saw a deeper decline in home values -- a whopping 17.4 percent loss. Tampa Bay currently ranks as the second biggest loser behind Las Vegas.

Many economists and real estate gurus are predicting further price softening as the government's home buyer tax credit program of $8,00 or $6,500 comes to an end after April 30th. In addition, interest rates on home mortgages will probably move upward since the Federal Reserve will stop supporting mortgage markets. Moreover, in the Tampa Bay area, nearly half the homes sold are short sales or foreclosures which are sold at less than market value and further drive down real estate prices. Finally, the area suffers some of the worst unemployment in the nation, with an unemployment rate of about 12.5 percent of the available workforce -- and unemployed people don't buy homes.

None of these things bodes well for real estate markets to rebound anytime soon. So, the longer you wait, the less valuable your property becomes.

See why I say that time is not on the side of the seller?

Yes, there was a slight rebound in housing prices last fall. But recent bad economic news has virtually destroyed any gains that might have been seen then. As an overview, Tampa Bay prices have dropped 42 percent since reaching their peak in July, 2006. Prices today hover at about the same level as they were in May of 2003 -- seven years ago!

So, what's the moral of this story? Well, you can probably draw a lot of conclusions but here's the one I like: If you need to sell your property, put it on the market now. If you are waiting for prices to return to some high level, well, you might be waiting for a very long time.

So, sell it now. Take your financial lumps. Get on with your life. Waiting for prices to come charging upward may prove to be a very bad strategy.

Happy selling!

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Realtor Magazine Just Ticked Me Off

I've been in the real estate business for a long time. During all those years as a professional real estate agent, it was drilled into my brain that there is no such thing as a national real estate market.

Why?

Because real estate markets depend on local economic conditions. If the local economy is growing, jobs are being created, mortgage money is plentiful, and home inventory is adequate. Sure, in a market like that local real estate sales are probably doing great.

But, we all learned, in another city or state, jobs could be being exported offshore, wages could be depressed, plants and factories could be closing, mortgage money could be difficult to obtain, and the market may be flooded with available homes for sale. In that case, the real estate market could be in bad shape.

And, we all learned, the thing about houses is that they are not portable. You can't pick up your house and move it to some area where the market is hot and then sell it. If we could do that, half the homes in Florida, California, Las Vegas and numerous other areas would be getting shipped someplace to be sold off.

So, what moves across my e-mail this afternoon? Why an article from the National Association of Realtors.

What did they report?

Nothing much. Only that there appears to now be a national real estate market and it is improving!

Yes, according to Realtor Magazine, "Housing Experts Say Real Estate is Recovering". The magazine states that some of the nation's leading economists believe the housing market has turned and better days are about to arrive.

They claim that jobs are on the increase. They believe credit is improving. And they believe that affordable homes will overcome impediments such as rising interest rates and the elimination of the Federal stimulus program.

Who are these rah-rah gurus? Why, none other than Dean Maki, Chief Economist for Barclays Capital. And Karl Case, co-creator of the S&P/Case-Shiller Home Price Index and a professor of economics at Wellesley College. Even Bruce Kasman, Chief Economist at JP Morgan Chase was quoted in the article as saying, "The underlying trend is turning positive."

Somebody ought to take these three guys to a meeting of local real estate agents in Tampa Bay and let us inform them that there is no such thing as a national real estate market for them to spout off about. The only market that matters is the one in which the property you own is located. And since you can't move the house to a better part of the country, you better take into consideration all the bad stuff that might be happening where you live.

If you happen to be in Tampa Bay, you have unemployment hovering around 13 percent. You have prices continuing to fall by about 11 percent annually according to Mr. Case's latest price index report on this area. You have mortgage interest rates that are projected to jump by at least a point over the next few months that a chief economist from JP Morgan Chase ought to know about. You have builders who have just finished 2009 with the worst year on record and have projected an even poorer year for 2010. And locally we have something in the neighborhood of half our sales being either short sales or foreclosures. In addition to all that, we have about a 14 month supply of single family home inventory in the MLS right now, and heaven only knows how much ghost inventory is floating around in Hillsborough, Pinellas and Pasco Counties.

So, from where I sit, if this is a real estate recovery it looks pretty lame to me. But then, I'm just a local real estate agent. What do I know?

Here's the point of all this: The "underlying numbers" that economists are always talking about only matter when they are the numbers you have to deal with in your local market. There is no national real estate scene. And you guys ought to know it.

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A Tip-of-the-Hat To James Thorner

Did you read James Thorner's column, (Un)Real Estate, in the St. Petersburg Times for Friday, March 19th?

If you have an interest in Tampa Bay real estate but didn't read Thorner's words, go buy a copy of the paper. Or borrow a copy of the paper. Or have somebody send you a copy of his story. Or go to the website.

No matter how you do it, get that column and read it. Study it, in fact.

Finally, somebody is "telling it like it is".

Thorner has correctly pointed out that the so-called real estate recovery is on shaky ground around Tampa Bay. He comes to this conclusion based on some darn convincing evidence from three sources: 1. Florida real estate agents have reported an 11 percent price decline in Tampa Bay from December to January; 2. The S&P Case-Shiller Home Price Index reported a drop in prices of 11 percent from December '08 to December '09 around here; and 3. Discouraging reports from the Greater Tampa Association of Realtors about recent sales.

He could easily have added median price declines from the Pinellas Realtor Organization as a fourth source of discouraging news for home sellers.

Like you, I already knew that prices were continuing to fall in this neck of the woods. Ask any real estate agent and he or she will quickly point out that despite an increase in the number of properties sold recently, the prices for those properties have continued to decline since peaking in 2006. Sure, a few isolated neighborhoods have staged modest price increases lately and the rate of decline has been reduced in recent months, but for the most part the area is still looking eyeball-to-eyeball with declining property values.

What I like about Thorner's story is that he correctly tells us why this price decline is likely to continue, to wit:

• Foreclosures and mortgage defaults: Thorner points out that another bunch of Alt-A Loans will likely start defaulting in greater numbers this year. Alt-A's are mortgages for moderately risky borrowers and rank somewhere between subprime and prime. Thousands of these types of adjustable rate mortgages are scheduled to reset this year and it is expected that many of these mortgages will eventually go into bank foreclosure. REO properties (homes owned by the bank) generally sell for very large discounts and tend to drive down the prices of other properties.

• End of government subsidies: The home buyer tax credit programs will end in April and June. These programs help to support prices. When they end, it is likely that prices will be lower without the government's supportive program.

• Rising Mortgage Rates: The reason mortgage rates are so low now is because the Federal Reserve has been propping them up. Those props are being withdrawn pretty soon, so it is likely that mortgage interest rates will rise. I hear on the grapevine that mortgage rates will likely jump a full point, from 5 to about 6 percent or even a bit higher for a thirty year fixed loan. Thorner reported the same thing in his column. We'll have to wait and see how high they go. But higher mortgage rates mean higher monthly payments, and that means buyers will have to purchase their homes for less money or purchase less expensive properties. No matter what, it's not a good situation for a real estate recovery.

• Record Low Housing Starts: 2009 was a record low year in housing starts for Tampa Bay builders. They have predicted that 2010 will probably be worse. You would think that fewer new homes means less competition for those needing to sell existing homes. You would think that such a circumstance would help to improve the prices for existing homes. Ahhhh ... but you ignore the employment problems.

• Mind-Boggling Unemployment: Thorner reports that Tampa Bay unemployment reached 13.1 percent in January. In Pasco County, it's darn near 15 percent. With fewer jobs, there will be fewer homes sold. Simple as that.

So, it seems that the deck might continue to be stacked against a meaningful real estate recovery for the foreseeable future. For sellers, it doesn't really look too promising unless you can sell for a low price. For long term buyers, I think you should act now before the mortgage rates take a jump and while you still might be able to get in on the government subsidies if you act fast. For "flippers", well, I think I'd find another line of gainful employment.

Thanks to James Thorner for a very informative article that pretty well summarizes the whole darn situation.

Happy selling!

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February Was Flat

Some years ago, those of us in the real estate business in Florida and especially in the Tampa Bay area, used to really look forward to the winter months of January, February and March. Why? Because that was "the season". "Winter Visitors" often became "Winter Buyers" and real estate sales always took a hefty jump when the "snowbirds" arrived. It was great!



Well, times have changed. This winter's buying season is far short of what it used to be "back in the day" and the unseasonable El Nino weather has not helped one little bit.



Let's take a look at how we fared in February by first checking out the Absorption Rate (AR). The AR, as you know, is calculated by dividing the number of units sold in a month by the total number of listings in the MLS system.



For February, the AR for single family homes was 7.9 percent as compared to January's 6.8 percent. That's an improvement, but nothing to really brag about.



Condos seemed to do a little better. The AR for condos in February was 6.6 percent; up from January's 5.7 percent figure. Actually, that's a pretty good increase as you will see once we look at the raw number of sales.



Single Family Home Sales



During February, the MLS system had a total of 6,346 single family homes listed for sale. In January there were 6,399 -- virtually the same number. Sales of single family homes did jump up a little in February as compared to January. In February there were 502 single family homes sold in Pinellas County while in January the sales figure was 438. That's a nice little jump and explains the upward movement in the AR for February.

By the way, just so you will remember it, in February of 2007 there were 11,003 single family homes in the MLS. Ahhh, the good ol' days!

The median price for homes in February 2010 was $130,000. In February 2009 it was $139,900. That's a drop of 7.1 percent in twelve months.

Keep this in mind as well: in October 2005, the median price for a single family home in Pinellas County was $276,000. And yes, if you bought then you probably are underwater now.

Condominium Sales

In February, there were 5,505 condos listed for sale in the MLS. In January, there were 5,503 listed. A net gain of 2 listings.

Condo sales, on the other hand, show some real improvement. There were 365 condos sold in February as compared to January's 312. So, that explains the jump in AR for condos.

The median price for condos continued to fall as compared to last year. In February 2010, the median price was $110,000; in February 2009 it was $117,500. That's a drop in median price of 6.4 percent for the year just ended.

Now, let's all get ready for some big improvements in condo sales for March. They just sold about 50 or 60 units downtown at The Signature through an auction. That's going to make March's figures look really great, but don't be fooled by it. It will probably raise the AR and the median price for condos by quite a bit.

Just in case anyone out there is keeping track of such things -- and let's hope you have more to do in life than keep track of this kind of stuff -- there are now 11,851 properties for sale in the Pinellas MLS. In February of 2007 there were 18,242 properties for sale.

Now you might say that's really great, we're cutting down the inventory and that should help bring prices back. Malarkey.

Sure, real estate agents have sold quite a bit of property in the last three years, but an awful lot of this decrease in inventory is the result of sellers who have simply given up and taken their property off the market or found renters for them.

Also, keep in mind that mortgage bankers have been holding off the release of a lot of foreclosed properties in order to keep from flooding the market and driving prices even lower. This so-called "ghost inventory" will have to be disposed of before we can start to talk about a true real estate recovery.

Still in all, the recovery starts with the very next sale. So good luck and happy selling!

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What Makes A House Overpriced?

In the past few months, I've had a number of conversations with sellers who simply do not seem to understand why their property is overpriced and what that REALLY means.

Let's say that we're trying to sell a house in a nice neighborhood where people have been remodeling and fixing up their homes for the past few years.

Our subject property, however, was last remodeled in 1975 and it looks like it.

Everything in the house works fine -- the baths are all A-OK, all the kitchen appliances are in top-notch condition for their age, and those window air conditioners cool things down just fine in the summer. I even like those little tiny 1-inch hexagonal white tiles on the bathroom floor.

As far as the seller is concerned, his house is just superb.

Problem is, buyers don't think the house is so superb.

Buyers want the latest and greatest as far as bathrooms, kitchens, central heating and AC goes, along with lots of other fancy doo-dads that add to the livability of the home. When those things are not there, buyers want to add them once they buy the place.

So, sellers need to remember that if a buyer is going to remodel the house after he buys it, he can't pay you top dollar for it. If he does, by the time he gets finished paying for all those doo-dads the house will be way overpriced for the neighborhood. In other words, if the house would be worth, say, $300,000 all fixed up, and it will cost $75,000 to pay for the remodeling, the buyer can only afford to pay you $225,000 for the house. And that is your top dollar.

I just love that word: doo-dads. I used it in an advertisement I wrote about 30 years ago and haven't used it since. Neat word, don't you think?

Anyway, a property that is suffering from, well, let's call it benign neglect, is not going to sell for top dollar even though the seller wants it to. Not gonna happen. Sellers need to look at their property with a realistic idea as to its true value today and not compare it with other houses that have added all the doo-dads. Those houses are not comparable. To be honest, real estate agents make the same mistake sometimes when doing CMA's -- and agents should know better.

Realistic pricing will get houses sold even in today's market.

Happy Selling!

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Renting Versus Buying

Should you continue to rent or would you be better off buying?

Sometimes, that's a hard decision to make. It's not always a matter of money. You need to consider a lot of things including how long you intend to stay in a given area, your career prospects, family expansion plans and the like. These and countless other matters will have an impact on your rent versus buy plans.


But let's assume for the moment that you can boil it all down to a financial decision. Based on what you are paying now for rent, how much house can you afford to buy ... and will that amount get you the kind of house you want in a neighborhood where you want to live?

John Fenech of Sunbelt Lending e-mailed me some info on that very subject this week. He converted rent payments to mortgage loan amounts so you can see just how much house can be purchased for the same amount of rent money. Here's what John sent me ...

Payment --------------------------Loan Amount

$1,105/mo ------------------------$150,000
$1,399/mo ------------------------$200,000
$1,745/mo ------------------------$250,000
$2,211/mo ------------------------$300,000
$2,480/mo ------------------------$350,000

Now, all of the options are based on full documentation loans, 30-year fixed with no pre-payment penalty. The principal and interest payments are based on an interest rate of 5.00 percent and subject to change until you apply. Taxes and insurance, which is included in the payment amounts, are realistic estimates but could be higher or lower depending on your particular situation. The point is, this is probably pretty accurate.

With so many houses, condos, and town homes on the market today, you can probably find the kind of property you're looking for in a neighborhood where you would like to live. And, if you're already making rent payments on time, well, why not buy?

Give it some thought.

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How Do Home Buyers Shop?

Ever wonder how home buyers find out about houses that are for sale?

Well, according to the National Association of Realtors, here's what buyers use as their resource for a home search ...

1. Internet: 87%
2. Real estate agent: 85%
3. Yard sign: 62%
4. Open house: 48%
5. Newspaper ad: 47%
6. Home book or magazine: 30%

Now you know why real estate listing agents make such a big deal out of internet sites.

Happy Home Selling!

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