Volume Up, Prices Down In Tampa Bay

The St. Petersburg Times reported that sales of existing homes in Tampa Bay rose 6% from April to May, 2011. The median price, however, dropped from $121,400 to $120,200.

Sound familiar?

You know ... prices go down, volume goes up. Kind of has a familiar ring to it, doesn't it?

Nationally, existing home sales in May fell 3.8%. Lawrence Yun, the chief economist for the National Association of Realtors, blames the lending community for this drop in sales across the country. Yun believes homes sales are being held back because lenders are relying on overly restrictive loan underwriting standards. He also attributes reduced closings to rising gasoline prices and severe weather.

There may be something to what Yun says, but frankly, I think the more obvious reason for reduced real estate sales is unemployment. I'm not an economist, but it just seems to me that when you have over 9% of the work force unemployed, and heaven-only-knows how many people are underemployed or unsure if they will have a job tomorrow, well, people just don't buy real estate. You can't blame them!

Maybe sales will pick up next month. Keep your fingers crossed.

-30-

Invest In Real Estate NOW!!!!

About two weeks ago I received one of those unsolicited telephone calls from somebody who wanted to change my entire investment portfolio and guarantee me a 10% return by investing in the futures market.

"Sorry", I said, "but I'm investing in real estate from now on."

"Sure," says he, "that's about as liquid as concrete." At that point I hung up the phone. I realized that this guy was just another salesman and that any further conversation with him would indeed be about as productive as talking to concrete.

If you are an investor, I would suggest you start (or continue) investing in real estate. The reason? Just do a quick scan of next Monday's Investor's Business Daily(IBD). (I get Monday's IBD on Saturday. It helps me foretell the future.)

Here's what Monday's IBD will tell you about your investments in stocks, bonds, mutual funds, futures etc. etc. etc.

Under IBD's headline "Another Week, Another Loss" you will learn that:

The New York Stock Exchange sank 1.6% last week

The Nasdaq dropped 1.5% last week

The S&P 500 fell 1.4% last week

Oil fell below $100 per barrel

Gold hit a 2-week low

Silver sank 3%

Treasury yields fell back below 3%.

I could go on and on with bad news from Wall Street -- and that's just from last week! No wonder they call the last 10 years the "lost decade" for investors. You can't make money with money anymore!

So, what are you supposed to do?

May I suggest you follow the "golden brick road" that many smart investors are now trodding and start buying investment property? This is the best time to be in the real estate market in many years because of all the short sales and bank foreclosures -- and things should continue looking up for the foreseeable future as more and more troubled homeowners face the loss of property due to the uncertainties of the current American economy. This enables you to purchase properties at very reasonable rates.

Remember this, people who lose homes still need a place to live. Consequently, the rental market is good right now and people are willing to pay well for nice rentals. Many of those being forced out of their homes are families, so buying larger single family homes makes a sound investment for you. If you don't want the headaches associated with managing property, turn it over to a reasonably priced professional property manager.

How much money can you make now in rental properties? I don't know, but some people enjoy much better returns on their real estate than they do in "traditional" investments. Look, let's say you've got a $50,000 CD paying you what, about 1.2% per month. That comes out to about $50 per month. Go purchase a single family short sale for $50,000 -- pay cash for it if you want -- and rent it for the going rate in your area. I'll bet dollars to donuts you will rent it for more than the $50 per month the bank is paying you on that CD!

Let's say you had that same $50,000 in Nasdaq stocks. You had a nice little gain going until last Friday. On Friday, Nasdaq fell 1.5%. All the gain that you had made for 2011 was lost. All of it! Six months of invested profits are now gone, gone, gone. Of course, you get to start all over again on Monday when the market opens -- unless it falls again, which is very likely given the situation in Europe and China.

Here's all I'm suggesting: If you're an investor it's time for you to give today's real estate opportunities a serious look. Don't look for the value of the property to go up like it did a few years ago. Those days are over. Instead, look for your investment to pay you rental income on a regular basis. Think of that rental income as your dividend and enjoy those profits.

-30-

Lawrence Yun Says Tampa Bay Housing Recovery Is A Year Behind Nation

Lawrence Yun is a genuine big shot. No, I mean it. Yun is the real deal. He is the chief economist for the National Association of Realtors (NAR), and when Yun speaks people listen -- or they had better.

Yesterday, Yun spoke to a group of real estate agents at the Greater Tampa Association of Realtors. Somehow, my invitation to this engagement must have gotten lost in the mail. Your's too?

Well, here's what Yun said. Yun told the assemblage that the Tampa Bay area's real estate recovery is running about a year behind such cities as Miami, Phoenix and Las Vegas. He pointed out that right now, we have enjoyed a 14.2% jump in real estate sales volume compared to the same time last year, and that we now have a housing inventory of 6.2 months which is down from the 20 months of housing inventory that we had a couple of years ago. When you have about a 6-month supply of homes in inventory you have a market that is pretty much stable.

Sellers, however, will not be entirely happy with Mr. Yun's additional comments. Despite the increase in volume, Yun pointed out that prices here continue to slide. In fact, he said that prices in Tampa Bay have fallen an additional 7% in the last year. So, that typical $200,000 house that you bought last year is probably worth about $186,000 now.

Yun said that Florida's real estate recovery should begin picking up. He stressed the fact that even though Florida's economy was pretty uninspiring, it was still Florida. He predicted that retiring baby boomers will return in the next few years to drive sales volume and prices upward as people seek warmer winters in the sunshine state.

There is one fly in Yun's prediction, however, and it looms large in the recovery picture.

The federal government is apparently considering "an initiative" which will require borrowers to pay more cash up front when obtaining the best mortgages and interest rates.

Borrowers who don't meet certain income-to-debt ratios might be required to make a full 20% down payment. This initiative, aimed at helping the country avoid another foreclosure crises, could be finalized in about a year.

If this initiative becomes law, some 60% of all potential real estate buyers would be disqualified from obtaining a mortgage with the best and lowest interest rates. This will make monthly mortgage payments higher and will likely slow down the real estate recovery.

Anyway, now you know what Lawrence Yun was doing in town yesterday.

-30-

April & May Real Estate Sales: Lots of Volume

I didn't bother to write a sales update for April because the newspapers seemed to be spreading a lot of ink letting everybody know that real estate sales volume in Pinellas County and the entire Tampa Bay area was pretty darn good. Why should I repeat what they are writing?

However, the paper does not seem to have gotten out the word that May was a fairly good month as well.

The Absorption Rate (AR) for May for single family homes was 15.3% as compared to April's 15.4%. See what I mean? Pretty close. For condos, the AR for May was 11.9% as compared to April's 13.2%. That's pretty close, too!

Here's the thing you need to keep in mind: these are measurements of VOLUME. If you examine the VALUE of the homes and condos being sold you will see that there are a lot of sales of properties priced under $200,000 and that 64% of the sales are to cash buyers.

So, what does that mean? Simply this. Most of these sales are being made to investors. The tip off? What's getting sold are a lot of lower priced homes -- probably short sales and foreclosures -- and they are being purchased as cash investments. What's not selling so well? Why, all those higher priced properties. The percentage of properties priced above $300,000 falls off significantly with each incremental increase in price. So, if you've got a luxury home on the beach or golf course and you keep reading about how sales have gotten red hot in Pinellas County, it's probably very frustrating for you just to open the pages of the newspaper because your property remains unsold. By the way, there is a solution to your problem: Lower The Price!

Single Family Homes

In May, there were 4,916 single family homes listed in the MLS. Of those, 754 were sold during May. That's pretty good. The median selling price was $117,000. That is a 15.7% drop in price compared to May of 2010. See what I mean ... good volume but prices continue to slide downward.

Condominiums

There were 4,720 condos in the MLS system for May, and 562 condos were sold that month. Condo sellers have to feel good about that. I mean, back in 2009 we had months where fewer than 200 condos sold. So, condo volume is headed upward. Condo prices, however, are still headed downward. The median condo price for May was $79,400 as compared to $118,800 for May of last year. That's a drop of 33.2%.

So what we're seeing in Pinellas County is good activity among cash investors, a reduction in listing inventory, and probably some frustration among sellers of luxury homes. All in all, however, I think things are looking up. Remember, we have to sell off this inventory of distressed property before we can breathe some real life into the real estate markets. So, keep your chin up!

-30-