Florida’s consumer confidence rises as economic fears ease

GAINESVILLE, Fla. – Sept. 30, 2009 – Belief that a national economic recovery is under way boosted Florida’s consumer confidence three points to 74 in September, according to a new University of Florida survey.

“I think Florida consumers are buying into the argument that the worst of the recession is over and we have avoided a complete meltdown,” says Chris McCarty, survey director of UF’s Bureau of Economic and Business Research. “Once again, they have surprised us with a higher-than-expected index.”

This month’s three-point rise follows a four-point revised increase in August. Of the five components that make up September’s index, three rose, one declined and one was unchanged. Perceptions of personal finances now compared with a year ago remained unchanged at 44, only five points above its all-time low of 39 in December. Expectations about personal finances a year from now fell three points to 81.

In contrast, perceptions of U.S. economic conditions over the next year rose three points to 75, while expectations about economic conditions over the next five years rose five points to 86. Perceptions of whether it is a good time to buy big-ticket items, such as appliances and cars, rose nine points to 84.

“It is worth noting that the two index components that gauge perceptions of personal finances both now and in the future are flat or down,” McCarty says. “All of the increase is in perceptions of future economic conditions, and in the perception that if you have the money, it’s a good time to buy.”

There are some signs that the economy is improving, he says.

Once again, the median price of a single-family home is virtually flat compared with the previous month, and up for the year, suggesting that housing prices in many areas of Florida have bottomed out, McCarty says. Although foreclosures are still high, the rate seems to be declining.

In other good news, inflation and, in particular, gas prices remain low overall compared with a year ago, McCarty says. In the past few years, gas prices have dominated the consumer confidence index. In addition, the stock market is still up for the year and at least for now appears stable.

“On the negative side, unemployment remains at 10.7 percent for Florida,” McCarty says. “This number is not expected to improve much until next year, and it could still get worse. Florida lost population this past year and could do so again as the underlying problems that prevent people from moving are still in place.”

Tourisms both domestically and internationally also are down as consumers trim discretionary spending, McCarty said. Programs such as Cash for Clunkers at least temporarily lifted retail sales, but sales tax revenues in Florida have dropped 10 percent from a year ago.

“In the near term, we expect consumer confidence to decline at least a point or two as the holiday season nears and stimulus programs like Cash for Clunkers and rebates for first-time home buyers expire,” he says. “The discussion about health care reform will be at center stage this fall, and may affect confidence if the plans involve increased payments from the middle class.”

Also of economic concern is that, at some point, extended unemployment benefits will run out, putting more pressure on the unemployed. In the long term, consumers need to be prepared for the inevitable drawing back of stimulus money from the economy, McCarty says.

The U.S. government effectively printed money to avoid a depression, and at some point most of the money will have to be withdrawn from the economy to avoid inflation and a very weak dollar, McCarty says. When that happens, interest rates will rise dramatically.

“We also have to think about how the Florida economy will adjust moving forward,” he says. “It is likely that discussions about off-shore drilling will receive much more attention as Florida looks for industries to replace those dependent on population growth.”

The research center conducts the Florida Consumer Attitude Survey monthly. Respondents are 18 or older and live in households telephoned randomly. The preliminary index for September was conducted from 412 responses. The index is benchmarked to 1966, so a value of 100 represents the same level of confidence for that year.

© 2009 Florida Realtors®

International buyers confident of Fla. recovery

MIAMI – June 15, 2009 – Gerson Lehman Group reports that international realty buyers believe the Florida housing market is poised for recovery, and they are paying close attention to distressed properties in the state. The report says these international buyers view homes in the United States as “desirable, profitable and secure” investments.

“Those who delay buying their dream home in Florida may soon find that they have to pay considerably more for the same property in just a few months,” advises the report’s author, Howard Liggett, president of Distressed Real Estate Consulting Services.

Liggett cites data from the National Association of Realtors® and the Florida Association of Realtors® indicating that 25 percent of international buyers are Canadian, 21 percent are British, and 21 percent are western European.

Bernanke: Economy on pace for ‘09 turnaround

WASHINGTON – June 5, 2009 – The pace of economic contraction is slowing, indicating the economy could bottom out and then turn up later this year, Federal Reserve Chairman Ben S. Bernanke told the House Budget Committee on June 3. He cited recent reports, including a flattening out of the decline in consumer spending and signs of a bottom in the housing market.

Bernanke said the economy “has contracted sharply since last fall, with real gross domestic product [GDP] having dropped at an average annual rate of about 6 percent during the fourth quarter of 2008 and the first quarter of this year,” Bernanke told the committee. He said 6 million jobs have been lost since the downturn began, and recent labor market information “suggests that sizable jobs losses and further increases in unemployment are likely over the next few months.”

Bernanke said consumer spending, which dropped sharply in the second half of 2008, has been “roughly flat” so far in 2009, and “consumer sentiment has improved.” He also said the Obama Administration’s economic stimulus could boost spending. However, the Fed chairman said a weak job market, the loss of housing wealth, and tight credit conditions could hamper consumer spending, which would be a key component of any recovery.

“Making Progress”

The Fed chairman said businesses “remain very cautious and continue to reduce their workforces and capital investments. On a more positive note, firms are making progress in shedding the unwanted inventories that they accumulated following last fall’s sharp downturn in sales.”

Bernanke said the Fed continues to believe economic activity will turn up later this year, based on improvements in consumer spending and housing demand supported by fiscal and monetary stimulus and stabilization in foreign economic activity. Inflation is likely to remain low over the next year, Bernanke said.

However, he warned that the forecast is dependent on continuing improvement in credit markets, and he said that “even after a recovery gets under way, the rate of growth of real economic activity is likely to remain below its longer-run potential for a while, with unemployment continuing to rise even after the economy turns around.

Concerns about the job market were heightened by Wednesday’s release of the ADP National Employment Report. The private sector report, which has become more closely watched in recent months, said employment decreased by 532,000 in May, vs. a revised decline of 545,000 jobs in April.

While the ADP report showed a slight improvement, it was “another in a list of ‘less bad’ economic reports,” said Alan Gayle, senior investment strategist at RidgeWorth Capital Management. “We do believe that the market expectations are shifting from simple survival to sustainability, so less bad is not good enough.”

Copyright © 2009 The McGraw-Hill Cos., Business Week Online, Phil Mintz. All rights reserved. The Associated Press contributed to this report.

 

January 2009 pending sales jump almost 18 percent

In the face of national economic doom and gloom, pending sales in the Sarasota real estate market rose to 683 in January 2009 as reported by members of the Sarasota Association of Realtors®, topping the 500 level for the 13th month in a row. Pending sales last month were much higher than the 516 reported in January 2008, which indicates that local real estate has bucked the national downward to some extent.
 
Pending sales reflect contracts executed by buyers and sellers. The recent numbers demonstrate a steady, strong pattern, indicating buyers have become more active in the Sarasota market as the traditional season heats up.

 
“These are certainly historic times for our nation’s economy, and we must be realistic and understand that higher unemployment and the recession impacts everyone,” said 2009 SAR President Bill Geller. “But we must also understand that even during downturns, opportunities exist for savvy buyers. The Sarasota market is blessed with tremendous, high quality properties, and the lower prices have made this area a goldmine of opportunity. With the guidance of a well-trained, professional local Realtor®, buyers can be assured that they will find the perfect property in today’s market environment.”
 
Overall closed sales in the first month of 2009 stood at 319, compared to 327 in January 2008, a year-to-year decline of only 2.4 percent. Sales totaled 406 December 2008, but the monthly decline was expected, especially during a four-year election cycle, when real estate activity often sees a lull prior to a new administration taking office.
 
The recent signing of the $787 billion American Recovery and Reinvestment Act, plus the Obama administration’s enactment of the $75 billion Housing Support and Foreclosure Prevention program should help improve the real estate markets even more in the months ahead, said Geller.
 
“We are clearly seeing a focus by this administration on the root of the economic problems – the real estate downturn,” said Geller. “There have been several initiatives adopted which include suggestions by the National Association of Realtors®, and we are hopeful these programs will help us back on the road to recovery.”
 
For instance, first-time homebuyers who meet eligibility requirements and purchase a home this year prior to Dec. 1 are eligible for a tax credit of $8,000. Unlike the 2008 tax credit, this one does not have to be repaid. Combined with historically low interest rates, experts expect this program to generate an increase in sales.
 
“And the ripple effects of expenditures for household items, moving costs, furnishings and so on should provide a needed shot in the arm for our local economy,” said Geller.
 
The median sale price for single family homes declined to $149,950 in January 2009 after coming in at $175,000 in December 2008, for a 14 percent decline. Condominium prices fell to $220,000 in January 2009 from the December 2008 figure of $255,000, also 14 percent decline. While statistics have not been tabulated breaking down the number of short sales and foreclosures, many local agents and brokers have indicated these sales have dominated their recent business, which tends to impact the median sales prices substantially.
 
Another important market tracker – the absorption rate of properties on the market – continues to track lower than last year at this time for both single family homes and condominiums. Absorption rate is the number of months it would take to sell the entire remaining listed inventory in a particular category, based upon the sales for that particular month.

For January 2009, the absorption rate for single family homes stood at 25.3 months, compared to 39.0 months in January 2008. For condominiums, the absorption rate was at 38.4 months in January 2009, substantially lower than the 52.0 months reported in January 2008.

Published by Sarasota Association of Realtors

 
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‘Freaky’ side of real estate economics
Flat-fee brokers may put pressure on traditional commissions
Friday, June 23, 2006

By Glenn Roberts Jr.
Inman News

SAN FRANCISCO — Traditional pricing for real estate services is bound to crumble, and flat-fee brokers will likely deliver the deathblow — at least according to Steven D. Levitt, co-author of “Freakonomics,” a book that takes an unconventional approach to economics.

Levitt, who spoke to attendees Thursday at the PCBC builders’ conference and trade show at San Francisco’s Moscone Center, also said that the real estate brokerage industry is in some ways its own worst enemy, as low barriers to entry lead to proportional surges in agent population during housing market booms.

“It turns out that the median real estate agent is making the same amount of money today that they were 10 years ago, despite the fact that housing prices are up 50 to 60 to 70 percent during that time period nationwide. In the end … you’ve got to feel sorry for the real estate agents. Now, instead of selling six houses a year, the typical agent sells two or three houses. My own feeling is that if you were thinking about getting into the real estate business, I wouldn’t do it,” he said.

Such views have not won Levitt and co-author Stephen J. Dubner any popularity contests within the ranks of the National Association of Realtors trade group, Levitt readily acknowledges. Particularly because one of the chapters in the book draws parallels between real estate agents and the Ku Klux Klan. “We’re not big favorites with the National Association of Realtors right now,” he said.

But Levitt explained that the book is not intended “to imply that real estate agents are bad people in any way, shape or form,” he said. His research has raised questions, though, about whether real estate agents always seek to get the best deal for their clients.

In an analysis of 100,000 home sales in the Chicago area, Levitt found that real estate agents tend to sell their own homes for about 3 percent or so more than the selling price of their clients’ homes. When he speaks to real estate agents, he inevitably will hear a familiar range of responses, he said, such as: “Well, that’s just because we have better taste. We’re better at showing houses. We have good paint colors and that makes people want to jump in our houses and pay more.”

The research also found that real estate agents tend to leave their own homes on the market about 10 percent longer than their clients’ homes. “If they have such great taste in paint you’d think their homes would sell faster than their clients’ (homes),” he said, adding that he was not surprised by the findings.

He shared a personal story about a home he was interested in buying in the suburban Chicago area. The home had been on the market for about six or eight months, and he decided to call the listing agent directly.

“I had learned already that I didn’t want to have a buyer’s agent,” he said, since he knew that a buyer’s agent shares in the total commission paid by the seller to the listing agent. By going directly to the seller’s agent, that agent and the agent’s broker could keep all of the commission for themselves.

“I said to her, ‘I’m interested in this house and I don’t believe in buyer’s agents.’ I could hear her voice really pick up on the other side of the line.” Then, he asked a very direct question. “Can you just tell me the absolute lowest price at which the homeowner is willing to sell this house for?”

Her response, “You should be ashamed of yourself. That would be a complete violation of my client relationship to tell you any information like that and you should know better than that. It’s not right to ask me questions like that.”

Later, as the phone call came to an end, Levitt said the agent volunteered some information that led to his offer on the property: “Let me just tell you one last thing. The owner of this home is willing to sell this house for less than you can possibly imagine.”

He made an offer for $50,000 less than he had planned to offer, and the offer was accepted without any back-and-forth. “Basically, in order for that agent to put an extra $20,000 or $30,000 back in her pocket she basically stole $50,000 from her client.”

Levitt added, “When I tell this story in front of real estate agents, I always get the same reaction, completely predictably, ‘I would never, ever do something like that to my client. It’s just patently absurd.’ But you wouldn’t believe the people I interact with on a daily basis – every other real estate agent is doing this every time I turn around.”

Lately, Levitt has focused his attention on flat-fee real estate brokers that charge a flat rate for listing a home for sale in a multiple listing service. He has studied three markets, and so far has concluded that there isn’t much difference in the price that sellers get for using a flat-fee broker versus a traditional, full-service real estate broker.

“In some markets it may take 10 to 15 days longer to sell my house — in other markets I see no difference at all. In the end, if this is true, it’s really going to be bad, bad news for real estate agents, which I think is actually really good news for everybody else.

“I just don’t see how the real estate agents can maintain the level of pricing they have,” he said, referring to a commission rate that has traditionally hovered around 6 percent of the sale price of a home. “And I think that the way it will crumble is not through FSBOs (for-sale-by-owner transactions). What’s really going to be the undoing of real estate agents is going to be flat-fee brokers. It seems to me that’s a very viable option, unless (Realtors are) successful in the end in getting legislation passed which will preclude it from happening.”

Levitt said that lawyers for the National Association of Realtors asked about the source of the MLS data used in his and threatened litigation. But Laurie Janik, general counsel for the National Association of Realtors, said today, “NAR never at any time ever threatened Mr. Levitt with litigation nor did any member of my staff ever speak to him or contact him.”

And Steve Cook, a spokesman for the National Association of Realtors, said that the Realtor group has not taken any legal action against Levitt or the real estate professional who supplied the MLS data.

New doors opened to his research after the release of “Freakonomics,” Levitt said. “Suddenly, everybody wants to give me data.”

 
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Commissions pressured beyond discounting
Savvy buyers, sellers tap new business models for more savings
By Susan Romero
Inman News Features
The competition for listings between so-called “traditional” realty brokerages and commission discounters kicks up a lot of dust, but when the air clears it’s apparent that cut-rate brokerages aren’t the only force putting downward pressure on realty commissions as a percentage of the home sales price.

Fee-for-service brokerages, Internet-savvy buyers, skyrocketing home prices, a dearth of listings in some markets and some sellers’ notion that they can sell their home without paying an agent are among the other factors bearing down on conventional realty pricing structures.

Brokers and agents for decades have feared and resisted changes that would restructure commissions and traditional business models. But experts say change is unavoidable due to the new breed of real estate consumer created by the Internet.

“Real estate for almost a hundred years (considered) the end-user as being the agent and the brokerage, not the consumer. With the advent of the Internet, the entire paradigm is shifting and our end-user is definitely the consumer, not the agent,” said Julie Gardon-Good, founder and president of the National Association of Real Estate Consultants, a 1,000-member group formed in 1999 to assist realty practitioners in reframing their focus as real estate consultants.

Consumers want more control over the transaction. They value the real estate agent’s knowledge, but they resist paying for it as a percentage of the home sales price, according to Gardon-Good. She believes the fee-for-service model gives sellers what they want and compensates agents with what they’re worth.

Fee-for-service agents attach a dollar value to each service or calculate an hourly rate that’s paid regardless of whether the deal closes. The model recognizes services that have typically been given away and identifies which services are more profitable than others. Discounting typically includes providing the so-called “full service,” but charging less than the market-rate commission.

The menu aspect of fee-for-service often is confused with commission discounting. But the home’s market value determines whether the seller pays a discount or a premium price on a fee-for-service basis.

Bill Wendell, broker/owner of the Real Estate Café, which dishes a la carte buyer-side realty services, operates on the front lines of the fee-for-service model. Wendell charges $100 per hour for his services.

The average real estate transaction requires 40-60 hours per side, according Gardon-Good. That means Wendell would earn $4,000 to $6,000 per transaction or slightly more than 3 percent on a $160,000 house, but significantly less than 3 percent on a $300,000 house.

Other forces picking away at the commission structure are for-sale-by-owners who can pay a flat fee to an agent for an MLS listing with or without a buyer-agent commission split offer and the low inventory of houses for sale in some markets, which motivates agents to cut commissions in an attempt to win listings.

Skyrocketing home prices lead some sellers to question the typical 6 percent commission. A home that cost, say, $200,000 a year ago would have generated a $12,000 commission at 6 percent. If that home cost, say, $235,000 today, it would generate a $14,100 commission at 6 percent for the same services. The numbers are more striking for higher-priced homes and exceptionally hot markets. Sellers make those calculations themselves, then use the numbers to negotiate a lower rate.

Tom Cromer, broker/owner of a Miami Assist-2-Sell office, believes technology and demanding consumers pressure commissions downward, especially in the high-end housing market where a $3 million sale with a 6 percent commission would net a $180,000 commission.

“We don’t find home selling that complicated. It doesn’t take much more effort to sell a $3 million house than it takes to sell a $300,000 house,” he said.

Internet-based find-an-agent referral services like HomeGain, among others, have empowered home sellers with anonymity and turned them into fearless commission negotiators.

“People have more courage on the phone, so it would make sense that people would have more courage taking this issue on online,” said HomeGain CEO Bruce Schroder.

Self-sufficient, Web-savvy buyers and sellers know their options, spend more time virtually shopping homes and less time in the backseat of an agent’s car and expect their hard work to be rewarded with lower realty fees.

A California Association of Realtors 2002 study revealed that home buyers who used the Internet to help them with their real estate needs spent on average two weeks home shopping with their real estate agent and looked at approximately 7 homes. Traditional buyers spent approximately 6 weeks with their agents and looked at approximately 15 homes.

“The Internet has brought real estate information, be that about Realtors, house prices, commission structures, to everybody’s doorstep. So things which they might not have been sensitive about before they are more aware of today,” said real estate expert and author Stefan Swanepoel.

Editor’s note: Inman News Publisher Bradley Inman also is the founder and chairman of Homegain

 Mortgage rates drop to lowest level since January

WASHINGTON – Dec. 5, 2008 – Rates on 30-year mortgages plunged this week to the lowest level since January after the government launched a sweeping new effort to aid the U.S. housing market.

Mortgage finance giant Freddie Mac reported Thursday that average rates on 30-year fixed-rate mortgages dropped to 5.53 percent in the largest one-week drop in 27 years. That was down from 5.97 percent last week, and the lowest since the week of Jan. 24, when it was at 5.48 percent.

Further drops could be on the way if the government launches an industry-backed plan to lower the rate on a 30-year mortgage to 4.5 percent by spending hundreds of billions to buy mortgage-backed securities issued by Fannie Mae and Freddie Mac.

That would follow an effort announced last week by the Federal Reserve, which is planning to purchase up to $600 billion of mortgage-backed securities and other debt issued by Fannie and Freddie and the Federal Home Loan Banks. Those institutions don’t make loans directly to consumers, but provide money to the mortgage market by packaging loans into investments.

The Fed’s move caused rates to immediately drop by about a half-point, and many in the real estate industry hope rates will keep dropping as the government increases efforts to battle the credit crisis.

Rates “are now almost a full percentage point lower since the last week in October,” Freddie Mac Chief Economist Frank Nothaft said in a statement.

Bringing mortgage rates down is positive, but it “doesn’t help people that currently have unaffordable mortgages because it doesn’t help them refinance,” Sheila Bair, chairman of the Federal Deposit Insurance Corp., said Thursday. “Low interest rates help some consumers, but the ones that really need help and can’t refinance are not helped.”

Meanwhile, Federal Reserve Chairman Ben Bernanke said the government can take steps to improve the functioning of the mortgage market, which would allow more people to secure home loans and help stabilize the housing market. Currently, he said, “the mortgage market is dysfunctional.”

Mortgage rates are sinking as Treasury yields, some of the most sensitive barometers of investor sentiment, have dropped to record lows this week as a torrent of bad economic news continues. But as investors send yields down, they’re also influencing the economy – driving interest rates so low that savers get punished and borrowers get a break.

Treasury buying has picked up and sent yields down because the economy is in a recession that investors believe will be long and deep.

Consumers already are taking advantage of the situation. New mortgage applications more than doubled last week, according to the Mortgage Bankers Association’s weekly survey released Wednesday. Refinance volume more than tripled, and made up nearly 70 percent of all applications.

Rates on other types of mortgages also fell, according to Freddie Mac’s survey. For 15-year, fixed-rate mortgages, rates averaged 5.33 percent, down from 5.74 percent last week.

Rates on five-year, adjustable-rate mortgages dipped to 5.77 percent, compared with 5.86 percent last week. Rates on one-year, adjustable-rate mortgages dropped to 5.02 percent, from 5.18 percent last week.

The rates do not include add-on fees known as points. The nationwide fee for 30-year and 15-year mortgages averaged 0.7 point last week. The fee on five-year, adjustable-rate mortgages averaged 0.6 point, while the fee on one-year adjustable-rate mortgages averaged 0.5 point.

A year ago, the nationwide average rate on 30-year mortgages stood at 5.96 percent, 15-year mortgage rates averaged 5.65 percent, five-year adjustable-rate mortgages were at 5.75 percent, and one-year adjustable-rate mortgages stood at 5.46 percent.

The rate on Fannie Mae 30-year mortgage-backed securities fell to about 4.25 percent Thursday, said Kevin Giddis, managing director of fixed income at Morgan Keegan. That is down from about 5.5 percent in mid-November.

Fears of a protracted recession are slamming Treasury yield, which is good for borrowers with mortgage rates tied to Treasurys, but bad for people invested in money market funds that have been buying up Treasurys for safety.

Treasury prices fell again on Thursday, sending rates to new record lows, as the Dow Jones industrial average fell more than 200 points. The 10-year Treasury note yielded 2.56 percent, down from 2.67 percent late Wednesday, while the 30-year Treasury bond yielded 3.07 percent, down from 3.17 percent.

Copyright © 2008 The Associated Press, Alan Zibel (AP Real Estate Writer). All rights reserved

(I’m representing more Real Estate Investors than ever due to the depreciating prices in our market.. Sarasota, & much of Florida, traditionally has made for rough rental investments due to expensive prices & contrasting low rent rates.. With correcting values, investors are re-entering the market & buying homes that earn them 10% a year on their capital investment.. Purchasing a home below market value, & finding a tenant to pay market value for rent is a common package in our current market & something Shirley International Realty Inc. offers to anyone looking to make money off of Real Estate. Read on about the experiences from other Real Estate Professionals & Investors uncovering opportunities Post-”The Bust”..

Bright side of housing bust

OCALA, Fla. – Nov. 26, 2008 – Ron Boatright had more business than he could handle during the housing boom.

His Ocala drywall business employed as many as 60 people in the home construction heyday. Back then, it looked like there would be good times for a long time.

“It was wide open. I was in The Villages for 12 years working and the most we did was 16 (homes) a week. That’s a lot,” Boatright said.

Fast forward three years and Boatright’s thriving drywall business is anything but. That’s because with almost no new homes being built, there’s little need for drywallers and Boatright’s telephone, which once rang off the hook, went silent.

“Now we’re lucky if we do one home a week,” Boatright said. “And I think it’s going to get worse.”

But the 50-year-old Boatright also saw a new housing niche and a way he and his family could cash in on it. He saw hundreds of homes for sale with sticker prices significantly less than what their owners had paid for them just a few years ago.

So Boatright took his savings and looked for homes costing about $50,000 or less. He found one this year, bought it for $50,000 and put his family and in-laws to work restoring it. Three years ago the home cost $110,000.

Boatright put in about $8,000 worth of repairs, tacked on another $2,000 for a Realtor to list the house for $70,000 and sell it. Within two weeks he had a potential buyer. The only problem was the buyers didn’t qualify for a bank loan.

So Boatright decided to hold the mortgage for five years. By doing that, he made some extra money and ensured the sale went through. At 8 percent interest, Boatright is planning to make an extra $10,000 in interest in addition to proceeds from the sale of the house.

Now Boatright said he’s accepting buyers that many banks would probably reject, and he accepts a smaller down payment than most financial institutions. He is in the process of buying his fourth investment house this year.

“If I can find somebody with halfway decent credit and a steady job, I can get them in the (house),” Boatright said.

Even though he’s charging higher interest, Boatright said he’s offering homes that buyers can afford, something most banks didn’t do before with sub-prime mortgages.

Dawn Rickabough, a broker and mortgage consultant in California, said that in today’s tough housing market, offering homes at lower cost and owner financing gives sellers an edge.

“Depending on the area, it can be critical and the difference between making a sale and not,” said Rickabough, who lectures on holding mortgages.

Although there are no statistics readily available about how many homes are sold through owner financing, Rickabough said an informal study she commissioned showed that in 2006, about one in every 400 properties sold had some form of owner financing.

That jumped to one in every 50 this year, and Rickabough predicts the number will only grow during the next few years.

Rickabough said that while the market has been a tough road for sellers these past couple of years, there is a niche and people like Boatright are filling it.

“I think he’s got a good system going there,” she said. “(He’s) getting a decent return on his money and doing better than the stock market. I think it’s a fabulous strategy.”

But buying a home cheap, fixing it and selling it by holding the mortgage isn’t for everybody.

Rickabough said sellers need to understand the risks and whether they can afford to keep the property if the buyers stop making payments.

Sellers need a reliable source of equity to buy properties, and set the buyers’ payments according to the risk. Sellers should also make sure they have all the financial documents in order, such as proof of buyers’ income, tax returns and credit history, in case the seller wants to sell the mortgage one day to another investor.

Michael Malkasian, president of the Web site FSBO.com (For Sale by Owner) said that during the past couple of years he is seeing about double the number of people buying inexpensive homes, repairing them and then selling them through owner financing or renting them in hopes the market will improve later.

“In a market like today, sellers are forced to come up with more creative ways to get their properties sold and owner financing is one of the oldest ways,” he said.

The market in Ocala is tough, but one in which Boatright can flourish, with more than 6,000 properties listed for sale.

And with sales stagnant, Boatright is working in an environment in which investors can buy homes at a fraction of what they sold for just a few years ago.

Single-family home sales in the third quarter of this year were down 10 percent in the Ocala area compared to the same period in 2007, according to a study released Tuesday by the Florida Association of Realtors. The median sales price dropped 16 percent. During the same period from 2006 to 2007, Ocala single-home sales dropped 53 percent and sales prices dropped 6 percent.

Sales in Gainesville weren’t much better. The number of home sales in the Gainesville area dropped 33 percent during the third quarter of 2008, compared to the same period in 2007. Median sales prices dropped 11 percent. During the same period last year, home sales dropped 10 percent from 2006 and 2007 and prices fell 4 percent.

Bert Meadows, president elect of the Marion County Association of Realtors, said there is money to be made in the housing market if investors buy cheap, make modest repairs and offer owner financing. Boatright said he plans to continue buying and selling homes because he doesn’t see the demand for drywall work picking up soon.

Flipping houses and offering mortgages has kept some of his family members and in-laws off the unemployment line.

“And I just see it getting worse,” he said. “So I’m going to keep doing what I’m doing.”

Copyright © 2008 Ocala Star-Banner, Fla., Fred Hiers. All rights reserved. Distributed by McClatchy-Tribune Information Services.

 

Foreclosure reprieve gives hope to families

TAMPA, Fla. – Dec. 1, 2008 – Tiffany Edwards thought she was running out of time to persuade her lender to work out a new loan so her growing family could stay in their Tampa home.

She had been out of work for more than a year, and her husband’s income wasn’t enough to cover all the family’s bills. She found a job a few weeks ago, but her lender was already set to foreclose on the house – likely before Christmas.

With a 3-year old daughter and a baby on the way, Edwards panicked. Then came last week’s announcement that Fannie Mae and Freddie Mac – the nation’s two largest providers of mortgages – will postpone foreclosures until early January. In the meantime, they will try to work out loan modifications so more homeowners can keep their homes.

“What a stress relief,” Edwards said. “Now I have hope we’re going to be able to work something out.”

The Edwardses are one of about 16,000 families nationwide who are eligible for the help. The foreclosure suspension is exactly the kind of action some economists and industry leaders say is needed as the foreclosure crisis weighs down the entire economy. Florida Gov. Charlie Crist is contemplating a way to get lenders to agree to a moratorium on foreclosures until after the holidays.

There were cheers when Fannie and Freddie agreed to hold off on some foreclosures. But now that the dust is settling, many wonder how significant the action will really be.

That’s because after Jan. 9, the people helped by the reprieve could still lose their homes. Even if all those people work out new loans, they still represent a small percentage of the more than 2 million homes that are expected to be lost in foreclosure before late 2009.

“This is great, it really is,” said Debbi Colon, a Catholic Charities foreclosure counselor who has worked with the Edwards family. “But it’s just a first step.”

After the announcement last week, her phone rang all day and night from clients wondering if they qualified for the reprieve, Colon said. Most don’t, she said, because their loans are held by private companies.

That’s the downside of the plan, Colon said. Only homeowners with loans owned by Fannie Mae and Freddie Mac are eligible. Together, the two companies own only about 20 percent of the nation’s delinquent loans.

Of the loans that Fannie and Freddie own, not all of them are eligible for the reprieve. Homeowners must be still living in the home and must be at least three months behind on their payments.

For those who are lucky enough to get a second chance at a loan modification, Fannie and Freddie’s new program could be a big help. It calls for mortgage payments – including taxes and insurance – to total no more than 38 percent of homeowners’ pretax monthly income.

Officials for the Center for Responsible Lending said they are encouraged by Fannie and Freddie’s holiday reprieve, but know it’s not a solution.

“This is a solid step in the right direction,” said Ginna Green, spokeswoman for the center. “But we must also aim for solutions – like streamlined modifications – that keep families in their homes for the long term as well as the short term.”

Even so, Edwards and her family say they are thankful for the extra time in their home. No matter how long that ends up being.

Copyright © 2008 Tampa Tribune, Fla., Shannon Behnken. Distributed by McClatchy-Tribune Information Services.

ORLANDO, Fla. – Nov. 11, 2008 – When families lose their homes to foreclosure, communities, the housing market and the economy all suffer. Short sales are one way that some troubled homeowners can avoid foreclosure, a topic discussed by Realtors at the Short Sales Solutions session, part of the National Association of Realtors® (NAR) 2008 Conference & Expo in Orlando.

“Homeowners who are struggling to make their mortgage payments must have more options available to them to avoid foreclosure,” said NAR President Richard Gaylord. “Short sales can benefit not only the homeowner in question, but also buyers, lenders and the surrounding community. With their established lender relationships and insights into complicated real estate transactions, Realtors can add real value for both sellers and buyers interested in short sales.”

A short sale is a transaction in which the seller’s mortgage lender agrees to accept a payoff of less than the balance due on the loan. The lender often receives a higher amount of the remaining loan balance than it would from the sale of the property after a foreclosure. This helps support home values in the surrounding community. Short sales also help homeowners maintain some level of credit.

According to Freddie Mac, 50 percent of homeowners entering the foreclosure process did not have any contact with the lender first. One of the most valuable services Realtors can provide to clients who may be facing a foreclosure is guiding them through the lender’s short sale process and facilitating communication, according to session panelists Michael and Stacey Spikes of America’s Home Rescue.

“The process for short selling an FHA loan is different than the process for shorting a Veterans Administration or conventional loan,” said Stacey Spikes. “Knowing the type of loan the seller has, and understanding the proper steps for short selling that loan and the order of those steps, is critical.”

Homeowners who are having difficulty making their mortgage payments and who may be considering a short sale must generally meet three qualifying criteria: they must be behind on their payments, be able to prove a legitimate hardship, and have little or no equity in their home.

While a typical real estate transaction involves two real estate professionals, a seller, a buyer, and the buyer’s lender, a short sale can include all of these parties in addition to the seller’s loan servicer, housing counselor, junior lien holders, mortgage investors and mortgage insurers. In addition to the number of parties involved, Realtors say that other challenges can make short sales difficult. These include burdensome paperwork, appraisals that do not consider the sellers’ duress or the number of foreclosures in a community, over-burdened loss mitigation departments, and complications created by second mortgages.

NAR has created a working group to examine the problems and difficulties surrounding short sales and to educate its members on how to best work with their clients through this process. NAR is also reaching out to its partners in the housing and mortgage industry to encourage adoption of principles and practices to streamline the short sale process.

“Short sales give many families in financial difficulties the possibility of salvaging their credit and avoiding the embarrassment of a foreclosure,” said Gaylord. “Realtors across the country stand ready to help.”

© 2008 FLORIDA ASSOCIATION OF REALTORS®