Market Timing for Sellers and Buyers on the Treasure Coast

I’d like to take a moment of your time to discuss some common misconceptions on market timing that I have been seeing from Treasure Coast property owners.

For those of you that have had your property on the market and seen few or no showings or offers, you may have become discouraged and have allowed your property to expire from the active market. Common thinking is, “I’ll wait for the market to turn around and get more for my property at that time”. The question I have is, “how long are you willing to wait?” All local indicators are showing that we are going to continue in a moderating market for at least the next six months to a year, locally. After the market stabilizes, we will be in a prolonged period of stabilized to slowly appreciating prices. Inventory levels have stabilized in the past few months, but buyers are still reluctant to make a move in any great numbers. Even if the buyers come out in some better numbers, there will be plenty of inventory that will come on the market from previously expired listings. What many people don’t realize is that we are currently in a decent stable residential market. In fact, 2006 will be the third best year for housing on record (in terms of number of units sold).

So, what happens if you wait for the market to rebound? You wait 1 – 2 – 3 or more years and possibly sell your home for 5% more than possible today. Please note, I don’t mean sell it for more than you are asking for today, but what you can sell it for today. Is it worth the wait? If you are planning on buying another home, the odds are the new home will also cost at least 5% more, so that’s a wash. If you are selling a second home and feel the 5% additional is worth the wait, consider selling at today’s price and investing your proceeds into a conservative money market fund that are currently paying 4-6%. With the reduced carrying costs of your property, taxes, insurance, mortgage, maintenance, etc., which scenario is best for you?

Many sellers are concerned with the rise in taxes when you reset your homestead exemption in moving to a new home within the area. If you are in this position, you have most likely a considerable amount of equity in your home and you may be much better off investing some of that equity or possibly buying your new property without a mortgage and still be better off financially. A tax advisor or a good real estate professional can help you figure this out.

In conclusion, market timing is very difficult and often a roll of the dice. All the best economic and trend indicators do not favor waiting for a better market currently. Every individual situation is different and the decision to sell what is most probably your most valuable resource is not easy, nor should it be taken lightly.

Please consult your financial or real estate advisor and have them work out the numbers for you. I am also available for advice and can be contacted through my website at www.GabeSanders.com

NAR Report on 3rd Quarter 2007

Conditions for home buyers improved during the third quarter as existing single-family home prices in many metropolitan areas experienced corrections, and most states saw sales activity below a year ago which helped to build housing inventories, according to the latest quarterly surveys by the National Association of Realtors.

Total state existing-home sales, including single-family and condo, were at a seasonally adjusted annual rate1 of 6.27 million units in the third quarter, down 12.7 percent from a 7.18 million-unit pace in the third quarter of 2005 – the second highest level on record, after a peak of 7.19 million in the second quarter of last year. Even with the overall decline, 10 states showed increases in sales activity from a year ago.

Third-quarter metro area single-family home prices, examining changes in 148 metropolitan statistical areas, 2 show 102 areas had price gains, including 21 metros with double-digit annual increases, and 45 areas experiencing price declines; one was unchanged.

David Lereah, NAR’s chief economist, said market conditions are nearly the opposite of a year ago. “Last year we had a record sales market and historically tight supplies of homes with buyers bidding over the asking price,” he said. “With the market in full transition, buyers now have choices and sellers are more willing to negotiate – under these circumstances it’s no surprise that overall home prices are slightly below a year ago. We expect this trend to continue in the months ahead, but we’ll see modest appreciation in most of the country in 2007.”
The national median existing single-family home price was $224,900 in the third quarter, down 1.2 percent from a year earlier when the median price was $227,600. The median is a typical market price where half of the homes sold for more and half sold for less.

NAR President Pat Vredevoogd Combs, of Grand Rapids, Mich., and vice president of Coldwell Banker-AJS-Schmidt, said the market transition is good news for home buyers. “With the supply of homes at the highest level in over a decade and historically low mortgage interest rates, it’s become a great time to buy a home,” said Combs. “This window of opportunity will continue into the new year, but inventories are starting to decline and sellers will be less willing to negotiate when conditions begin to balance in most areas around early spring.”

According to Freddie Mac, the national average commitment rate on a 30-year conventional fixed-rate mortgage was 6.56 percent in the third quarter, down from 6.60 percent in the second quarter; the rate was 5.76 percent in the third quarter of 2005. Last week, Freddie Mac reported the 30-year fixed rate was down to 6.24 percent.

The biggest total sales increase was in North Carolina, where existing-home sales rose 9.7 percent from the third quarter of 2005. In Texas the third-quarter resale pace rose 8.6 percent from a year earlier, while Montana experienced the third strongest gain, up 6.4 percent.

The largest single-family home price increase was in the Salem, Ore., area, where the third quarter price of $228,000 was 24.7 percent higher than a year ago. Next was Elmira, N.Y., at $93,600, up 21.4 percent from the third quarter of 2005. The Salt Lake City area, with a third quarter median price of $216,300, increased 19.2 percent in the last year.

Median third-quarter metro area single-family prices ranged from a very affordable $86,000 in both Decatur, Ill., and the Youngstown-Warren-Boardman area of Ohio and Pennsylvania, to nearly nine times that amount in the San Francisco-Oakland-Fremont area where the median price was $749,400. The second most expensive area was the San Jose-Sunnyvale-Santa Clara area of California, at $747,400, followed by the Anaheim-Santa Ana-Irvine area (Orange Co., Calif.), at $705,000.

In addition to Elmira, N.Y., other affordable markets include South Bend-Mishawaka, Ind., with a third-quarter median price of $96,000, and the Cumberland area of Maryland and West Virginia at $100,900.

In the condo sector, metro area condominium and cooperative prices – covering changes in 57 markets – show the national median existing condo price was $222,900 in the third quarter, down 2.1 percent from the same period in 2005. Thirty-one metros showed annual increases in the median condo price, including eight areas with double-digit gains; 27 metros had price declines.

The strongest condo price gains were in the Knoxville, Tenn., area, where the third quarter price of $155,700 rose 29.0 percent from a year ago. In Wichita, Kan., the median condo price of $130,300 rose 25.5 percent from the third quarter of 2005, while Albuquerque, N.M., at $153,300, increased 21.0 percent.

Metro area median existing condo prices in the third quarter ranged from $108,200 in Rochester, N.Y., to $600,600 in the San Francisco-Oakland-Fremont area. The second most expensive reported condo market was Los Angeles-Long Beach-Santa Ana, at $384,500, followed by the San Diego-Carlsbad-San Marcos area of California at $361,100.
Other affordable condo markets include Bismarck, N.D., at $109,000, and Greensboro-High Point, N.C., at $113,000.

Regionally, total existing-home sales in the South were at an annual rate of 2.52 million units in the third quarter, down 7.8 percent from a year ago. After the gains in North Carolina and Texas, the next strongest increase in the South was in Louisiana, up 4.5 percent from the third quarter of 2005, while resales in Arkansas rose 4.3 percent; four other Southern states also posted sales gains.

The median existing single-family home price in the South was $187,300 in the third quarter, which is 0.1 percent below a year earlier. The strongest increase in the South was in the Virginia Beach-Norfolk-Newport News area, where the median price of $243,800 was 16.9 percent above the third quarter of 2005. Next was Gainesville, Fla., at $215,200, up 15.9 percent from a year ago, followed by the Gulfport-Biloxi area of Mississippi, with a 15.7 percent gain to $154,400.

In the Midwest, total existing-home sales declined 11.8 percent to a 1.42 million-unit annual level compared with the third quarter of 2005. The strongest performance in the region was in South Dakota, where sales rose 3.1 percent from a year ago.

The median existing single-family home price in the Midwest was $170,500 in the third quarter, down 2.6 percent from a year earlier. The strongest metro price increase in the region was in the Wichita, Kan., area, where the median price of $127,900 was 15.0 percent higher than the third quarter of 2005. Next was Bismarck, N.D., at $140,400, up 7.4 percent, and Kankakee-Bradley, Ill., at $138,400, up 6.1 percent in the last year.

The Northeast saw an existing-home sales pace of 1.05 million units in the third quarter, which was 12.5 percent below a year ago. The median Northeastern resale single-family home price was $276,000 in the third quarter, which is 4.8 percent below the same period in 2005.
After Elmira, N.Y., the strongest price increase in the Northeast was in Atlantic City, N.J., with a median price of $277,200, up 12.0 percent from the third quarter of last year, followed by Binghamton, N.Y., with a median price of $107,400, up 10.0 percent.

In the West, the existing-home sales pace of 1.29 million units was 21.5 percent lower than the third quarter of 2005. The best performance the region was in Montana where existing-home sales rose 6.4 percent from a year earlier.

The median existing single-family home price in the West slipped 0.9 percent to $349,000 during the third quarter. After Salem, Ore., and Salt Lake City, the strongest increase in the West was in the Seattle-Tacoma-Bellevue area of Washington, at $372,400, up 14.6 percent from third quarter of 2005, followed by Spokane, Wash., at $191,100, up 14.1 percent, and Farmington, N.M., at $176,200, up 12.9 percent from a year ago.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing more than 1.3 million members involved in all aspects of the residential and commercial real estate industries.

1. The seasonally adjusted annual rate for a particular quarter represents what the total number of actual sales for a year would be if the relative sales pace for that quarter was maintained for four consecutive quarters. Total home sales include single family, townhomes, condominiums and co-operative housing. NAR began tracking the state sales series in 1981.

Seasonally adjusted rates are used in reporting quarterly data to factor out seasonal variations in resale activity. For example, sales volume normally is higher in the summer and relatively light in winter, primarily because of differences in the weather and household buying patterns.
Tables of state resale rates, percent changes and some historic data are available at the site below under Research – click on Housing Statistics, then scroll down the center to State Existing-Home Sales.

2. Areas are generally metropolitan statistical areas as defined by the U.S. Office of Management and Budget. A list of counties included in MSA definitions is available at: http://www.census.gov/population/estimates/metro-city/0312msa.txt

Regional median home prices include rural areas and samples of many smaller metros that are not included in this report; the regional percentage changes do not necessarily parallel changes in the larger metro areas. The only valid comparisons for median prices are with the same period a year earlier due to seasonality in buying patterns. Quarter-to-quarter comparisons do not compensate for seasonal changes, especially for the timing of family buying patterns.
NAR began publication of metropolitan area median single-family home prices in 1982; the metro area condo price series was launched at the beginning of 2006.

Because there is a concentration of condos in high-cost metro areas, the national median condo price sometimes is higher than the median single-family price. In a given market area, condos typically cost less than single-family homes. As the reporting sample expands in the future, additional area will be included in the condo price report.

Tables of metropolitan area median prices, percent changes and some historic data are available at http://www.realtor.org/ – under Research click on Housing Statistics, then scroll down the center to Metropolitan Area Prices.

From Walter Molony
Washington DC – Realty Times

Home sales plunge on Treasure Coast

Single-family existing home sales on the Treasure Coast continued to mirror the national trend of higher inventory and slumping sales during the third quarter, a report from the Florida Association of Realtors said Monday.

Buyers in the Fort Pierce-Port St. Lucie-Stuart metropolitan statistical area, which includes Martin County, snapped up 1,123 existing homes during the third quarter of this year. That’s 44 percent less than the 2,016 purchased during the same period last year.

Locally, the median price for an existing home was $252,000, down 6 percent from $267,500 in the same period of 2005. The association does not track statistics in Indian River County.

“The market isn’t going to improve anytime soon, especially on the Treasure Coast and most especially in Port St. Lucie,” said Jack McCabe, CEO of McCabe Research and Consulting, a real estate consulting firm in Deerfield Beach. “It’s going to be 2008 before we see any meaningful change because the vast majority of people on the Treasure Coast still can’t afford the homes there.”

As for existing condominiums, the association said regional sales decreased 35 percent in September while prices reached $213,800, up 10 percent from the $194,400 in the third quarter of 2005.

Brad Hunter, director of Metrostudy’s South Florida division, which follows housing trends on the Treasure Coast and in South Florida, said older homes are not selling because new home builders are offering such lucrative incentives on new product.

“What’s making it tough for sellers is builders offering such extraordinary incentives because they need to close on deals before the end of the fiscal year,” Hunter said. “I’ve heard of some offering new leases on cars or the cash equivalent so that really eroding the market for sellers.”
In areas adjoining the Treasure Coast, home prices continued to drop with sales also declining. The association does not track statistics in Indian River County.

Sales of single-family homes in the Melbourne-Palm Bay-Titusville dropped 34 percent during the third quarter, and the median price dropped 9 percent to $215,500 from $237,800 last year.

In the West Palm Beach-Boca Raton market, existing-home sales dropped 49 percent and the median sales price dropped 5 percent to $380,900 between the two quarters. Sales dropped 27 percent in Fort Lauderdale as median prices fell 3 percent to $371,100.

Auctions/Foreclosures Pick Up In Nevada, Florida, Colo.

Auctions/Foreclosures Pick Up In Nevada, Florida, Colo.

From Tampa Bay Online in Florida. “More than a year after launching one of the area’s most expensive condo conversions, Bay Communities is trying a novel approach to unload its unsold units at The Hamptons in Tampa Palms. The developer will sell 100 condominiums on Dec. 9 at a public auction, 40 condos will be sold ‘absolute’ – awarded to the highest bidder with no minimum bid.”

“The developer owes the county $1 million in back taxes. The Tampa Palms Owners Association also has a lien on the property for unpaid dues.”

“The Hamptons has 315 units, and they were the priciest conversions in New Tampa. As of this summer, Bay Communities had sold just 70 units. With 13 condo conversions in one year, most New Tampa developers gave up and started leasing the units again.

“The Palm Beach Post. “Florida led the nation in foreclosure activity for the third quarter of this year as adjustable rate mortgages came home to roost, a report shows. The number of households in foreclosure throughout the state spiked 55 percent compared with the second quarter of this year, and rose 26 percent over the third quarter of 2005.”

“In Palm Beach County, one in every 153 households was in foreclosure in the third quarter, up 26 percent over the third quarter of 2005. Foreclosures rose 38 percent over the previous quarter.”

“St. Lucie County foreclosures jumped 68 percent over the same quarter a year ago, and 65 percent over the second quarter of this year.

“The Review Journal reports from Las Vegas. “Looking for an affordable home? Your chance to buy a foreclosed home at below-market value in Las Vegas comes Nov. 19 at the JW Marriott. Hudson & Marshall is offering nine Las Vegas homes valued from $275,000 to $460,000. They’re among more than 100 homes on the block in the foreclosure-battered states of Colorado and Nevada.”

“The homes are ‘real estate owned,’ or REO, property taken back by national lending institutions and asset management companies after every effort was made to work with the borrower. ‘Posting a foreclosure doesn’t necessarily mean foreclosure,’ principal Dave Webb said. ‘These homes are in foreclosure, not default. Realtors have already had their shot at (selling) them.'”

“Rising interest rates have forced many homeowners with adjustable-rate mortgages to default on their loans because they no longer can afford the rising mortgage payments, Webb said.”

“‘We’ve had some large sales in Las Vegas. I’d say we did two to three (auctions) a year in Vegas from 1999 to about 2003 with a big inventory, 40 to 50 homes,’ he said. ‘Then the market took off. You were building like crazy. There were very few foreclosures from then until about the last six months.'”

Comments from Gabe Sanders:

I expect foreclosures to hit there peak some time next year. The most active areas for foreclosures will be in new home and new condo developments. If you are looking at purchasing a foreclosure property, I want to caution you to make sure you use a licensed professional (a REALTOR or a real estate attorney) to help with the transaction. There are a number of very significant problems that can arise in foreclosure sales.

Do not expect to find any significant deals or opportunities by paying for foreclosure leads. These are mostly properties that are in ‘pre-foreclosure’ where the owner has missed some payments. The lenders will do everything in their power to avoid a foreclosure and more often than not these properties will most likely stay in the owner’s hands. For properties where the owner can’t make the payments, and there is significant equity in the home, the property will most likely be sold by the owner before the foreclosure happens. Occasionally some of these higher equity homes do get into the foreclosure and the possibility exists of purchasing the note and deed on the court house steps, but be very careful of any liens or claims against the property, that accompany the purchase.

Most of the foreclosures that will indeed go through will be the new construction investors that owe more on their investment than it is currently worth. These notes will go on sale for the full value of the mortgages that are currently above the market value of the home. It is only after the bank or lending institution appraises the property and re-lists it at a reduced price that it becomes a true opportunity for the buyer. These properties are called an REO (Real Estate Owned) listing.

Should you have any interest in REO property in the Treasure Coast area feel free to contact me through my web site at www.GabeSanders.com.

Zillow – Can you use it?

Zillow made a big splash on the real estate/internet scene late last year and early this year. This past week it was in the news again as it is being sued for misleading consumers as to the valuation of their homes. Many real estate professionals have been having headaches as a result of Zillow, as their prospective customers point out how high a valuation it shows (for sellers) or how low a valuation it shows (when working with buyers).

How does Zillow work? In a nutshell, it uses publicly available tax records and computes the dollar value of recent sales for the size of the home within a neighborhood and geographical area. This can lead to some very large errors in some situations, while giving very accurate results in others. If one is comparing a subdivision with more or less identical homes, on identical lots Zillow will give a relatively accurate market value. It will miss any special improvements or deterioration, damage, etc. On the other hand, in non-homogeneous neighborhoods with waterfront, golf courses or lake front, Zillow just doesn’t know how to value that information as of now. Maybe in the future.

So, am I saying disregard Zillow? No! It can be a useful tool if used correctly. Do not take the default Zillow ‘zestimate’ at face value. Go deeper in the program and select the comparable homes that work with the one that you are trying to value. Try to pick good comparables – this is where the professionals know which ones to pick. They’ve seen many of these homes, been inside and know the neighborhoods. Water front, lake front, golf course, damage, updated, etc. One can also adjust the improvements of the home and additions that may not be available to Zillow.

By fully utilizing Zillow in this way, one can get a much better ‘zestimate’. The only remaining problem is that it can still be somewhat inaccurate because very often the tax records are wrong. Results can only be as good as the data, and it is often inaccurate or misleading for various reasons.

Another major problem that Zillow doesn’t address is the trend of the market. Currently, some markets are in a down cycle. Comparing sales of a year ago or even six months can be risky as the values may have gone down, sometimes considerably. In a rapidly expanding market, the opposite can be true. Here’s where the professionals are needed to give you a proper analysis.

So feel free to use Zillow, but be aware of its limitations and shortfalls and do a little work making the ‘zestimate’ better. After all, if it was so good, banks wouldn’t need to send appraisers to check on a property before giving out a loan.

Please contact me through my website at www.GabeSanders.com if you have any questions or comments.