By Jeff Harrington, Saint Petersburg Times Staff Writer - Posted: Aug 24, 2010
The expiration of homebuyer tax credits took a heavy toll in July as home sales in the Tampa Bay area plunged 19 percent from year-ago levels.
Statewide, existing home sales fell 14 percent compared to a year ago. The drop-off between June and July was even more stark, with sales off 25 percent statewide and 29 percent in the bay area.
Sales prices also turned south year over year, falling 9 percent to a median price of $130,500 in the bay area and dropping 7 percent statewide to $138,000.
Sean Snaith, director for the University of Central Florida's Institute for Economic Competitiveness, said the loss of the federal tax credit geared toward first-time homebuyers "added a double dip to what has already been a harrowing ride in the Florida housing market."
The association representing Florida Realtors took heart that condominiums sales were improving, with activity up 11 percent compared to a year ago. However, the median condo sales price last month was $87,200, down 20 percent from the year-ago level of $108,500.
Nationally, the steep drop pushed homes sales down to the lowest level in 15 years, despite the lowest mortgage rates in decades and bargain prices in many areas.
July's sales fell by more than 27 percent from June to a seasonally adjusted annual rate of 3.83 million, the National Association of Realtors said Tuesday. It was the largest monthly drop on records dating back to 1968, and sharp declines were recorded in all regions of the country.
Jennifer H. Lee, senior economist for BMO Capital Markets, called the numbers "truly gut-wrenching."
Those on the front lines of real estate describe an absolute standoff between buyers and sellers.
"What few buyers are out there circle a listing like a vulture, waiting from the day of its debut until it's left for dead, contacting us only after it has left the market to ask what it sold for and whether it's taking backup offers," said Glenn Kelman, chief executive of the online brokerage Redfin.
Times wires contributed to this report.
Tuesday, August 24, 2010
Plunging home sales could sink recovery
Here is an article from CNN Money regarding the latest national housing trends.
By Hibah Yousuf, CNN Money staff reporter - August 24, 2010: 4:03 PM ET
NEW YORK (CNNMoney.com) -- With home sales plunging to their lowest level in 15 years, economists warn that a double-dip in housing prices is just around the corner, threatening to further slow the overall recovery.
Existing home sales sank 27.2% in July, twice as much as analysts expected, to a seasonally adjusted annual rate of 3.83 million units. Much of that drop is attributed to the end of the $8,000 homebuyer tax credit.
That credit brought buyers out in droves, as they tried to sign home contracts before the April 30 deadline. Now, two months later, sales are 34% below April's tax incentive-induced peak.
"Home sales were eye-wateringly weak in July," said economist Paul Dales of Capital Economics. "It is becoming abundantly clear that the housing market is undermining the already faltering wider economic recovery. With an increasingly inevitable double-dip in housing prices yet to come, things could get a lot worse."
The sales pace of all homes -- single-family homes, townhomes, condominiums and co-ops -- is at the lowest since NAR began tracking the figure in 1999. Sales of single-family homes, which account for a bulk of the transactions, are at the lowest level since May 1995.
Inventory has also continued to climb, rising 2.5% to 3.98 million existing homes for sale. That represents a 12.5-month supply at the current sales pace, the highest since October 1982 when it stood at 13.8 months. A six-month of supply is considered normal.
5 most affordable cities to buy a house
The combination of weak demand and glut of homes has put downward pressure on prices.
And as the recession proved, the housing market and the broader economy are closely intertwined. When housing prices collapse, so does the overall wealth and confidence of Americans.
"Falling housing prices strain the overall confidence in the economy and discourage Americans from spending," Dales said. "They also mean that banks lose money on their investments and curtail lending, meaning there is less money out there to invest and boost the economy.
The NAR report showed that the median price of homes sold in July was $182,600, up 0.7% from a year ago. Just under a third of homes sold during the month were distressed properties.
Though prices have yet to fall back, Dales expects they will decline about 5% from current levels over the next six months.
On the bright side, Dales said while a drop prices will put a dent in the economy recovery, it won't lead to another recession.
"The bulk of the downward adjustment in housing prices has been achieved over the last several years, so we're not headed for a complete disaster," said Dales. "We're going to see a double-dip in housing prices, but not a double-dip in the overall economy."
Sales by property and region: Sales of single-family homes sank 27.1% in July compared to the prior month, while condominium and co-op sales tanked 28.1%.
The Midwest fared the worst last month, with sales dropping 35% to an annual pace of 800,000 units in July. that's 33.3% lower than a year earlier.
Resales in the Northwest dropped 29.5% from the previous month to an annual pace of 620,000 units.
They fell by 25% in the West and 22.6% in the South.
By Hibah Yousuf, CNN Money staff reporter - August 24, 2010: 4:03 PM ET
NEW YORK (CNNMoney.com) -- With home sales plunging to their lowest level in 15 years, economists warn that a double-dip in housing prices is just around the corner, threatening to further slow the overall recovery.
Existing home sales sank 27.2% in July, twice as much as analysts expected, to a seasonally adjusted annual rate of 3.83 million units. Much of that drop is attributed to the end of the $8,000 homebuyer tax credit.
That credit brought buyers out in droves, as they tried to sign home contracts before the April 30 deadline. Now, two months later, sales are 34% below April's tax incentive-induced peak.
"Home sales were eye-wateringly weak in July," said economist Paul Dales of Capital Economics. "It is becoming abundantly clear that the housing market is undermining the already faltering wider economic recovery. With an increasingly inevitable double-dip in housing prices yet to come, things could get a lot worse."
The sales pace of all homes -- single-family homes, townhomes, condominiums and co-ops -- is at the lowest since NAR began tracking the figure in 1999. Sales of single-family homes, which account for a bulk of the transactions, are at the lowest level since May 1995.
Inventory has also continued to climb, rising 2.5% to 3.98 million existing homes for sale. That represents a 12.5-month supply at the current sales pace, the highest since October 1982 when it stood at 13.8 months. A six-month of supply is considered normal.
5 most affordable cities to buy a house
The combination of weak demand and glut of homes has put downward pressure on prices.
And as the recession proved, the housing market and the broader economy are closely intertwined. When housing prices collapse, so does the overall wealth and confidence of Americans.
"Falling housing prices strain the overall confidence in the economy and discourage Americans from spending," Dales said. "They also mean that banks lose money on their investments and curtail lending, meaning there is less money out there to invest and boost the economy.
The NAR report showed that the median price of homes sold in July was $182,600, up 0.7% from a year ago. Just under a third of homes sold during the month were distressed properties.
Though prices have yet to fall back, Dales expects they will decline about 5% from current levels over the next six months.
On the bright side, Dales said while a drop prices will put a dent in the economy recovery, it won't lead to another recession.
"The bulk of the downward adjustment in housing prices has been achieved over the last several years, so we're not headed for a complete disaster," said Dales. "We're going to see a double-dip in housing prices, but not a double-dip in the overall economy."
Sales by property and region: Sales of single-family homes sank 27.1% in July compared to the prior month, while condominium and co-op sales tanked 28.1%.
The Midwest fared the worst last month, with sales dropping 35% to an annual pace of 800,000 units in July. that's 33.3% lower than a year earlier.
Resales in the Northwest dropped 29.5% from the previous month to an annual pace of 620,000 units.
They fell by 25% in the West and 22.6% in the South.
Saturday, August 21, 2010
Mortgage defaults among Florida's high-value loans highest in U.S.
By Becky Bowers, Saint Petersburg Times Staff Writer - August 22,2010 — Five years ago, Florida's real estate market was a rollicking beachfront casino where you couldn't make a bad bet.
The reckoning hit high-rollers harder than anyone. Now home loans over $1 million are failing at a higher rate than the rest, and nowhere is that failure as severe as in Florida.
Case in point: A squat concrete block home in St. Petersburg's Snell Isle Shores cost $1 million in 2006. The $2 million mortgage also bankrolled demolition and the building of a 7,000-square-foot waterfront dream house.
By May 2009, the home was in foreclosure, and sold a year later. The winning offer? $1.13 million, a 60 percent discount from the asking price.
Developers and home buyers alike had banked on quickly rising home prices, said Sam Khater, senior economist at real estate analytics firm CoreLogic.
"The average person was basically betting, repeatedly," he said. High-value loans were an even worse bet.
The bulk of million-dollar loans were written in California, and to a lesser degree in New York and Florida, according to CoreLogic. But while California's and New York's default rates on those high-value loans were near or under the national average of 13 percent in April, nearly a third of Florida's were in default.
During the boom, Florida's dramatic price appreciation enticed buyers, said Mark Vitner, a senior economist at Wells Fargo who's been tracking the Florida real estate market since the mid '80s. If you could stretch to buy a high-end home, its rising value could make you rich.
"I know people that bought … would not think of themselves as speculating on a house. But they bought a lot more house than they should have because they could get the credit, and prices were going up," he said.
Alternative mortgages, such as five-year interest-only loans, made it easy to buy more house than you could afford, he said.
It wasn't just alternative mortgages that suffered, says Khater, the economist for CoreLogic, which compiled Florida and Tampa Bay default rates for the St. Petersburg Times. CoreLogic compared types of mortgages — from standard fixed rates to "funny" products — and saw the same trend, he said.
Khater points out that this recession, unlike earlier ones, hit middle- and high-income brackets especially hard. Home values dived at the same time stock portfolios suffered.
But it's also generally true that very small and very large loans tend to perform worse than those in the middle, said Michael Fratantoni, the vice president of research and economics for the Mortgage Bankers Association. Think of a "U" shape. That's why so-called "jumbo" loans typically have higher rates, even though those who get them have mostly higher incomes.
Why would a well-heeled buyer be riskier? A higher-value property tends to have a much more volatile price because the pool of potential buyers is smaller.
"In a down market, if it sells at all, it's going to sell for a much steeper discount," Fratantoni said.
And if it sits on the market as prices fall — and bay area prices fell more than 40 percent from 2006 — the mortgage holder is more likely to owe more than the home is worth. That increases the chances of becoming delinquent, even with the best intentions to sell and pay off the mortgage, he said.
Matthew Weidner, a St. Petersburg lawyer who focuses on foreclosures, said high-end bay area buyers were able to hang on longer as home values fell and investments and jobs disappeared. But this year he's seen a spike in foreclosures among people at the top of the economic ladder.
"It went from service workers to high-end professionals who got into trouble," he said.
Weidner said they used savings and assets to supplement their mortgage payments.
"Now they're in my office saying, 'I can't do this anymore.' "
Still, those high-value foreclosures remain a small fraction of the hundreds he's seen.
Indeed, it's not clear how many million-dollar mortgages face delinquency in the bay area. Nationally, huge mortgages represent a tiny slice of home loans, less than 1 percent, according to CoreLogic, which doesn't release its raw numbers.
At that price range, buyers are more likely to use cash, or get a loan for just part of the purchase price at a lower rate. And while Florida was among the top three states for such loans, many were concentrated in Miami.
So while the Tampa Bay area had a default rate of just over 24 percent on million-dollar loans in April, the actual number of loans may be very small, CoreLogic's economists cautioned. It's more accurate to concentrate on the state and national numbers, they said.
But where those struggling loans existed in this area, there were some mighty deals.
Take local short sales, in which a bank agrees to a price that's lower than what's owed, said Frank Malowany, a St. Petersburg real estate agent who specializes in higher-priced waterfront property.
This year, among about 80 sales in Pinellas and Hillsborough counties over $1 million, about a half dozen were distressed: bank-owned homes or short sales. Those numbers don't reflect homes in default that aren't yet for sale or remain unsold, or homes with million-dollar mortgages that sold for less than $1 million.
The discounts were hefty. One St. Petersburg home was listed for $2.95 million and sold for just over $1 million in March. Another in Redington Beach had a loan for $1.5 million and sold for $1 million flat.
Short sales let banks get at least some of their money back. And they've picked up in the past few months, said Glenn Goldberg, a 43-year-old St. Petersburg real estate attorney.
Like that dream home in Snell Isle Shores. Goldberg and his wife bought it for $1.13 million in May.
"We have two kids. We wanted to buy a bigger house, and we said, 'Why not?' "
Peter Krauser, president of Mark Maconi Homes of Tampa Bay, had built it in 2007. He recalls putting $2.4 million into the project. Property values kept soaring, so they kept adding custom features.
"The banks told us that anything we could build, we could sell," he said. Then banks started to realize how many speculators they had on their hands — and stopped writing big loans. And that was it, he said. "We just ran out of cash."
The bank filed to foreclose, but let him sell it instead. He owes the bank $200,000 in the deal. At the moment, he's not building anything.
"His product was fantastic. His timing wasn't so fantastic," Goldberg said. "It's like everything you do. Timing is everything."
The reckoning hit high-rollers harder than anyone. Now home loans over $1 million are failing at a higher rate than the rest, and nowhere is that failure as severe as in Florida.
Case in point: A squat concrete block home in St. Petersburg's Snell Isle Shores cost $1 million in 2006. The $2 million mortgage also bankrolled demolition and the building of a 7,000-square-foot waterfront dream house.
By May 2009, the home was in foreclosure, and sold a year later. The winning offer? $1.13 million, a 60 percent discount from the asking price.
Developers and home buyers alike had banked on quickly rising home prices, said Sam Khater, senior economist at real estate analytics firm CoreLogic.
"The average person was basically betting, repeatedly," he said. High-value loans were an even worse bet.
The bulk of million-dollar loans were written in California, and to a lesser degree in New York and Florida, according to CoreLogic. But while California's and New York's default rates on those high-value loans were near or under the national average of 13 percent in April, nearly a third of Florida's were in default.
During the boom, Florida's dramatic price appreciation enticed buyers, said Mark Vitner, a senior economist at Wells Fargo who's been tracking the Florida real estate market since the mid '80s. If you could stretch to buy a high-end home, its rising value could make you rich.
"I know people that bought … would not think of themselves as speculating on a house. But they bought a lot more house than they should have because they could get the credit, and prices were going up," he said.
Alternative mortgages, such as five-year interest-only loans, made it easy to buy more house than you could afford, he said.
It wasn't just alternative mortgages that suffered, says Khater, the economist for CoreLogic, which compiled Florida and Tampa Bay default rates for the St. Petersburg Times. CoreLogic compared types of mortgages — from standard fixed rates to "funny" products — and saw the same trend, he said.
Khater points out that this recession, unlike earlier ones, hit middle- and high-income brackets especially hard. Home values dived at the same time stock portfolios suffered.
But it's also generally true that very small and very large loans tend to perform worse than those in the middle, said Michael Fratantoni, the vice president of research and economics for the Mortgage Bankers Association. Think of a "U" shape. That's why so-called "jumbo" loans typically have higher rates, even though those who get them have mostly higher incomes.
Why would a well-heeled buyer be riskier? A higher-value property tends to have a much more volatile price because the pool of potential buyers is smaller.
"In a down market, if it sells at all, it's going to sell for a much steeper discount," Fratantoni said.
And if it sits on the market as prices fall — and bay area prices fell more than 40 percent from 2006 — the mortgage holder is more likely to owe more than the home is worth. That increases the chances of becoming delinquent, even with the best intentions to sell and pay off the mortgage, he said.
Matthew Weidner, a St. Petersburg lawyer who focuses on foreclosures, said high-end bay area buyers were able to hang on longer as home values fell and investments and jobs disappeared. But this year he's seen a spike in foreclosures among people at the top of the economic ladder.
"It went from service workers to high-end professionals who got into trouble," he said.
Weidner said they used savings and assets to supplement their mortgage payments.
"Now they're in my office saying, 'I can't do this anymore.' "
Still, those high-value foreclosures remain a small fraction of the hundreds he's seen.
Indeed, it's not clear how many million-dollar mortgages face delinquency in the bay area. Nationally, huge mortgages represent a tiny slice of home loans, less than 1 percent, according to CoreLogic, which doesn't release its raw numbers.
At that price range, buyers are more likely to use cash, or get a loan for just part of the purchase price at a lower rate. And while Florida was among the top three states for such loans, many were concentrated in Miami.
So while the Tampa Bay area had a default rate of just over 24 percent on million-dollar loans in April, the actual number of loans may be very small, CoreLogic's economists cautioned. It's more accurate to concentrate on the state and national numbers, they said.
But where those struggling loans existed in this area, there were some mighty deals.
Take local short sales, in which a bank agrees to a price that's lower than what's owed, said Frank Malowany, a St. Petersburg real estate agent who specializes in higher-priced waterfront property.
This year, among about 80 sales in Pinellas and Hillsborough counties over $1 million, about a half dozen were distressed: bank-owned homes or short sales. Those numbers don't reflect homes in default that aren't yet for sale or remain unsold, or homes with million-dollar mortgages that sold for less than $1 million.
The discounts were hefty. One St. Petersburg home was listed for $2.95 million and sold for just over $1 million in March. Another in Redington Beach had a loan for $1.5 million and sold for $1 million flat.
Short sales let banks get at least some of their money back. And they've picked up in the past few months, said Glenn Goldberg, a 43-year-old St. Petersburg real estate attorney.
Like that dream home in Snell Isle Shores. Goldberg and his wife bought it for $1.13 million in May.
"We have two kids. We wanted to buy a bigger house, and we said, 'Why not?' "
Peter Krauser, president of Mark Maconi Homes of Tampa Bay, had built it in 2007. He recalls putting $2.4 million into the project. Property values kept soaring, so they kept adding custom features.
"The banks told us that anything we could build, we could sell," he said. Then banks started to realize how many speculators they had on their hands — and stopped writing big loans. And that was it, he said. "We just ran out of cash."
The bank filed to foreclose, but let him sell it instead. He owes the bank $200,000 in the deal. At the moment, he's not building anything.
"His product was fantastic. His timing wasn't so fantastic," Goldberg said. "It's like everything you do. Timing is everything."
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