Wednesday, December 20, 2006
NAR Profile of Home Buyers
Home buyers and sellers rely on real estate professionals to assist them in many aspects of the home sales transaction. From the initial search to closing, real estate agents and brokers help guide home buyers through the many steps that culminate in a successful home purchase. Real estate professionals also help home sellers by developing market plans, pricing homes competitively and utilizing their experience to assist sellers through each step of the process.The National Association of REALTORS® annually surveys home buyers and sellers to gather detailed information on the home buying and selling process.* The survey results provide REALTORS® with insights into the characteristics and needs of their clients. It also helps them to improve client services. Others can also benefit from the findings through a better understanding of the housing market and how the unique role of real estate professionals continues to evolve. The latest survey results were recently released and published in the 2006 NAR Profile of Home Buyers and Sellers. Below are highlights from the report that focus on home buyers.Characteristics of Home BuyersWho are today’s home buyers? The demographic characteristics of home buyers can provide insight into how the demand for housing will evolve over time. Smaller households (those with fewer young children) and aging baby-boomers approaching retirement will influence the type of homes those households purchase. In addition, healthy levels of legal immigration will contribute to household formation, fueling housing demand. · The typical home buyer was 41 years old. As in previous surveys, first-time buyers tended to be younger than repeat buyers. Among first-time buyers, the median age was 32; for repeat buyers, the median age was 47. The largest percentage of all home buyers – 30 percent – were between 25 and 34 years old.· The majority of home buyers – 62 percent – were in households where there were no children under 18 years old residing in the home. Fewer than one in five buyers had one child under 18 years old who still lived at home.· Home buyers tended to have a larger income than did the population in general. The 2005 median household income for buyers was $71,800. As a comparison, the Census Bureau reports that the median income for all households was $46,326 in 2005 (latest data available).· First-time home buyers accounted for 36 percent of homes purchased – the first decrease in the share of first-time home buyers since 2001. First-time homebuyers had a lower median household income – $58,300 – than did repeat buyers ($81,900). That is not surprising since first-time buyers are generally younger than repeat buyers.What They BuyBuyers purchase homes in different areas – suburban or city – and of different types and at different prices. As in previous surveys, existing homes accounted for the majority of homes sold during the survey period, but new homes were also popular.· One in five homes purchased by recent buyers was newly built. · Similar to results in the previous survey, three out of four homes purchased in 2005 were detached single-family homes.· The typical home buyer purchased a home 13 miles from their previous residence in a suburb or subdivision. · The median price of a home purchased by the typical buyer was $214,000. First-time buyers generally purchased less expensive homes – $165,000 – than did repeat buyers – $249,000.This is not surprising since repeat buyers tend to have higher incomes and can use the equity from their previous home toward their next purchase.Why They BuyPeople buy homes for many reasons: as an investment, for more space, to be closer to schools, relatives, or their work. But the reasons for purchasing a home can differ for first-time buyers and repeat buyers.· The most frequently cited reason for purchasing a home – whether a first-time or repeat purchase – was the desire to own a home of one’s own. As might be expected, this was most important for first-time buyers (74 percent).· The desire for more living space was the cited as the primary reason for a housing change by 20 percent of repeat buyers, but 16 percent of them purchased another home due to a job relocation or move.· Other reasons for a home purchase include retirement, change in family situation and desire for less space. Finding a HomeHome buyers can turn to many information sources when searching for a home to purchase. Real estate agents and the Internet are the two most popular sources of information cited in the latest survey. Yard signs, open houses and newspapers are also frequently cited as information sources.The Internet, in particular, has continued to increase in popularity among home buyers as a search tool. Eighty percent of buyers used the Internet as an information source. Almostone fourth – 24 percent – of all buyers first found the home they eventually purchased on the Internet.There were differences in the type of information used between first-time and repeat buyers. First-time home buyers were more likely to cite the Internet as a home search tool than were repeat buyers (83 percent vs. 78 percent). Repeat buyers used a home builder as an information source more often than did first-time buyers (30 percent vs. 19 percent).The Use of Real Estate ProfessionalsIn spite of the continued rise of the Internet as a home search tool, real estate professionals are still the number one source of information about homes for sale. In fact, 87 percent of Internet searchers also used a real estate agent as a source of information, and 35 percent of them found the home they ultimately purchased through a real estate agent.Use of the Internet has not diminished the role of real estate professionals in the home purchase process. More than three quarters – 77 percent – of home buyers purchased their home through a real estate agent. Interestingly, even those home buyers who used the Internet to search for a home were more likely to use a real estate agent in the homepurchase transaction. What Buyers Look for in Their Real Estate ProfessionalHome buyers rely on the experience and professionalism of their real estate agents. The two most important factors in choosing an agent are the agent’s honesty and trustworthiness and her reputation. That honesty and repute can result in additionalbusiness. Almost half of first-time buyers found their real estate agent through a referral from a friend, neighbor or relative (or knew the agent themselves). Over one third of repeat buyers (35%) also relied on referrals for an agent, but 19 percent of them also relied on their previous experience with an agent. Regardless of how they found their real estate professional, what buyers most wanted from their agent was help finding the right home to purchase. Interestingly, this factor was more important for repeat buyers than first-time buyers; first-time buyers more often wanted guidance in determining how much home they could afford.ConclusionThe professionalism, responsiveness, knowledge and efficiency that real estate professionals bring to their home-buyer clients pays off in repeat business. The 2006 NAR Profile of Home Buyers and Sellers** shows that two thirds of agent-assisted buyers would definitely use their same agent again or recommend that agent to others.Many of the home buyers surveyed for this report will use their agents to help them sell a home in the future. Next month in this column, we will take a brief look at the profile of home sellers based on the results of the 2006 survey – their characteristics and those of their homes, FSBOs, and the role of real estate professionals.*These surveys provide information on demographics, housing characteristics and the experience of buyers and sellers in the housing market. Buyers and sellers also share information on the role of real estate professionals in their home sales transactions. The 2006 survey results are representative of home purchases between July 2005 and June 2006. Consumer names and addresses were obtained from Experian, a firm that maintains an extensive database of recent home buyers derived from county records. Information about sellers comes from those buyers who also sold a home.
Sites that Estimate Your Homes Value
You might have heard this piece of wisdom: A man with one clock
always knows what time it is. A man with two clocks is never sure. The
old saw applies to the rapidly expanding number of sites that estimate
your home's value. First came Zillow (www.zillow.com) and its
"Zestimates," which launched with a splash earlier this year. Realtors
and consumer advocates gripe that Zillow's estimates are inaccurate and
confusing. Now comes CyberHomes (www.cyberhomes.com), the
Zillow-like site just launched by title insurance giant Fidelity National
Information Services. Both sites make it nearly effortless to look up
home values. So, The Palm Beach Post ran some homes currently listed
for sale and compared the prices to the valuations offered by Zillow,
CyberHomes and county property appraisers' sites. The results? The
numbers are all over the place, with CyberHomes offering especially
optimistic values. CyberHomes was above the asking price for four homes looked at. The lesson? Don't take these tools too seriously.
always knows what time it is. A man with two clocks is never sure. The
old saw applies to the rapidly expanding number of sites that estimate
your home's value. First came Zillow (www.zillow.com) and its
"Zestimates," which launched with a splash earlier this year. Realtors
and consumer advocates gripe that Zillow's estimates are inaccurate and
confusing. Now comes CyberHomes (www.cyberhomes.com), the
Zillow-like site just launched by title insurance giant Fidelity National
Information Services. Both sites make it nearly effortless to look up
home values. So, The Palm Beach Post ran some homes currently listed
for sale and compared the prices to the valuations offered by Zillow,
CyberHomes and county property appraisers' sites. The results? The
numbers are all over the place, with CyberHomes offering especially
optimistic values. CyberHomes was above the asking price for four homes looked at. The lesson? Don't take these tools too seriously.
Checking into Condo-Hotels
ORLANDO, Fla. – Dec. 5, 2006 – Once you’ve hit the big time, there are certain perks you become entitled to enjoy: first-class travel, better bottles of wine, a garage full of expensive cars, and a vacation home. But all too often this last luxury takes the shape of a seasonal ski lodge or beach house, usually a good distance from your primary residence.
Before too long, you realize that you are paying to keep up a place 12 months of the year when you spend a fraction of your time there. Do the math. You’re a smart person. Does that make sense?
What if, instead, you had the opportunity to have a place of your own but one that would make you money when you aren’t using it? Better yet, what if, when you were in residence, you not only enjoyed all the comforts of home but all the comforts of a hotel as well?
If that sounds good to you, you may want to consider buying a property in a condo-hotel. A relatively new concept, condo-hotels, as the term implies, allow buyers to own an apartment unit in a hotel.
As with any condo, buyers share costs for the upkeep of common areas but maintain ownership of their own unit – but with the added advantage of being able to get a maid to change the sheets or room service to send up a trolley full of sandwiches day or night.
Today, across North America there are roughly 350 condo-hotels in existence or in development, according to the National Association of Condo Hotel Owners [NACHO]. New project openings for condo-hotels are set to accelerate over the next year, with 27 opening in the second half of 2006, 37 scheduled for 2007, and 39 slated to open in 2008, according to Lodging Econometrics, a Portsmouth [N.H.] hotel industry research firm. In total, 103 projects with a planned 23,143 condo-hotel units are in the pipeline.
Boomer boom
As with much of the real estate market, the condo-hotel segment has become overheated. Lodging Econometrics expects rising construction costs, an impending economic slowdown, and overheated development to lead to some project cancellations. Others are placing their bets on the 75 million baby boomers-turned-empty nesters who are hitting their financial peaks and looking to retire and downsize.
“As the early 1970s consumer was to the condominium, the baby boomer will be to the condo-hotel,” says NACHO President and Chief Executive Officer Dante Alexander. “A couple of years from now, we are going to wish we had built more.”
If you buy a piece of your favorite vacation accommodation, you can expect to receive all the services and amenities offered by the hotel during your stay. These may include concierge service, valet parking, room service, housekeeping, access to a spa and fitness center, and fine dining. Hotel management will also maintain the property.
When you are not using your unit, you have the option of placing it in a rental program that allows hotel management to book your condo as if it were a regular hotel room. Individual owners typically receive 35 percent to 50 percent of the rental income, which offsets property taxes, homeowners association fees, mortgage debt, and insurance. It’s a good deal for the developers because they can offset much of the cost of development to the condo owners.
With ownership, some restrictions
But there are some catches. For one, even though you may “own” the property, your contract may not allow you to occupy it as often as you like or even when you like. In many cases, you may have to give the hotel as much as 60 days’ notice to reserve your room, and you may have as little as 30 days allotted to you per year to use it. [Hotel residences, like those being offered by the Plaza Hotel in New York, allow owners to use their unit 365 days a year.]
For many buyers, this isn’t a problem. Those interested in condo-hotels are usually looking for a second home, explains Joel Greene, a broker with Miami-based Condo Hotel Center, an Internet broker that sells condo-hotels in the preconstruction stage. “They are in a position to travel more than ever, and owning a second home ensures that they will do this and is even a status symbol to some, like owning a fancy car.”
People who do not like to visit the same place year after year, and those who can only get away from their jobs on short notice, are not good candidates for condo-hotels, says Greene.
Another drawback is that, unlike a real home, you are not allowed to decorate your unit the way you like. While owners are given storage space to keep their personal mementos and family pictures when they are not in residence, they can’t, say, put in a new kitchen or even, in most cases, repaint the bathroom without permission from the hotel or the developer.
Break-even investment
There are two primary reasons for this. First, these are still hotels and need to adhere to certain consistent design standards within the property. Second, to protect consumers, the U.S. Securities & Exchange Commission forbids developers to use return on investment as an incentive to buy a condo-hotel unit. Because consumers can’t sink money into renovating the property, the likelihood of being able to flip it for a high multiple of the original price is reduced.
“Do not buy this if you are looking for good cash flow,” Greene adds. “It’s a vacation home that may happen to be an investment.” However, he admits, “it is designed to break even.”
A third drawback is liability. Once you own a condo-hotel, you essentially become an hotelier of a unit subject to the same threats as the highly cyclical hotel industry, including competition, hurricanes, and terrorism. If your beachfront condo-hotel gets walloped by a hurricane or the hotel goes out of business for any other reason, you can’t just pack your bags and catch the next flight out as you would as a normal hotel guest.
While you may not have complete freedom to design or choose your vacation getaway, what you will get is a hassle-free home with world-class service in a fabulous destination. And the newest condo-hotels – reshaping skylines in Mexico, the Caribbean, and Canada – are more elegant and extraordinary than ever.
“They may not ever take over roadside inns, but [condo-hotels] represent a paradigm shift in modern development,” says NACHO CEO Dante Alexander.
Luxury properties galore
BusinessWeek.com put together a list of some of the condo-hotels and hotel residences that are generating the most buzz, selling the most units, and seeing the fastest appreciation in prices. Most of the featured developments are under construction, while some haven’t even broken ground yet. Others are landmark hotels, such as the Plaza and Gramercy Park hotels, both in Manhattan, which have undergone complete renovations to include residences.
There are colossal micro-cities in Las Vegas, ultra-luxury escapes in Manhattan, and Venice-inspired “canal communities” in the Bahamas and the Dominican Republic.
While many units in these four- and five-star hotel developments will cost you upwards of $5 million, you may be pleasantly surprised to see that a few, like the Trump Ocean Resort in Baja, Mexico, start in the mid-$200,000 range. The opportunity to own a piece of oceanfront Trump property for that price has units like these selling at warp speed, according to the Condo Hotel Center’s Susan Greene.
“We pray every night for Donald’s continued good health,” she says. “He’s going to help us retire early.”
© 2006 The McGraw-Hill Cos., Maya Roney
Before too long, you realize that you are paying to keep up a place 12 months of the year when you spend a fraction of your time there. Do the math. You’re a smart person. Does that make sense?
What if, instead, you had the opportunity to have a place of your own but one that would make you money when you aren’t using it? Better yet, what if, when you were in residence, you not only enjoyed all the comforts of home but all the comforts of a hotel as well?
If that sounds good to you, you may want to consider buying a property in a condo-hotel. A relatively new concept, condo-hotels, as the term implies, allow buyers to own an apartment unit in a hotel.
As with any condo, buyers share costs for the upkeep of common areas but maintain ownership of their own unit – but with the added advantage of being able to get a maid to change the sheets or room service to send up a trolley full of sandwiches day or night.
Today, across North America there are roughly 350 condo-hotels in existence or in development, according to the National Association of Condo Hotel Owners [NACHO]. New project openings for condo-hotels are set to accelerate over the next year, with 27 opening in the second half of 2006, 37 scheduled for 2007, and 39 slated to open in 2008, according to Lodging Econometrics, a Portsmouth [N.H.] hotel industry research firm. In total, 103 projects with a planned 23,143 condo-hotel units are in the pipeline.
Boomer boom
As with much of the real estate market, the condo-hotel segment has become overheated. Lodging Econometrics expects rising construction costs, an impending economic slowdown, and overheated development to lead to some project cancellations. Others are placing their bets on the 75 million baby boomers-turned-empty nesters who are hitting their financial peaks and looking to retire and downsize.
“As the early 1970s consumer was to the condominium, the baby boomer will be to the condo-hotel,” says NACHO President and Chief Executive Officer Dante Alexander. “A couple of years from now, we are going to wish we had built more.”
If you buy a piece of your favorite vacation accommodation, you can expect to receive all the services and amenities offered by the hotel during your stay. These may include concierge service, valet parking, room service, housekeeping, access to a spa and fitness center, and fine dining. Hotel management will also maintain the property.
When you are not using your unit, you have the option of placing it in a rental program that allows hotel management to book your condo as if it were a regular hotel room. Individual owners typically receive 35 percent to 50 percent of the rental income, which offsets property taxes, homeowners association fees, mortgage debt, and insurance. It’s a good deal for the developers because they can offset much of the cost of development to the condo owners.
With ownership, some restrictions
But there are some catches. For one, even though you may “own” the property, your contract may not allow you to occupy it as often as you like or even when you like. In many cases, you may have to give the hotel as much as 60 days’ notice to reserve your room, and you may have as little as 30 days allotted to you per year to use it. [Hotel residences, like those being offered by the Plaza Hotel in New York, allow owners to use their unit 365 days a year.]
For many buyers, this isn’t a problem. Those interested in condo-hotels are usually looking for a second home, explains Joel Greene, a broker with Miami-based Condo Hotel Center, an Internet broker that sells condo-hotels in the preconstruction stage. “They are in a position to travel more than ever, and owning a second home ensures that they will do this and is even a status symbol to some, like owning a fancy car.”
People who do not like to visit the same place year after year, and those who can only get away from their jobs on short notice, are not good candidates for condo-hotels, says Greene.
Another drawback is that, unlike a real home, you are not allowed to decorate your unit the way you like. While owners are given storage space to keep their personal mementos and family pictures when they are not in residence, they can’t, say, put in a new kitchen or even, in most cases, repaint the bathroom without permission from the hotel or the developer.
Break-even investment
There are two primary reasons for this. First, these are still hotels and need to adhere to certain consistent design standards within the property. Second, to protect consumers, the U.S. Securities & Exchange Commission forbids developers to use return on investment as an incentive to buy a condo-hotel unit. Because consumers can’t sink money into renovating the property, the likelihood of being able to flip it for a high multiple of the original price is reduced.
“Do not buy this if you are looking for good cash flow,” Greene adds. “It’s a vacation home that may happen to be an investment.” However, he admits, “it is designed to break even.”
A third drawback is liability. Once you own a condo-hotel, you essentially become an hotelier of a unit subject to the same threats as the highly cyclical hotel industry, including competition, hurricanes, and terrorism. If your beachfront condo-hotel gets walloped by a hurricane or the hotel goes out of business for any other reason, you can’t just pack your bags and catch the next flight out as you would as a normal hotel guest.
While you may not have complete freedom to design or choose your vacation getaway, what you will get is a hassle-free home with world-class service in a fabulous destination. And the newest condo-hotels – reshaping skylines in Mexico, the Caribbean, and Canada – are more elegant and extraordinary than ever.
“They may not ever take over roadside inns, but [condo-hotels] represent a paradigm shift in modern development,” says NACHO CEO Dante Alexander.
Luxury properties galore
BusinessWeek.com put together a list of some of the condo-hotels and hotel residences that are generating the most buzz, selling the most units, and seeing the fastest appreciation in prices. Most of the featured developments are under construction, while some haven’t even broken ground yet. Others are landmark hotels, such as the Plaza and Gramercy Park hotels, both in Manhattan, which have undergone complete renovations to include residences.
There are colossal micro-cities in Las Vegas, ultra-luxury escapes in Manhattan, and Venice-inspired “canal communities” in the Bahamas and the Dominican Republic.
While many units in these four- and five-star hotel developments will cost you upwards of $5 million, you may be pleasantly surprised to see that a few, like the Trump Ocean Resort in Baja, Mexico, start in the mid-$200,000 range. The opportunity to own a piece of oceanfront Trump property for that price has units like these selling at warp speed, according to the Condo Hotel Center’s Susan Greene.
“We pray every night for Donald’s continued good health,” she says. “He’s going to help us retire early.”
© 2006 The McGraw-Hill Cos., Maya Roney
UF Study - Outlook for Florida
UF study: Outlook for Florida real estate market not all bad
GAINESVILLE, Fla. – Dec. 6, 2006 – The University of Florida’s (UF) fourth quarter survey of Florida real estate trends finds that things aren’t all bad. While the outlook for sales of homes and condos in Florida remains sluggish, the real estate prognosis for business properties is much better as it rides on a still-strong state economy, according to Wayne Archer, director of UF’s Bergstrom Center for Real Estate Studies.
Nearly half of Florida real estate experts say it’s a poor time to build single-family housing and more than two-thirds say the same about condos, but they’re more optimistic about all other types of properties. The results are from the center’s fourth quarterly survey of Florida real estate trends that was completed in October.
“Condominium markets are clearly struggling and single-family markets are softening, although, contrary to some news reports, we don’t see evidence of prices tumbling,” Archer says. “But the picture is pretty healthy when you look at everything else. One important indicator of the real estate market is occupancy rates, and these appear to be stable or increasing in most markets, including apartments, office buildings, retail space, and industrial warehouse and distribution space.”
More than 70 percent of those surveyed said now is a bad time to build condos, and 46 percent said the same thing about single-family housing; but for 10 other property types the respondents were predominantly neutral or even positive, he says.
The foundation for the upbeat view about business property is the relative health and growth of Florida’s economy, Archer says.
“Employment is very good and the fundamentals that drive rental income and occupancy are still very strong,” he says. “In addition, interest rates have remained perhaps a little more stable than some people expected.”
The share of respondents expecting future declines in absorption rates – the rate at which properties are able to be leased or sold – remains unchanged for single-family housing at 61 percent since July, Archer says. It inched up slightly for condos, from 69 to 71 percent.
“The main question we focused on is how bad it is,” he says. “There have been so many news reports and rumors flying about how the condo bubble has burst and how the length of time it takes to sell a house has increased dramatically.”
The results were somewhat more sobering for prices. The percentage of respondents expecting single-family residential prices in Florida to drop doubled from 24 percent in July to 47 percent in October, he says.
For condominiums, the rate of decline was not as dramatic as it was for single-family homes because expectations had already dropped in July, Archer says. Forty-four percent of respondents said they expected condo prices to decline in October, compared with 38 percent in July, he says.
“Condos have always been one of the most volatile markets in real estate,” he says. “They’re a place where naïve investors find it easy to jump in and speculate.”
The condo market is probably overbuilt at the moment, with properties taking longer than usual to sell, Archer says.
“If history is any indication, condos that have special attributes, such as waterfront or lakefront, are those that are going to survive the best,” he says.
One sign that pessimism about single-family housing and condos does not extend to other real estate markets in Florida is in capitalization rates, the measure of how fast an investment will pay for itself in net cash, Archer says. If there is growing apprehension about rental markets, capitalization rates should increase in response to rising perceived risk, but respondents reported capitalization rate increases of less than a third of a percent and even some decreases among 10 major property types since July, he says.
The increasing cost of homeowners’ insurance in Florida was again a major concern in this survey, as it was in the previous quarterly survey released in September. “However, the fact that the investment outlook remains stable to positive for most property types and the fact that cap rates remain stable, signaling continued investor confidence, are both indicators that the immediate insurance crisis is not yet being viewed as so bad that it has changed real estate markets,” Archer says.
For the survey, UF’s Survey Research Center asked a series of questions of 183 industry executives, real estate lawyers, market analysts, title insurers, financial advisers, market research economists, real estate scholars and other experts in the field. More information is available on the center’s Web site at www.realestate.ufl.edu
© 2006 FLORIDA ASSOCIATION OF REALTORS®
GAINESVILLE, Fla. – Dec. 6, 2006 – The University of Florida’s (UF) fourth quarter survey of Florida real estate trends finds that things aren’t all bad. While the outlook for sales of homes and condos in Florida remains sluggish, the real estate prognosis for business properties is much better as it rides on a still-strong state economy, according to Wayne Archer, director of UF’s Bergstrom Center for Real Estate Studies.
Nearly half of Florida real estate experts say it’s a poor time to build single-family housing and more than two-thirds say the same about condos, but they’re more optimistic about all other types of properties. The results are from the center’s fourth quarterly survey of Florida real estate trends that was completed in October.
“Condominium markets are clearly struggling and single-family markets are softening, although, contrary to some news reports, we don’t see evidence of prices tumbling,” Archer says. “But the picture is pretty healthy when you look at everything else. One important indicator of the real estate market is occupancy rates, and these appear to be stable or increasing in most markets, including apartments, office buildings, retail space, and industrial warehouse and distribution space.”
More than 70 percent of those surveyed said now is a bad time to build condos, and 46 percent said the same thing about single-family housing; but for 10 other property types the respondents were predominantly neutral or even positive, he says.
The foundation for the upbeat view about business property is the relative health and growth of Florida’s economy, Archer says.
“Employment is very good and the fundamentals that drive rental income and occupancy are still very strong,” he says. “In addition, interest rates have remained perhaps a little more stable than some people expected.”
The share of respondents expecting future declines in absorption rates – the rate at which properties are able to be leased or sold – remains unchanged for single-family housing at 61 percent since July, Archer says. It inched up slightly for condos, from 69 to 71 percent.
“The main question we focused on is how bad it is,” he says. “There have been so many news reports and rumors flying about how the condo bubble has burst and how the length of time it takes to sell a house has increased dramatically.”
The results were somewhat more sobering for prices. The percentage of respondents expecting single-family residential prices in Florida to drop doubled from 24 percent in July to 47 percent in October, he says.
For condominiums, the rate of decline was not as dramatic as it was for single-family homes because expectations had already dropped in July, Archer says. Forty-four percent of respondents said they expected condo prices to decline in October, compared with 38 percent in July, he says.
“Condos have always been one of the most volatile markets in real estate,” he says. “They’re a place where naïve investors find it easy to jump in and speculate.”
The condo market is probably overbuilt at the moment, with properties taking longer than usual to sell, Archer says.
“If history is any indication, condos that have special attributes, such as waterfront or lakefront, are those that are going to survive the best,” he says.
One sign that pessimism about single-family housing and condos does not extend to other real estate markets in Florida is in capitalization rates, the measure of how fast an investment will pay for itself in net cash, Archer says. If there is growing apprehension about rental markets, capitalization rates should increase in response to rising perceived risk, but respondents reported capitalization rate increases of less than a third of a percent and even some decreases among 10 major property types since July, he says.
The increasing cost of homeowners’ insurance in Florida was again a major concern in this survey, as it was in the previous quarterly survey released in September. “However, the fact that the investment outlook remains stable to positive for most property types and the fact that cap rates remain stable, signaling continued investor confidence, are both indicators that the immediate insurance crisis is not yet being viewed as so bad that it has changed real estate markets,” Archer says.
For the survey, UF’s Survey Research Center asked a series of questions of 183 industry executives, real estate lawyers, market analysts, title insurers, financial advisers, market research economists, real estate scholars and other experts in the field. More information is available on the center’s Web site at www.realestate.ufl.edu
© 2006 FLORIDA ASSOCIATION OF REALTORS®
Signs of the Times
Signs of the Timesby David Lereah, NAR Chief EconomistOur nation’s housing markets have been in a slump since late last year. Existing-home sales are projected to fall by about 9 percent this year. New home sales are expected to fall by almost 17 percent. But take heart – the worst may be over. As we enter the new year, further contraction in the housing industry may be limited. The signs are out there – but you need to look.The pace of existing-home sales appears to be close bottoming out – resales have hovered around 6.3 million annualized units during the past several months. We’ll need to wait for at least two more months of data before confirming that we have hit bottom. But year-over-year pending sales for existing homes are improving, from a 16 percent drop in July to a 13 percent drop in August to an 11 percent drop in September. More encouraging news: new home sales actually posted positive growth during the past two months. Home inventories are also improving. The supply of both existing and new homes fell during the past two months. The supply of existing homes has topped out at 7.3 months, while the supply for new homes fell from 7.1 months in July to 6.4 months in September.Other housing measures also suggest that the industry’s downturn may be over. The Mortgage Bankers Association’s index of mortgage purchase applications has stabilized within the 380 to 400 range. Home price appreciation has turned negative the past two months. And, while that may sound like bad news it may actually be a welcome development, forcing sellers to show some flexibility and bringing buyers back to the market. With household wages and incomes rising and home prices falling, housing affordability measures are improving. The NAR Housing Affordability Index has moved up in September to 108 compared with 100 in July.It's About ConfidenceSo why should the doomsayers of housing -- those who are predicting a prolonged contraction and a tumbling of home prices -- believe that the housing contraction of 2006 is almost near its end? The answer lies in the attitudes of households. The current contraction has to do with household confidence, or rather, lack thereof. Previous housing downturns were driven more by households’ financial wherewithal to purchase a home.For instance the last two housing contractions (1979-1981 and 1989-1991) occurred against an economic backdrop of job losses, negative GDP growth (a recession), and double-digit mortgage rates. Simply stated, households did not have the wherewithal to purchase homes, even if they wanted to. Today’s housing contraction has more to do with negative household confidence, and home prices rising to unaffordable levels.It won’t be surprising to see home sales bottom out after a year of slowing. During this past year, affordability measures improved. With every home price drop, there is a buyer who was standing on the sidelines and is now willing to get back into the home-buying market. There are also marginal home buyers who now qualify to purchase a home because of falling prices. Further, our growing economy is creating jobs and wage/income gains. With every job creation and every wage/income gain, housing affordability improves for that waiting-on-the-sidelines home-buyer household. So over time, there are market forces that are working to improve affordability, thus permitting households to buy homes. This is why the 2006 housing contraction is almost over.Some Areas Will Take Longer to ImproveOf course, it’s not going to be all roses and sunshine. There are a number of metropolitan areas that will continue to experience some pain well after the national housing market contraction ends. I estimate that 26 percent of our markets will continue to contract in 2007. These are the hottest boom markets of the past five years that are cooling the fastest. (I guess the bigger they are, the harder they fall applies.) As you would expect, they are the usual suspects: California, southern and middle Florida, resort locations sprinkled down the east coast, Washington, DC, New York, Boston, Nevada and Arizona.Some of these markets will correct sooner than will others. The length of time for each market’s correction and how far prices need to fall for that correction to be complete depends on some local market measures – local job creation, the median home price, net migration, affordability and the share of second-home buying. I expect most of these markets to fully correct by the second half of next year. But there may be some markets that may experience contraction well into 2008.Still, we should put all of this into perspective. The real estate boom of 2002-2005 was unprecedented. The industry flew higher than it ever did. The plane needs to land and refuel in order to take off again.
Wednesday, November 22, 2006
The Road To Recovery
This is a wonderful Power Point presentation given to over 30,000 participants at the National Association of Realtors, Annual Conference in New Orleans in November 2006. It cannot be posted here, but please send me your e-mail address and I will send it out to you right away. Call me at 386-453-7909 or e-mail your request to nadinecaldwell@onebox.com.
Housing Slump May Be Nearing End
NEW ORLEANS – Nov. 13, 2006 – Saying “the worst may be over,” the housing industry’s chief economist said Friday that home prices must continue to come down in some regions before the real estate slump plays out.
“We need a price decline, we were over bloated,” particularly on the West Coast, David Lereah, chief economist for the National Association of Realtors, told attendees at his organization’s annual meeting here on Friday.
“In 2007, it will be a flat year, maybe 1 percent (sales) drop, and that’s it,” he said. “After 2007, we’ll be back to expansion again,” Lereah said.
But Steve Murray, a Littleton, Colo., industry consultant who followed Lereah on the podium at the convention, which drew an estimated 30,000 people, said he was less optimistic about the speed of the market’s recovery.
“Lereah said we’re at the bottom (of the slump), but in most markets we are going to slide some more,” Murray said. Citing interviews with executives at more than 100 large real estate firms, he said the pending sales data could be falsely reassuring.
“The fall-through rate (of contracted home sales) has gone from single to double digits,” Murray said the executives reported. “Buyers can’t sell their existing homes.”
“People who think this thing is going to turn around in six months are out of their minds,” Murray said in an interview before his speech.
Lereah forecast that 2006 sales will end up about 9 percent lower than in 2005, a record year. He anticipates sales of 6.47 million units, declining to 6.43 million next year. Prices nationwide will be down by about 2 percent, year over year, and will inch up by 1.5 percent in 2007, he said.
New-home sales will decline this year by 16.8 percent, to 1.07 million units, and will sink 8.7 percent further next year, to 975,000, he said.
Lereah said inventory is stabilizing, citing his trade group’s data on pending sales - homes that have gone under contract.
“It appears that inventory has peaked,” said Lereah, who now estimates a 7.3-month supply of available homes nationwide.
“We were hovering near 4 to 5 months’ (supply of homes fore sale) during the boom, and in some areas, such as Orange County, Calif., we were measuring it in weeks, not months.”
But Lereah said the national picture is positive. “I’m optimistic for 74 percent of the country,” where local markets are, at worst, flat. “The other 26 percent are in for some rough times.”
Struggling the most would be California, Southern Florida, Arizona, Nevada, and metro Washington, D.C., he said, where sellers particularly need to lower their prices.
© 2006, Chicago Tribune, Mary Umberger. Distributed by McClatchy-Tribune News Service.
“We need a price decline, we were over bloated,” particularly on the West Coast, David Lereah, chief economist for the National Association of Realtors, told attendees at his organization’s annual meeting here on Friday.
“In 2007, it will be a flat year, maybe 1 percent (sales) drop, and that’s it,” he said. “After 2007, we’ll be back to expansion again,” Lereah said.
But Steve Murray, a Littleton, Colo., industry consultant who followed Lereah on the podium at the convention, which drew an estimated 30,000 people, said he was less optimistic about the speed of the market’s recovery.
“Lereah said we’re at the bottom (of the slump), but in most markets we are going to slide some more,” Murray said. Citing interviews with executives at more than 100 large real estate firms, he said the pending sales data could be falsely reassuring.
“The fall-through rate (of contracted home sales) has gone from single to double digits,” Murray said the executives reported. “Buyers can’t sell their existing homes.”
“People who think this thing is going to turn around in six months are out of their minds,” Murray said in an interview before his speech.
Lereah forecast that 2006 sales will end up about 9 percent lower than in 2005, a record year. He anticipates sales of 6.47 million units, declining to 6.43 million next year. Prices nationwide will be down by about 2 percent, year over year, and will inch up by 1.5 percent in 2007, he said.
New-home sales will decline this year by 16.8 percent, to 1.07 million units, and will sink 8.7 percent further next year, to 975,000, he said.
Lereah said inventory is stabilizing, citing his trade group’s data on pending sales - homes that have gone under contract.
“It appears that inventory has peaked,” said Lereah, who now estimates a 7.3-month supply of available homes nationwide.
“We were hovering near 4 to 5 months’ (supply of homes fore sale) during the boom, and in some areas, such as Orange County, Calif., we were measuring it in weeks, not months.”
But Lereah said the national picture is positive. “I’m optimistic for 74 percent of the country,” where local markets are, at worst, flat. “The other 26 percent are in for some rough times.”
Struggling the most would be California, Southern Florida, Arizona, Nevada, and metro Washington, D.C., he said, where sellers particularly need to lower their prices.
© 2006, Chicago Tribune, Mary Umberger. Distributed by McClatchy-Tribune News Service.
To Rent or Buy - Which is Right for You?
Should you sign another lease or take the plunge and buy a place of your own? Millions of Americans ask themselves that question everyday. To make a wise decision consumers should consider a few factors, such as their lifestyle and financial situation. There is no right or wrong answer when trying to make a decision to rent or buy. A good decision is one that is right for you. However, there are advantages and disadvantages to both.
Although most Americans own their homes, homeownership is not for everyone. If you move around frequently, have credit problems or if you cannot afford the home you want or simply do not want the responsibility of owning a home, you could be better off renting. Usually when renting, the landlord or owner of the property generally pays for the cost of any work or repairs that are done to the property. And, there is generally less up-front cash needed to move in.
However, when you are renting a property, you are waving good-bye to your money each month. Renting a home does not provide tax advantages to the renter. Any and all tax advantages go to the landlord or property owner. Also, monthly payments for renters can be unpredictable, depending on the lease.
Owning a home is a big responsibility. Not only does it mean paying a mortgage each month, but it also involves other costs associated with the home, such as, the cost of insurance, taxes, repairs and general maintenance. First-time homebuyers are often startled by the investment associated with purchasing a house. The down payment required can be as much as 20 percent. You also have to consider other fees, such as lawyer's fees, points, escrow costs, appraisals, and credit checks.
In spite of the risks and responsibilities, millions of people enjoy the rewards of home ownership. Purchasing a home is generally a sound investment. As you pay down your home loan, you are building equity. And unlike many things you buy, a home can actually increase in value over time.
Home ownership does offer tax advantages. The mortgage interest and real estate taxes are tax deductible, which allows you to subtract part of your housing-related expenses from your income, thereby reducing your tax liability.
There is not much doubt that for most people owning a home is better over the long term than renting. When you have made the decision to buy, do your homework. Know how large a mortgage you can afford. If possible, get "pre-qualified" for a loan. When you find a home you like, carefully give it your own personal inspection. If you have questions, seek the advice of a professional. And, contact the Better Business Bureau for a reliability report on the mortgage company that you decide to do business with. 4/18/2003
© 2003 Council of Better Business Bureaus, Inc.
Four tips for buying a house in a buyer's market
NORTH PALM BEACH, Fla. -- Oct. 6, 2006 -- Now is a great time to buy a house. Prices are falling, and so are mortgage rates. Millions of houses are for sale, and sellers are getting anxious.
That's one way of looking at it.
Alternatively, you could say: This is a bad time to buy a house. Prices might be lower in a few months. Same with mortgage rates. With more than 4 million houses on the market nationally, and more being added daily, sellers are bound to become desperate. Why not wait them out?
In many places, it's a buyer's market in real estate, with sellers outnumbering potential purchasers. The resulting downward push on prices makes buyers happy. But it complicates matters for buyers, too. In some markets, there are too many choices to sort through. Even more bewildering, buyers wonder if they should wait a few months.
"They're worried that they're going to buy too soon, and the figures will reduce, and by the time they go through the transaction, they'll have negative equity," says Mario Villena, vice president of Homekeys, a Miami-based online real estate brokerage. But, Villena adds, in every market there are people who are serious about buying, and don't get sidetracked by market forces that aren't under their control.
For those buyers, experts have some advice: If you find the right house at the right price, buy it.
1. Put technology and a buyer's agent to good use.
2. Negotiate effectively.
3. Avoid gimmicks.
4. If you find the right house at the right price, buy it
________________________________________________
1. Put technology and your agent to good use
Cool technological innovations are popping up on real estate Web sites practically every week. Among the most useful are valuation tools. Zillow has the best known of these called the "Zestimate," which is a computer-generated estimate of a house's market value.
The Homekeys site allows users to find estimated market values and to search for listings with aggressively competitive asking prices. Homekeys operates only in Florida, whereas Zillow has nationwide coverage.
It's hard to stress how revolutionary these valuation tools are, Villena says: "Until recently, this was impossible. You didn't have, as a consumer, tools that could reasonably provide home values to you without spending something like $300 for each property to appraise it."
Now those estimates are free, and you can get them without changing out of your pajamas.
Villena recommends that buyers start out by playing around with Web sites such as Homekeys, Zillow and Realtor.com, just to find out how much they can learn about the houses in their target neighborhoods. Focus on finding faster ways to weed out the houses you're not interested in -- because they don't fit your criteria for asking price, size, neighborhood or amenities.
"If you're a serious buyer, you really have to increase the speed at which you arrive at reasonably priced homes," Villena says. "Those are the ones that are going to see a lot of action. You need to be early to that party. Start out by being more specific about the characteristics defining your desired home."
With so many houses on the market, it's useful to hire a buyer's agent to sort them out, says Pam O'Connor, president of Leading Real Estate Companies of the World, a national network of 650 regional and independent brokers. You have your pick of agents now, and "you should be asking what's their experience, how long they've been in the market, what price they specialize in," O'Connor says.
If you find a house you like, ask the agent to perform a comparative market analysis -- basically, to do what technology does, but with the addition of human judgment. Do your own analysis online. Compare your research with your agent's. If they corroborate each other, fine. If something seems amiss, find out why. (An experienced agent is almost surely more accurate than Zillow.)
2. Negotiate effectively
Right now, "there's more room for negotiation" in most housing markets because the sales pace slows in autumn, and prices have been falling, says Steve Habetz, president of ARCServ, a network of real estate attorneys.
Villena counsels buyers to avoid the temptation to toss out lowball offers, because sellers won't negotiate if they feel insulted. "You have to be able to defend that offer as much as the seller has to be able to defend the asking price," he says. "If you're not making a full-price offer, it's not enough to pull a number out of the air. You should be able to show that this neighborhood has 20 comparable homes for sale, and, although I like your property, it's priced 6 percent above the other properties. That gives you a better footing for establishing an objective and reasonable negotiation."
Don't just negotiate with the seller. "Most people think that only sellers pay commissions," Villena says. "They think that buyers are being serviced for free. Most people are not yet aware that there is a commission component reserved for the buyer's agent. And that, too, just like the seller's commission, is negotiable."
3. Avoid gimmicks
You're shopping for a house, not for a Caribbean cruise or a car lease. Recently The New York Verdana, Arial reported on a condo seller who was offering to give the buyer a year's use of a leased Mercedes-Benz E-Class sedan. Razzi says you'll find all sorts of gimmicky incentives from condo sellers. They offer flat-screen TVs or weekends at vacation homes, or more creative inducements. "That has nothing to do with the transaction at hand," Razzi says. If there's an incentive, make sure it has something to do with the dwelling -- upgraded countertops, decorating allowances, payment of mortgage closing costs, that sort of thing. "If they're willing to subsidize it with a $500 TV, ask for $500 off the asking price," she says.
There's another gimmick to avoid: what O'Connor calls "magic loans." This is the time to avoid mortgages such as pay-option ARMs and interest-only loans, she says. If you can't afford it with a more mainstream loan, such as a 30-year fixed or a 5/1 ARM, you can't afford it. Not in this market, where house values could drop and mortgage rates are almost sure to rise.
4. If you find the right house at the right price, buy it
If you're serious about buying a house, this is both the first step and the final goal. To put it more precisely, you have to decide whether you will actively shop and then negotiate a fair deal, or if you'll just passively browse houses, hoping to stumble on a steal.
You're more likely to succeed with the active approach instead of waiting (possibly in vain) for prices to fall further. You can't predict when the local market will hit bottom. Even if prices do fall, someone could buy your favorite house out from under you. Diane Saatchi, a real estate agent with the Corcoran Group on Long Island, N.Y., draws this analogy: "It's like when you find a dress that you like, and you wait for it to be on sale, and then the sale comes and they don't have your size. Theoretically, you saved 20 percent. But you don't have your dress."
There's always the possibility that you'll buy a house and then the value will fall. In the 1990s, Southern California and South Florida had housing slumps in which it took years for prices to recover their previous levels. It could happen again, there or elsewhere. For that reason, "buy a home that can grow with you if necessary," says Elizabeth Razzi, author of "The Fearless Home Buyer."
"Look to the long term, because you don't know how long you'll be there," Razzi says. "You might have to ride out bad market conditions for a while." True to her book's title, Razzi says you shouldn't let fear dictate your timing.
"You should not wait if you find the right property, because, for one thing, you're not looking solely for the best price. You're looking for the best home."
And keep in mind that mortgage rates have fallen about three-quarters of a percentage point in the last three months. "Right now is a perfect time to buy, because of a real sudden increase in buying power," says Bill Christiano, loan officer with MortgageIT's office in suburban Westchester, N.Y.
© 2006 Bankrate.com
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