While it’s important to use caution when choosing the right Florida home loan, many buyers are still drawn in my non-traditional home loans. The allure of purchasing a house they didn’t expect to be in their price range is often too much. For this reason, banks recently voted to increase restrictions on such exotic Florida home loans.

Bank trade groups and financial institutions aren’t pleased about the development. They dismiss concerns about risks to future home owners are overblown.

Complaints have poured in from groups representing federally regulated banks and thrifts, including the American Bankers Association, America’s Community Bankers and the Consumer Mortgage Coalition, suggesting that the new requirements are overly restrictive and, if adopted, would cause many Florida home loan lenders to stop offering the nontraditional home loans.

Problems with home loan regulations

One of the most aggressive mortgage lenders, Countrywide Financial Corp., said in its comment letter: “We do not believe that the risks associated with these particular loan products justify the specific and prescriptive guidance.”

Late last year, federal regulators proposed more disclosure and tighter requirements for borrowers to qualify for so-called “interest only” and “payment option” adjustable-rate mortgages. These loans allow borrowers to exchange lower payments during an initial period for higher payments later in the payment schedule - as opposed to the set amounts of a 30-year fixed-rate mortgage.

With borrowers risking a possible doubling of monthly mortgage payments as interest rates rise, regulators raised concerns about defaults of these complex Florida home loans and whether borrowers truly understand them.

The popularity of exotic home loans

The loans grew in popularity over the past few years as housing prices escalated in several regions of the country, but demand has cooled recently as general interest rates have risen. Many banks, in part because of regulators’ crackdown, already have stopped aggressively marketing nontraditional mortgages.

America’s Community Bankers said it supports appropriate disclosure to potential borrowers about alternative mortgage terms, but the group objected to requiring lenders to determine the best home loan for their clients.

“We do not believe it is appropriate or possible for the lender to dictate the best mortgage products for individual consumers,” the ACB letter said

The Consumer Mortgage Coalition, a trade group representing national residential mortgage companies, said in its letter that requirements should apply to all lenders including state-chartered mortgage companies, not only to federally regulated institutions.

Meanwhile, a few consumer advocacy groups, including the Greenlining Institute in Berkeley, Calif., and small banks wrote letters applauding strict guidance.

“It is very dangerous to use mortgage products that allow borrowers to buy homes more expensive than they can afford. Add this to a slowdown in the economy and the job market and we could have a serious recession,” said David Stone, president of the Portales National Bank in New Mexico.

Final thoughts on these unique Florida home loans

You need to be careful. We understand that the initial enticements of certain mortgages are difficult to resist, but think down the line. The long-term effects of various Florida home loans may cause more harm than good.

In a move that was far from surprising, the Federal Reserve raised Fed Funds by 25 basis points this week. It was the 15th consecutive increase.

“This increase takes the overnight lending rate higher than rates on 10-year Treasury bonds. We won’t know for some time whether the Fed’s current course of action is warranted,” said Bob Walters, chief economist for Quicken Loans. “However, it’s likely that, whether the economy slows or not, the persistence of the Fed will be good news for long-term mortgage rates.”

Walters also pointed to another results of the Fed’s actions. Home owners will now have an easier opportunity to refinance adjustable Florida home loans. While these rates may have treated individuals well for the last five years, safer, fixed Florida home loans are now a far safer bet.

If you’re confused about the direction the housing market is taking, you are most certainly not alone. There are stories of sellers slashing prices and offering new incentives to attract buyers, but at the same time, home prices nationally have risen more than 10 percent over the past year. Even as inventories of unsold homes are on the rise, homebuilders such as Lennar Corp. are reporting huge jumps in earnings. The much anticipated rise in 30-year Florida home loan rates has been tepid, if that.

The most recent issue of Business Week takes a look at the situation, and what should you do whether you’re on the buying end or trying to sell. Cut your price now, or hold out for more? Rent while you wait the market out, or buy while you can still snare a low-interest Florida home loan? Get a bigger house or downsize? Across the nation, confusion reigns.

“Buyers are complaining that prices are astronomical, but sellers are still thinking they’ll get what they saw their neighbors get last year,” said Carol Higgins, a realtor in the New York City suburb of Larchmont.

No one can predict which way home prices will go in the next nine months or so, and perhaps longer. Over the past several years almost every pundit who has attempted to forecast the market has been markedly off. You can avoid critical psychological and financial mistakes in today’s anxious Florida housing market by following some pretty basic advice. however. No matter how smart you are, it’s easy to fall into certain traps. Costly traps.

“So much of what drives the housing market is human interpersonal dynamics,” said Yale University economist Robert J. Shiller.

Instead of concentrating on fundamentals, people tend to be ruled by their feelings and by comparisons to their neighbors. If your brother-in-law made a killing in real estate, you’re determined to do the same. If your buddy’s house sold for 40 percent more than he paid for it, you’re convinced yours will reap the same reward, even if the market has shifted.

Below are a set of guidelines crafted by behavioral economists. Look at some bad decisions people make, so as to avoid following in their footsteps. You can also see which geographical areas are more susceptible to a drop in median prices and which are less at risk.

CONTRARIAN IS COOL
A first rule of thumb is to avoid herd behavior, which is what lures a lot of people into some of the more overpriced markets in the first place. Millions of eager buyers can’t all be wrong. Can they? Expectations of rising prices become a self-fulfilling prophecy as everyone and their mother tries to leapfrog each other. People simply believe that prices will not go down. Ever.

“You see people who aren’t particularly talented, who aren’t hard-working, who buy a house with nothing down, and they’ve been getting rich doing it. If they’re getting richer, then you’re falling behind,” Robert H. Frank, a Cornell University economist, said.

Herd behavior is taking the easy way out. Thinking independently can be more rewarding. Richard X. Bove, a financial analyst at Punk, Ziegel & Co., concluded that Florida real estate was overpriced and bailed out earlier this year. He sold his 5,600-square-foot St. Petersburg home for $1.2 million, twice what he paid for it a decade ago. His plan was to rent while he waited out the housing decline, but when he couldn’t find a good rental, Bove lowballed a four-bedroom house in Tampa and got it at $740,000 — 30 percent below the asking price.

In a softening South Florida housing market, it’s a dangerous mental mistake to commit to “loss aversion,” or the determination to avoid recording a loss at all cost. Some sellers gamble the market will bounce back rather than cut their prices. Florida real estate agents, in general, have a much clearer idea than sellers that demand has softened. Even owners who stand to make a big profit on a sale even after a reduction will often set the price too high.

Sellers set their listing prices, in part, based on data that’s 6-9 months old. If you don’t pay attention, you may underprice in a rising market and overprice in a falling one.

GETTING STUNG ON BOTH ENDS
Joe and JoAnn Watson, a neurosurgeon and Ph.D. in genetics, respectively, recently relocated from New Rochelle, N.Y., to McLean, Va. They planned to come out even by selling and buying at roughly $1.2 million, but are being burned on both ends of the transaction. The Virginia house is costing them significantly more than $1.2 million, while they can’t get what they want for their suburban New York residence.

“We were advised by two brokers to price it initially at $999,999, but my husband and I wanted to start at $1.19 million because we thought we could get it,” said JoAnn Watson, who has since dropped the price $1.09 million and still hasn’t received an offer. “It’s a great house. Why doesn’t anyone realize it?”

The danger of lagging on price cuts in a sinking market is that you follow the market, failing to sell because the price is always a little high. In recent research, Christopher J. Mayer of a Columbia Business School and David Genesove of Hebrew University in Jerusalem found that when prices were falling in Boston in the early 1990s, two-thirds of the houses that came on the market were eventually withdrawn without a sale.

In parts of the country where the market is still strong, such as South Florida, a common blunder continues to be overconfidence. Owners typically don’t seriously consider a wide enough range of potential housing market outcomes, including the possibility of a steep decline. That leads people to take more risks than they should.

Deciding whether to rent or buy is a perfect example of what the housing market can learn from behavioral economics. If financial efficiency were all that mattered, many more people would be renting nice houses instead of buying them, even with the mortgage interest deduction. But something about owning the place where you lay your head on the pillow each night gives people comfort.

“It’s worked out so phenomenal,” exults first-time buyer Obrey M. Minor, a 27-year-old special education teacher and first-time home buyer who recently settled into a house in the Houston suburb of Katy.

Social pressure to buy is intense, particularly in upscale communities. On the other end of the spectrum, you have individuals like Annapolis, Md., renter April McKinley, a health care consultant who recently moved with her husband from Pittsburgh to the Washington, D.C., area and ran smack into a wall of high prices.

“Here I am, a productive citizen, and I can’t afford to own a piece of it,” McKinley said.

Jonathan Miller, CEO of real estate appraiser Miller Samuel Inc., recalls that when he and his family moved to posh Darien, Conn., 15 years ago and rented for a year, “we were absolutely second-class citizens. It was very unpleasant.”

The notion that a home is a fortress is perfectly defensible, but it is not necessarily financially sound. In many markets the total monthly costs of renting are far below the total monthly costs (taking PITI into account) of owning the same property. Housing is 62 percent cheaper in San Diego, for example, according to Boston-based Torto Wheaton Research. So you owe it to yourself to consider the implications of buying your little piece of this world.

CONTROLLING THE CRAVINGS
In order to avoid home-buying mistakes in the Florida housing market, more people should be aware of the human tendency toward status-seeking. You can probably channel that desire more productively, if nothing else. If getting your kids into a good school district is a priority, for example, you may be able satisfy your lust for status by buying a smaller house in a prime school district — rather than a mansion in a less-desirable place.

A common foible that helps account for Americans’ obsession with real estate is what you might call the “tangibility fallacy.”

It’s the tendency to regard tangible things, like houses, as more stable than intangible ones like stocks and bonds. While a house provides more comfort than stockbroking account, it doesn’t make it a better investment. In fact, a comparison of stocks and real estate might surprise you. Except for the past few years, house prices have risen only about 1 percent faster than the rate of inflation. But not everyone sees it that way.

“We all went through the crash of the market. I lost $150,000. You never get that money back. I think the stock market is going to go down. I’d rather put the money we have in hard assets like property,” said 68-year old Ron DeLucia of Jacksonville, Fla., who is trying to by a bigger place across town.

It’s easy to lose your head over housing if you aren’t disciplined. To find your way, focus on the fundamental factors that determine value. With that in mind, it’s reassuring to realize that prices in the U.S., though high, are not out of line with other major countries. And remember that over the long run, real estate values rise at a pretty dependable clip.

BEWARE THE RED FLAGS
Prices in some U.S. housing markets do raise red flags, and a good starting point is to look at the affordability of homes for ordinary families. That measurement ranks Los Angeles dead last, with only 2 percent of homes sold there considered affordable by families earning the area’s median income, according to the National Association of Home Builders.

Other cities that don’t fare much better:

• New York — 6 percent.
• San Francisco — 7 percent.
• Miami — 14 percent.
• Boston — 24 percent.
• Washington, D.C. — 27 percent.

Of course, unaffordability is a chronic condition in places like New York, so it’s not necessarily a sign that a correction is coming soon. But in some cases, the median price is not too lofty. Tops in affordability among big cities were places like Dallas, with 60 percent of homes sold affordable by median-income families. San Antonio and Houston came in at 57 percent, while Chicago offers a respectable 48 percent.

Economists at Global Insight Inc. and National City Corp. conclude that in the fourth quarter of 2005, 42 percent of the top 299 metro markets were “extremely overvalued and at risk for a price correction.” The California and South Florida real estate markets dominate this list. Boston and New York look more reasonable by this measure, and San Francisco appears a bit less bubbly. Texas real estate still comes out looking like a bargain.

Another way to identify a problem area is to compare rents to sales prices, with the idea that if people’s monthly payments to own a house are much higher than what they would spend to rent the same place (real estate tax deductions and considerations included), then they must be banking on prices going up so they can sell for a profit someday — which leaves them exposed if prices don’t rise. By this measure, San Diego is one of the frothiest areas of the country, while Tampa and Orlando real estate aren’t nearly as costly.

The bottom line? Millions of households will buy a home this year. Locally, thousands of people will apply for Florida home loans. The process will always be lengthy and it is always big deal. Whether you are a buyer or seller, you don’t have to feel quite so lost. Or alone.

You should really get to know Paul Owens. He’s a business writer for the South Florida Sun-Sentinel and he recently answered a series of reader questions concerning Florida home loans and the state of the market. Among them were:

• Will prices for South Florida homes and condominiums drop?
• Should I hire a real estate agent now that the market has slowed?
• What about interest rates?

Some housing analysts think the real estate market will experience a major correction, while others are more optimistic. Jack McCabe, an analyst in Deerfield Beach, says condo prices could fall 20 percent to 30 percent, while single-family home prices could drop 5 percent to 20 percent during the next 30 months before rebounding.

Other analysts think Florida homes values will remain stable - and the market will continue to grow, albeit at a slower pace. They think prices will increase by 8 percent to 15 percent or so in 2006.

Some readers said they want to save 5 percent and 6 percent commissions by trying to sell their homes themselves. But selling in a soft market can be tricky and homeowners might best be served by listing their homes with real estate agents for maximum exposure.

Rates on 30-year Florida home loans are at about 6.3 percent, according to Freddie Mac, and are expected to continue rising closer to 7 percent this year. While mortgage rates remain relatively affordable compared with previous years, any rate increase prevents some people from being able to afford a reasonable Florida home loan.

Here is a sampling of other questions:

Q: Despite all this talk of a housing bubble, isn’t South Florida still an excellent place to invest in real estate for the long term?

A: Experts do agree that real estate remains a solid long-term investment. But investors and speculators who want to “flip” their units for fast cash will have a tough time in today’s climate.

Q: Is now the time to buy or should we wait for prices to fall?

A: With prices leveling off, now generally is a good time to [agree on a Florida home loan] if you plan to live in the home and build equity, housing analysts say. Some buyers are waiting for prices to plunge, but that might not happen. “I learned when I was very young that he who hesitates is lost,” said Michael Cannon, managing director of Miami-based Integra Realty Resources. “If you wait for the bargain, the bargain may not be there.”

Q: What is going to happen to all these condo developments when the developers realize that they are not able to sell them?

A: Experts predict developers would try to sell at below-market rates. In other cases, lenders would take back the properties. Some condo projects also could be canceled if developers can’t get financing.

Spring is in the air. So is home buying. As the weather turns warmer, more people are likely to look for a Florida home loan. Consequently, Lending Tree has provided a list of mistakes you should be hoping to avoid during this process:

- Going it alone. Buying a house is a complex transaction. Even if you don’t use an agent, you’ll need a complete, dependable team: Florida home loan officer, lawyer, inspector, insurer, as well as referrals and advice from friends and family. Enlist the help of these individuals early in the buying process.

- Not getting pre-qualified and pre-approved. Being pre-qualified gives you a general idea of how much you can afford to borrow. Being pre-approved means a lender has verified your information and credit rating and agreed to provide you with a specific amount of money. You are in a better position to go house hunting knowing exactly how much you can afford and that you have financing.

- Overbuying. You may qualify to borrow more, but can you afford to? Analyze your monthly costs: debt, food, transportation, entertainment, and savings. As a general rule, your total monthly debts, including your mortgage, should not exceed 36 percent of your income before taxes. Be sure to budget enough to cover closing costs, plus moving, redecorating and maintenance. Allow for increases in ongoing expenses such as utilities and taxes.

- Misplacing your trust. No matter how much you like the agent, sellers, inspector, or the guy down the block who vouches for them, remember this is a business transaction. Your decision is binding. Do your own research and know your support team’s roles and responsibilities.

- Skipping the fine print. You need to understand what you’re signing before you pick up a pen. Ask for Florida homa loan documents in advance, make time to read them and ask questions. Get copies of your mortgage papers a few days ahead of closing.

- Forgetting or betting on resale. Avoid buying a home that costs 50 percent more than neighboring homes and think before buying the most expensive home on the block. Your neighbors’ lower home values will weaken yours. Remember, markets change. If you buy intending to flip your investment and the market falls and you have to sell, your selling price may not be enough to even cover your mortgage.

- Making an unconditional offer. Protect yourself with at least two of these contingencies in your offer:

• Mortgage financing — You’re pre-approved, but is the house? Before a bank will lend you money, it will want a formal appraisal of the property to confirm that there is sufficient equity in it to warrant the loan. If the house appraises lower than the sales price, the Florida home loan may be declined.
• Inspection — Never buy an existing or new home without a thorough home inspection. Walk through the home with the inspector to learn more about the house and any concerns he or she may have.
• Insurance — Confirm you can get adequate coverage. In some areas, it’s difficult to get hazard insurance.

These aren’t in-depth secrets for choosing a Florida home loan. But they are important tidbits to keep in mind as you go through such an important process. Good luck!

Chalk one up for the good guys.

Ralph Roberts of the Realty Times reports that federal authorities in Texas have arrested Rebecca Hauck, alleged co-conspirator of real estate and mortgage fraud poster boy Matthew Cox.

Cox and Hauck could be called the Bonnie & Clyde of the Florida home loan world… and beyond. A string of dirty deeds that are rumored to stretch from coast to coast have gained them much notoriety. Now, half of the combo is in custody.

According to various news sources and unsealed federal documents, the pair allegedly began its crime spree by committing Florida real estate fraud in the Tampa area in 2003. The St. Petersburg Times and MortgageFraudBlog.com say that Cox started a Tampa-based mortgage company around that time. After he was charged with fraud in Tampa, Cox concocted a plan to use phony IDs and falsified records to make a fortune with fraudulent Florida home loans on broken-down properties.

Later, says MortgageFraudBlog.com, Cox and Hauck moved on to Atlanta, Ga., where they allegedly engaged in a real estate fraud scheme but disappeared before being caught. In 2005, Cox — whose known aliases include Maxwell Price, David R. Freeman, Gerald Scott Cugno, Michael S. Shanahan, Michael J. Eckert, Gary L. Sullivan, and David White — was nearly caught in South Carolina, but again managed to evade authorities and disappear. And not before securing over $1 million in fraudulent mortgage-related loans.

The story gets even more interesting.

According to numerous sources, Cox is rumored to have penned The Associates, a 300-page crime novel detailing the same criminal activities of which he is now accused, before embarking on the spree. The central character in Cox’s novel is a former University of South Florida student who quits his insurance sales job to strike it rich in the Florida home loan business, but finds himself in trouble with the FBI. In a bind, he masterminds an elaborate scheme to defraud lenders of millions before vanishing.

Cox himself is a former University of South Florida student who started his own mortgage company, and has now been charged with fraud in Tampa, while allegedly brainstorming a scheme to evade federal authorities. By his side throughout was accomplice Rebecca Hauck. It will be interesting to see if, upon her arrest, Hauck will reveal enough information about Cox so that he will be tracked down and put out of business for good. Hopefully, for the sake of Florida home loan applicants and businesses, he will be.

The Magic Kingdom just got a little smaller.

Walt Disney World is selling off parcels of excess land on the fringes of its complex, allowing developers to pursue their own magic… Central Florida real estate style.

According to the Orlando Sentinel, Disney recently sold 53 acres on Sherberth Road, just south of Disney’s Animal Kingdom, to a real estate developer who will build hundreds of vacation homes and condo units. Another 47 acres on Reams Road, north of the Kingdom, were sold to a home builder, while 30 acres is also up for sale on U.S. Highway 192. As soon as the company re-evaluates its vast Orlando-area real estate holdings, a lot more land may hit the market. The company is currently evaluating all its assets.

Disney owns 27,000 acres in Orange and Osceola counties, most purchased in the 1960s when founder Walt Disney stealthily assembled his holdings before the public learned of his plans to build Disney World. Much of the acreage comprises the area of, and around, Disney’s theme parks, water parks, golf courses, shopping and hotel and time-share resorts between U.S. 192, State Road 429, Reams Road and Interstate 4.

“With such significant land holdings in Central Florida, our strategy is to manage and develop land resources in ways that promote and enhance and complement our core businesses,” Disney spokeswoman Andrea Finger said.

Disney is not talking about the 30-acre tract on U.S. 192, except to say it is in contract. The latest deals are different from those at Celebration or Little Lake Bryan, both fully-planned communities. The company transferred property in both areas to subsidiaries, which developed the communities and sold off the real estate as they were developed. The latest deals would be governed by Orange or Osceola county planning and zoning codes, but would otherwise be outside Disney’s plans.
Susan Lawrence, president of Real Estate Strategies in Orlando, said Disney is finding a great time to sell. Demand is high, supply is tight, and the Florida housing market has reached its peak.

“Like stock, when the prices are extraordinarily high, you’re going to sell, especially if there’s no long-term strategic use for it,” Lawrence said. “That still leaves them with — what? — 26,000-plus acres?”

Last week Disney asked the Reedy Creek Board of Supervisors to begin steps to drop the 30-acre parcel from the agency’s jurisdiction. Reedy Creek, a government agency set up by the Florida State Legislature, provides fire, utilities, emergency medical aid, and other public services to Disney’s property. When Disney sells land governed by Reedy Creek, the company asks the agency to de-annex the land so that new owners would not share the district’s services and would not have say in Reedy Creek affairs.

“They have gone around and looked at the entire property, the perimeter of the property, and said, OK, does this really fit into future development plans or not? And if it doesn’t, is there a market for it?” asked Reedy Creek Executive Director C. Ray Maxwell, who expects to receive more de-annexation requests from Disney.

Centex Homes bought the 47-acre Reams Road property for $4.8 million, even though the company has not yet decided what to do with it.

Sherberth Development Partners paid $15.4 million for the 53 acres, which will be developed by Resorts Development Group. President Steve Parker said his company got an unexpected chance to buy the Disney property just as it was planning a 40-acre development next door. Knowing how rarely Disney has sold its Central Florida holdings, his investors immediately stepped up to buy it.

“We like to think it was real estate genius, but it was really dumb luck,” Parker said. “They said, ‘We just decided today to start selling some of it.’ We said, ‘OK, we’ll buy it.’”

Oh, the weather outside, it’s no longer frightful. This means the Florida home loan scene will soon be delightful. A warmer climate typically translates into a significant increase in home sales across the nation and state.

Especially in this somewhat cooler housing market, buyers have more leverage than ever before. So if you’re looking for a reasonable Florida home loan, it’s important to take notice of certain rules and tools. We’ve listed them below.

Rules for home buying

1) Get pre-approved for your loan. According to Lennox Scott, CEO of John L. Scott Real Estate, it’s more important than ever this year to get pre-approved - because virtually every other buyer has. “You have to do that,” he says, “to show you’re capable and motivated.”

Mortgage broker Bob Moulton, of Americana Mortgage, says it reduces the stress of home buying. “You’re going through a fire drill before closing, lining up inspectors, attorneys, getting paperwork together. It’s a lot easier if you already have the loan in place.”

Pre-approval involves filling out a mortgage application before you begin to shop. It includes all your financial information such as salary, credit history and bank statements, and it establishes a target Florida home loan amount. Approval typically takes at least several days.

2) Determine how much you can afford. Remember, you probably can’t count on the soaring home price market to bail you out anymore.

Why? Prices have changed dramatically in many places in just the past 12 months. You may have to re-think where you want to live. In Phoenix, prices grew nearly 50 percent. Several cities in Florida showed 40 percent appreciation or more. That split-level you had your eye last April may be an unaffordable today. In addition, interest rates are on the rise, increasing monthly payments.

Florida home loan lenders typically don’t want their borrowers’ total home expenses - including mortgage, taxes and insurance - to exceed 28 percent of their gross income. A borrower with household income of $60,000 a year, paying off a car loan at $300 a month and property taxes of $3,000 a year, would be eligible for a loan big enough to buy up to a $300,000 home on a 30-year, fixed 6.5 percent rate.

Jim Gillespie, CEO of Coldwell Banker, says, “For every 1 percent rise in mortgage rates, 250,000 to 300,000 buyers are priced out of the market.”

3) Don’t get caught up in a bidding war. Try not to fall too deeply in love when bidding on a home - you’re much more likely to overpay if you do.

This year, it should be easier to hold out. Housing inventories have risen steadily the past six months. As Moulton says, “With all the inventory out there, there’s always another house.”

4) Check out the home thoroughly before going to contract. Hiring a home inspector is always a good investment. They may find problems that can be repaired at the seller’s expense. At the very least, buyers can get some idea of how much they’ll need to put into repairs and remodeling before they close.

This is more important than ever. Ken Simonson, chief economist for the Associated General Contractors of America, is predicted double-digit increases in the prices of construction materials this year, thanks, in part, to Hurricane Katrina. Labor and energy costs will also spike.

5) Pick your sales agent carefully. Working with an experienced pro can make house hunting a pleasure instead of a nightmare, but the housing bubble of the past few years has lured legions of green recruits to the field. Be extra careful in choosing a real estate agent this year.

Palm Beach County Property Appraiser Gary Nikolits is worried about the area’s housing industry if serious property tax reform is not enacted, reports the Sun-Sentinel.

Speaking in front of about 100 real estate agents during a seminar at HomeBanc Mortgage Corp. in Palm Beach Gardens, Nikolits said he supports state legislation that would prevent sellers from incurring huge new tax bills when they switch homes. He urged that the South Florida real estate industry could be “brought to its knees” if homeowners aren’t allowed a property tax break with them when they move.

“We’re going to reach a point where people are not going to be able to afford to move,” Nikolits said.

Many residents already feel that way, saying they can’t afford to move up or even downsize because of the higher taxes they would incur on their new properties. It’s a reason often cited for the recent South Florida housing market slowdown. Homeowners currently receive a $25,000 Florida homestead exemption, while the Save Our Homes amendment, circa 1992, limits the rise in taxable value on homes to 3 percent per year.

• Once residents move, however, they lose that 3 percent benefit.
• Florida real estate is subject to reassessment every time it changes hands.

Legislators are trying to combat this problem. Bills allowing homesteaded property owners to transfer their Save Our Homes tax break when they move are currently under debate. Carl Domino, a Republican from Jupiter and a proponent of the measure, is pushing for no limits on the portable tax savings, which owners could take with them wherever they move in the state.

“It’ll put people into more of a buying-and-selling mode,” he said.

Nikolits said he would like to see a cap of $250,000 so wealthy homeowners don’t get out of having to pay their fair share of taxes. There are 3,680 homes in Palm Beach County with Save Our Homes tax savings of $500,000 or more, according to the appraiser’s office. Nikolits also thinks portability should be restricted to a homeowner moving within the same county, an idea Broward County Property Appraiser Lori Parrish agreed with.

“We could devastate a small community if it were to go statewide,” said Parrish, who supports portability but thinks counties should decide individually how best to institute it.

Mike Kleinrichert, a real estate agent from Wellington who attended the seminar where Nikolits spoke, said at least a third of his listings are from people who want to move out of the state, in part because of rising Florida property taxes. Naturally, portability would be beneficial to his business and clients. If you are considering a Florida Home Loan, keep an eye on the situation to see how the tax reform could benefit you.

As investors - or those seeking an eventual return on their Florida home loan - consider investing options, they may be in for a surprise. The houses around the nation that have shown the most significant appreciation over the last two years can be found is less affluent cities than you might expect.

According to a Forbes.com ZIP code analysis, the California city averaging the LEAST amount of appreciation was the posh neighborhood of Holmby Hills. Conversely, Watts - an area known for poverty - showed rising home prices of 91.9% between 2003 and 2005.

A pattern of home loan appreciation

This is a pattern that held true in several of the largest cities in the U.S. over the past couple years. Many neighborhoods with lower median incomes, neglected housing stock and low home prices, or areas that were dominated by office or industrial space, have surged forward.

For example, consider Miami’s Little Havana. Prices increased more than 150% over the last two years. Similarly, there’s the tough Northern Liberties section of Philadelphia, which enjoyed appreciation of more than 70%.

“In the past, you would expect that neighborhoods with higher median incomes would have stronger demand for homes,” says David Lereah, senior vice president and chief economist for the NAR. “Lower-income neighborhoods will have more renters. Higher-income areas will have more demand from people wanting to climb the ladder. It means that some things have changed.”

Fall out from home price increases

As prices have increased, some of the most desirable neighborhoods - which have always been more expensive - have topped out, becoming unaffordable for many home buyers. So instead of buying charming but overpriced stone homes in the leafy Baltimore neighborhood of Guilford, for instance, young families turned to blue-collar areas near the water, rehabbing old row houses that seemed cheap in comparison.

Jonas Lee, a founder and managing partner of Redbrick Partners in Manhattan, a private investment fund that puts money into single-family homes, is not surprised. His company targets just such urban areas for investment.

“It takes people a while to figure it out, but there’s a very large arbitrage between these neighborhoods and some of the nicer neighborhoods,” Lee says. “Once that price differential is large enough, people start to recognize the opportunities, and then there’s a sort of a herd mentality. It’s leading to the revitalization of neighborhoods that had not seen a lot of investment for a long period off time.”

What does all this mean? Perhaps you should be looking toward Miami for your next Florida home loan. The best real estate investing advice we can give you at the moment is to focus on areas that are reflective of booming price appreciation.