According to the Sun-Herald, which is conducting its ongoing business year in review feature, real estate in Charlotte County, Fla. showed what could best be described as a split personality during 2006.

The Southwest Florida housing market was clearly headed for a cooling-off period as the year began, coming off a torrid late 2004 and 2005 pace that real estate professionals realized had to fizzle at some point.

That’s because the local market was hot for the worst of all possible reasons - historically low Florida mortgage rates lured speculators from all over the country, creating artificial demand, and in the aftermath of Hurricane Charley, anything with four walls and a roof would sell.

But by the fall, sales volumes for existing houses were roughly two-thirds of their 2005 levels, while asking prices were creeping downward, although perhaps not enough to ease fears that Port Charlotte and Punta Gorda were losing affordable housing for working families.

Median home prices had crept above the psychologically critical $200,000 mark around the time of Charley. The “market correction” of recent months has yielded only a modest rollback in prices, which - disappointed sellers to the contrary - remain near historic highs.

Meanwhile, commercial real estate construction avoided the ups and downs of the residential market. Several significant commercial redevelopment deals were announced during 2006.

The feeling among local builders is that the commercial market’s big test won’t come until the market takes the full brunt of increased city and county impact fees. Indeed, some projects were timed to begin just before year’s end, thereby beating the new fee schedule.

But potentially the biggest new deal in Charlotte County will come entirely under the new fee regime - and perhaps it’s appropriate that The Wilder Companies successfully developed shopping centers in notoriously high-tax Massachusetts prior to turning its attention to the Orlando area.

In November, Wilder closed on the last parcels in a 200-acre tract south of Punta Gorda that will become The Loop, a mixed commercial and residential project that should break ground in about a year, assuming Charlotte County grants all required building permits.

The Loop will have about 1 million square feet of retail space, plus a hotel, condos and office buildings. The Florida condo market has been hit hard in recent months, however, so it remains to be seen if demand for the new units is anything more than tepid.

The real wild card in the area is also one of the biggest real estate deals ever in Charlotte County. In May, a Naples developer paid $25 million for a 129-acre tract at Interstate 75 and Jones Loop Road, south of the airport.

St. Petersburg property appraiser Frank Gregoire couldn’t help but chuckle when an appraisal request, sent by a California loan originator, came through his fax machine.

“Please call if unable to attain this value BEFORE INSPECTION.”

Photos of the property, the request said, could not include “unfinished construction or damage.”

Gregoire knew right away that the company was trying to influence his valuation of the home through the home inspection stipulation, and it would be unethical to take on the work.

“It was the most blatant request I’ve seen,” said Gregoire, who is chairman of the Florida Real Estate Appraisal Board. He said he’s seen a recent spike in unethical requests like the one from California.

With the Florida housing market bottoming out and lending fraud on the rise, professional appraisers say they’re under more pressure to value homes at specific, and often inflated, amounts.

As a result, some big national lenders and law enforcement officials say they are taking a harder look at the role of appraisers in questionable loan deals. It’s against state law for an appraiser to agree to value a home at a pre-determined amount or intentionally omit information that could mislead a lender about the value of a home.

Sales involving a Florida mortgage typically can’t move forward without an appraisal showing the lender that the home is valued at close to the sales price.

Law enforcement and industry investigators say that mortgage fraud involving obtaining inflated loans so someone can illegally pocket thousands of dollars is an epidemic.

It can leave investor homebuyers and Florida home mortgage lenders on the hook for loans worth more than the property. Prices of nearby homes can be artificially driven up and neighbors can end up paying higher taxes because of the inflated values.

This type of mortgage fraud requires a string of real estate professionals willing to go along. A key to the scheme is having an appraiser willing to overvalue a property. Historically, such unscrupulous appraisers have not been caught, or were let off relatively easy, experts say.

That may be changing.

“Without an appraiser coming in at the magic number, the fraud is stopped in its tracks,” said Tampa police Detective Jim Bartoszak, who’s working on several loan fraud investigations.

The Tampa Tribune recently uncovered a series of such deals in Pinellas and Hillsborough County. In many of the cases, the same person provided the appraisal for a number of homes for the same client. Lenders and regulatory boards are now reviewing the accuracy of some of those appraisals.

Borrowing additional money on top of a Florida mortgage loan to help with closing costs or repairs is not unusual and not illegal - as long as the lender knows about it.

The fraud, experts say, happens when the appraisal is skewed and the lender is misled about the home’s cost. It is against state and federal laws to misstate who receives loan money on federal housing documents.

Why would appraisers risk their licenses for so little? The president of the Appraisal Institute, Richard Powers, says appraisers are tempted to overvalue a home when they’re starved for work.

During the recent real estate boom a lot of people became appraisers. Now that the market has cooled, there isn’t enough work to go around.

“Appraisers who do this are often guaranteed more work from the client,” Powers said.

The pressure to inflate an appraisal, he said, comes from Florida mortgage brokers, loan officers and real estate agents - who are also competing for work in a slow market.

Phillip Wallen said such intense pressure prompted him to up and leave the business. Wallen worked as an appraiser in Pinellas County for 12 years and owned his own business.

“Every day I would get calls that I needed to do an appraisal for X amount,” he said. “There are so many appraisers out there willing to give out whatever value a client wants. That makes it tough for the honest appraisers to compete.”

As demand for Florida mortgages drop in cities such as Tampa Bay, the effect is also being felt across the Sunshine State condo market.

Developers have pulled the plug on some of Miami’s most anticipated condominium developments, a sign the city’s sizzling, speculator-driven condo market - where prices of many apartments doubled or tripled in a few brief years - has finally chilled.

“This market was too good to be true,” said Lewis Goodkin, a Miami economist and real estate analyst. “But it was a market fueled by speculators, so it wasn’t a true market.”

City officials say 15 condo projects, representing nearly 1,900 units, have been officially pulled from the waning Florida housing market. But analysts say the numbers are much higher when you consider the rest of Florida’s overbuilt condo situation.

A look at the Miami housing market

Miami’s building boom, the biggest in the city’s history, is far from over. Construction cranes dominate the skyline, as they have for years. The city alone still has more than 77,000 units, in nearly 300 projects, under construction or in planning.

But the “for sale” signs are not the only warnings of a fading Miami housing market.

Statewide sales of existing condos dropped 31 percent in October from the same month last year, according to the Florida Association of Realtors. Median prices fell 2 percent. The seller of a Miami Beach waterfront one-bedroom dropped his asking price from $445,000 to $400,000 to $370,000 in a matter of weeks.

Example of overbuilding

“We’re starting to see projects being canceled almost on a weekly basis,” said Jack McCabe, chief executive of McCabe Research & Consulting of Deerfield Beach.

Miami was considered one of the most speculative markets in the years-long U.S. residential real estate boom. Analysts said up to 80 percent of sales at some condo projects were to speculators who intended to quickly resell, or “flip,” the units.

Elie Mimoun, sales director of Midtown Miami, a $1 billion-plus redevelopment of a blighted former railroad yard north of downtown, said the softening represents a natural shakeout of speculators.

“The market is now keeping out the crazy people,” he said. “I think if the economy stays the same, the worst is behind us.”

Midtown Miami, a key cog in the city’s redevelopment plans, is a 56-acre site where developers plan to build more than 3,000 condo units, office space, and some 600,000 square feet of retail shops. Of the nine planned condo buildings, three are under construction and another breaks ground in February with the hopes people will use Florida home loans on them.

But Mimoun said the developers were simply trying to find a financial partner and “there was never a question of getting out completely.”

Mimoun and other optimists believe the unusual demographics of this Latin-flavored city will keep the Miami market strong. About 20 percent of his home buyers are Europeans whose spending is bolstered by a strong euro, and 13 percent are South Americans, traditionally eager consumers of Miami real estate.

But Goodkin said rising building costs, hurricane-fueled homeowners’ insurance hikes and property tax increases caused by exploding prices have made Florida increasingly unaffordable.

“You have to have people buying units to live in. Who are the speculators going to sell these units to?” Goodkin said.

Several years ago, McCabe began mustering funds, or “vulture” capital, to buy apartments when the bubble burst. But he has not yet begun buying and said it may take 5-10 years before prices bottom out and begin to rebound.

The Tampa Bay housing market wasn’t the only region to suffer last month.

Sales of existing homes and median prices in Palm Beach and Broward counties continued to fall in November, compared with November 2005 , the peak of the five-year South Florida housing boom.

In Palm Beach County, there were 525 sales of existing single-family homes last month, down 45 percent from the 952 homes sold in November a year ago. Broward County had 605 sales last month, a 23 percent decrease from the 788 sales in November 2005, according to figures released Thursday by the Florida Association of Realtors.

On an annual basis, median prices declined sharply last month in Palm Beach and Broward counties from record highs in November 2005. This should at least pave the way for more Florida home mortgage activity in the near future.

In Palm Beach County, the median home price was $370,400, down 12 percent from $421,500 a year ago. Broward County’s November median of $362,000 was down 7 percent, or $29,100, from the same month last year.

Condominium sales and prices remained soft, too. In Palm Beach County, there were 420 condo sales last month , down 23 percent compared with November 2005, but the median price rose $16,600, or 8 percent, to $219,800.

Broward’s condo sales fell to 560 in November , down 38 percent compared with the same month last year; the median price was flat at $199,700 compared with $198,900 a year ago.

Statewide, a total of 11,912 existing single-family homes were sold last month, a decrease of 30 percent from the 17,088 homes sold during the previous November. This time of year is traditionally slow for Florida home loan demand, however.

The Orlando housing market - mainly comprised of Orange, Osceola, Lake and Seminole counties - saw a 36 percent decrease in home sales in November, with 1,705 homes sold versus 2,656 in November 2005.

Median existing home prices, however, were up 4 percent for the month at $263,600 (compared to $254,600 a year ago), according to the Orlando-based Florida Association of Realtors. Such an increase could explain the lack of Florida home loans applied for last month.

Even with the November decrease in single-family existing home sales, Randy Martin, president of the Orlando Regional Realtor Association and a Florida mortgage broker associate with Re/Max 200 Realty Inc., says the Orlando area is still expected to finish out 2006 as the second-best year on record.

Florida condo news

In other local real estate news, condos also took a hit in November, with a total of 276 existing condos in Orlando changing hands - a 41 percent decrease over the 467 condos sold the previous year, FAR reports.

Median prices for condos slipped as well, coming in at $171,800 versus $182,400 in November 2005, a 6 percent decrease.

Statewide, meanwhile, sales of both homes and condos were down in November.

A total of 11,912 existing single-family homes sold statewide in November, a decrease of 30 percent from 17,088 homes sold a year ago. The median price of existing homes also fell from $250,400 a year ago to $242,500 this year, a 3 percent decrease.

In addition, condo sales statewide declined 36 percent last month, with 3,346 sales compared with 5,198 in November 2005. The statewide median price for condos also took a hit, coming in at $206,000 versus $215,100 a year ago - a 4 percent decrease. This may make it more reasonable to use a Florida mortgage on a condo for the time being.

A new national report may show new home sales making a 3.4 percent jump for November, but sales of existing homes in the Tampa Bay region still appear to be in a decline, according to recent statistics from area Realtor organizations.

Residential sales in Hillsborough and Pasco counties dropped 31 percent in November, as Florida mortgage loan activity waned. However, the average sales price continues to increase, this time to $267,741 compared to $264,144 a year ago, according to the Greater Tampa Association of Realtors.

Condominium prices, however, are dropping from $213,024 average sales price in November 2005 to $185,756 in November 2006.

The busiest areas in the two-county region continue to be Brandon and Lutz where homes are selling for $267,072 and $185,756 on average respectively.

Pinellas County has had its lowest volume of sales in the last five years with just 849 units being sold in November, compared to 1,433 the previous year. Until prices come down, there’s a good chance Florida home loan demand will remain slow.

Listings also continue to climb in the county where 16,759 units are now on the market, compared to just 7,726 the year before. Such an inventory truly makes the region a buyer’s market.

The median sales price for single-family homes in Pinellas is $215,000 in November, down 17 percent from the $259,000 median price in November 2005. It’s the lowest median price the market has seen since the beginning of 2005 when homes were selling for just over $216,000.

Condominiums are now selling at a median sales price of $155,900 for November, down 11.9 percent from the $176,900 they were selling for a year ago. That’s the lowest median price for condos in Pinellas County since April 2005.

Home building, one of the most battered sectors of the U.S. economy in recent months, showed surprising strength in November.

New homes sold at an annual pace of 1.05 million, up from the revised annual rate of 1.01 million in October. The signs are there that Florida home mortgage activity is returning.

Median prices, new home supply

The median home price came in at $251,700 in November, up from the $248,500 level in October. This figure had shown declines earlier in the fall due to a glut of homes available for sale on the market.
The national median price is now back to the second-highest level on record, trailing only the $257,000 level reached in April of this year.

The inventory of completed new homes available for sale continued to creep up, setting yet another record at 169,000. However, all new homes available for sale - which includes those with permits but not yet started as well as those under construction - was slightly lower. That took the inventory of new homes on the market down to an estimated 6.3 months supply in November.

And while the pace of home sales is down 15.3 percent from the white-hot sales rate of a year ago, it’s up nearly 7 percent from the trough hit in July of this year, when revised figures put the annual sales pace at just under a million.

John Tomlinson, an analyst with Majestic Research who covers the major publicly-traded builders, said the government report is missing some signs of weakness in the new home market, including orders for new homes which are cancelled by buyers or incentives offered by builders, such as covering closing costs or extra features on the homes for free, in order to support sales in the weak market.

“I’m not so sure that the pricing has bottomed here,” Tomlinson said. “There’s still a ton of inventory on the market. When inventory comes more in line with demand, we’ll be ready to see an upturn.”

In other words, buyers: Go send in a Florida mortgage loan application while you can. Take advantage of low prices while you can.

Every year at this time, the South Florida Sun-Sentinel polls real estate industry professionals who are experts in different segments of the Florida housing market. They’re asked to predict what the industry will do in the coming year.

Here are their responses:

Ron Berger, first vice president, Industrial Brokerage Division, of CB Richard Ellis Inc. in Miami: “The industrial sales and leasing market is on fire and has been for the past year. Based on limited supply and a very large demand, 2007 will be a repeat of 2006. The vacancy factor is under 4 percent across the board and will stay at that number for the better part of 2007.

Sales prices have reached their peak, but will maintain today’s prices throughout 2007. Owners are still reeling from the massive increase in property insurance that took place this year. Many see a light at the end of the tunnel for insurance reform. Watch out — that light could be a freight train carrying no property insurance relief.”

Angelo J. Bianco, senior vice president of Crocker Partners LLC in Boca Raton: “In 2007, South Florida will continue to see positive net absorption in all office product types. In many submarkets, however, the high price of new construction coupled with the anemic existing development pipeline will dramatically reduce their leasing capacity.

As a result, the lack of supply and increased tenant demand will cause an unprecedented spike in rental rates. It will be the first time since the late 1990s that landlords will find themselves in the stronger bargaining position.”

Eli Dreszer, partner, MFM Construction Corp. in Miami: “There’s a substantial shortage of middle-market housing that enables buyers [and Florida mortgage applicants] to live within close proximity to where they work. It is our estimate that the middle-income residential market will grow at a 15 percent rate, with the supporting retail sector growing at an even higher rate of 25 percent. The demand for middle-income housing is clearly there.”

David Dweck, a real estate agent with Re/Max Professionals in Coral Springs and president of the Boca Real Estate Investment Club: “The resale market will hit bottom in 2007, and it will remain a buyers’ and renters’ market. If insurance and taxes are not dealt with, we will have continued challenges that will affect sales.

Foreclosures will continue to increase to perhaps record levels from Miami-Dade through Port St. Lucie. Many real estate agents and title companies will be history since the party is over. Finally, investors will be in a great position to buy at prices significantly below market.”

Jay Jacobson, South Florida development partner of Wood Partners in Boca Raton: “There will be a resurgence in the apartment market in 2007-2008. Given land prices and construction costs, 99 percent of the product that’s going to be delivered will be Class A or A+. To justify the new investment that is going to be coming, rental rates have to increase significantly.

But to justify new construction, the opening rents on a new building will actually be even higher than any 6 to 9 percent rental increase can get you to. However, when the consumer looks at the cost of renting vs. buying in South Florida, the rental proposition is going to come back into balance and make it a cheaper alternative than it used to be.”

Jeff Kahn, manager consultant of Century 21 Hansen Realty in Fort Lauderdale: “Save any unforeseen catastrophes and assuming the continued low [Florida mortgage rates], 2007 should end up being a much better year in real estate than 2006. I certainly don’t foresee any rise in the average sales price; in fact, I think we will see a continued decline for at least the first and probably the second quarter and then maybe a steadying of prices for the remainder of the year.”

The number of Florida home loans going into default in Tampa is increasing. By how many, though, isn’t clear.

ForeclosuresDaily.com recently began to track foreclosures in the region. Its numbers for both October and November saw increases of between 45 and 53 percent year over year, including a 111 percent spike in the Sarasota housing market and Manatee county in October.

Reasons for Florida foreclosures

Increasing insurance rates, higher property taxes and a host of other problems have taken the blame for the increase in foreclosures. But if a culprit is to be fingered, housing speculation and adjustable rate mortgages are really to blame, say real estate practitioners.

A lot of people were approved for Florida mortgage loans that maybe shouldn’t have necessarily qualified, said Mike Kane, president of ForeclosuresDaily.com.

“With Sarasota and Manatee, there was a big appreciation (in home values), and now that’s slowing down,” Kane said. “Things had been appreciating so fast that no one wanted to think that it was going to slow down and stop. What happened, though, is that it came to a screeching halt. People are stuck with these ARMs, they can’t [Florida mortgage refinance] and take money out because there’s no equity, and that’s what is causing the increase in delinquency.”

More than 40 percent of mortgages are adjustable rate these days; people with those Florida home loans started seeing monthly payments rise over the summer to have an impact now, Kane said.

Different numbers

But the numbers are different at RealtyTrac, the Irvine, Calif.-based foreclosure broker. Its data shows foreclosures as staying mostly even in the Tampa Bay housing market for the first 11 months of 2006 compared to the same time period the year before at around 24,000 filings.

In fact, while RealtyTrac shows an increase between October 2005 and October 2006 of more than 1,000 filings, its November numbers went a different direction from 2,233 in 2005 to 1,415 in 2006.

“We’re coming out of a period where foreclosures were below historical averages that was largely out of the real estate boom we just came out of,” said Rick Sharga, VP of marketing for RealtyTrac. “When there’s a real high appreciation rate on housing and when there are a lot of buyers in the market, it tends to keep the foreclosure rate down. But the housing market has slowed down considerably, and it creates an imbalance of inventory of housing in the market.”

Speculators Fueling Foreclosures

Pinellas County has witnessed foreclosure filing jumps of 74 percent and 53 percent respectively in October and November, according to Kane’s data, showing that even “built-out” counties were not immune to the problems following the rash of speculative purchases over the last two years.

“The three things that I have seen [causing foreclosures] is an increase in insurance, the increase in property tax and the maturing of adjustable rate mortgages,” said Askia Muhammad Aquil, executive director of St. Petersburg Neighborhood Housing Services that offers foreclosure counseling. “People got into ARMs, and it was not necessarily a bad ARM. They just were not prepared for the increase in their mortgage payments along with everything else.”

Aquil said he expects to see more and more people seeking protection from these dangerous Florida home loan products coming through his offices as late as the end of next year, and RealtyTrac’s Sharga said he was in no position to disagree.

“The foreclosure rates will continue to increase into 2007, not at the rate of increase we’ve seen this year, but they will still go up,” he said. “Places where the housing market accelerated too rapidly, like Florida, are probably the first ones to get hit the hardest. There was a lot of speculative buying going on. The seasoned investors know how to play the game, but the novices, they were coming in at the peak of the market in any investment scenario and are at the most risk of getting burned, and they did.”

The Brevard County housing market continued to linger in the doldrums in November, according to Florida Today, which obtained the latest stats from the Home Builders & Contractors Association of Brevard.

The number of housing construction permits issued throughout Brevard County in November was 235, down from 613 permits in November 2005 and down from a short-lived increase of 512 permits in October of this year.

Of the 235 building permits issued last month, 201 were for single-family homes - the lowest number for single-family construction in any month this year. The 201 permits in November were down sharply from earlier this year, when more than 400 single-family home permits were being issued each month.

“It’s been pretty serious. It’s going to get a little bit more serious before it gets better,” said Franck Kaiser, the association’s CEO.

How serious is it? The number of Florida mortgage foreclosures in Brevard County has increased in recent months as housing prices have fallen and sales have slowed since last year, according to Kaiser and others in the local real estate industry. In places such as Palm Bay, “For Rent” signs have become a somewhat common sight in front of homes.

A lot of the Brevard housing slump stems from investors who bought homes last year - when prices peaked - and they haven’t been able to sell at a profit, or break even, since. The

“We’ve seen a spike in foreclosures,” said Sue Pierce, owner and principal broker at Integrity Home Loans in Melbourne. “I just saw a foreclosures list with about 200 people on it from the Palm Bay area. A lot of them are investors who are stuck in the market… It’s not normal to have that many on a foreclosure list. Usually, you’ll see only a handful of names.”

It’s not just investors, and it’s not just happening on the Space Coast.

A new study by the Center for Responsible Lending found that 2.2 million home owners nationwide will lose their homes due to foreclosures in the subprime lending market.

According to the non-profit group, risky bad credit Florida home loan practices have played a part in “the worst foreclosure crisis” in the modern market - projecting that one of five subprime loans issued in the state from 2005 and 2006 will ultimately fail.

On the bright side, Pierce said she is beginning to see signs of new life in the Brevard County market. Kaiser said he expects home sales and prices to pick up a bit in the first half of 2007, but substantial increases could take longer.

Ingo Winzer, president of The Local Market Monitor, a Massachusetts firm that tracks real estate market trends, said in many areas, the decline in prices was accompanied by a decrease in population from people moving out of an area, and Florida does not have that problem.

That’s why the Florida housing market downturn should not last as long as in some other states, where housing prices were flat for up to a decade following a market decline. Instead, Florida has been more like the stock market, where investors treated housing like a “speculative commodity.”

In Brevard County, the median sales price of an existing single-family home in October was $212,400, down 11 percent from $238,200 in October 2005.

Condominium prices dropped to a median of $179,000 in October, down 17 percent from $214,400 in October 2005, according to the latest statistics from the Florida Association of Realtors.