South Florida has become one of the world’s least affordable markets for housing, and for several years now, Boca Raton has been struggling with the issue of affordable housing.

An ordinance addressing the problem has long been in the draft stages, but has yet to see the light of day. But right across the border in Delray Beach, city officials are applauding the fact that the community has an affordable housing ordinance, a land trust and homes that are occupied by middle-income workers.

The only actual step Boca Raton has taken is to create a trust fund for affordable housing. The Stiles Corp. of Fort Lauderdale, which plans to build 172 homes on Yamato Road, has chipped in $3 million.
But there is no ordinance dictating how the fund can be used.

This past week, Delray Beach climbed a couple of rungs on the affordable housing ladder by approving zoning changes allowing for mixed-use developments to include workforce housing provisions.

When you’re struggling to afford a Florida mortgage, as many are, that can make all the difference in the world. The community also signed off on a $200 million deal to demolish the hurricane-damaged and vacant Carver Estates project and develop workforce housing there.

The Delray Beach Housing Authority (DBHA) voted unanimously to designate Auburn Development Group as the master developer.

The move conveyed the 18 acres into a public/private partnership between the Housing Authority and Auburn, marking the first step in what will be the development of the Villages of Delray, a $200 million, 50-acre mixed-use, mixed-income community.

Officials said it will have market rate rental and for-sale homes, as well as workforce and affordable housing for those who can afford only modest Florida mortgage loans. With more than 400 residences, this becomes the state’s largest community of its kind, officials believe.

The 18 acres will be combined with 11 acres being provided to the public-private partnership by Auburn Development for the workforce and affordable rental housing component of this community. The community is located east of I-95, between Linton Boulevard and Atlantic Avenue, about a mile and a half from the ocean and less than one mile from downtown.

“The Housing Authority is excited about beginning the development of this area and providing quality housing for our citizens,” said Joseph Bernadel, chairman of the Delray Beach Housing Authority (DBHA).

“This community is part of the ongoing efforts toward the growth of Delray Beach. It is our hope that this will be a national and statewide model for how the public and private sectors can work together to provide affordable housing opportunities for a wide range of residents.”

The Motley Fool opines that you don’t need to rent An Inconvenient Truth to see that Florida is sinking. With the cost of a Florida mortgage higher than most people can bear, the state could be facing a housing crisis of epic proportions.

It’s more than that, though. You see it in residents whose homeowners insurance rates have soared after a streak of bad hurricanes. You also see it in their incredulous gazes as simple residential moves trigger a surge in their property tax bills. And so on.

The state government has a plan to bail out its distressed citizenry, but the misunderstood measure faces an uphill battle in winning over skeptics. The idea - eliminating all property taxes on primary homes by increasing the state’s sales tax rate by 250 basis points - is a bold endeavor, one that supposedly pits homeowners against renters.

No one seems to be saying the obvious - this is ultimately a move to help the state’s battered developers - but the Fool will go ahead and say it. That’s all it really is when you think about it.

Like a lot of Florida’s eccentricities, its home builders have come in all flavors. You have conventional real estate developers like Lennar or high-rise specialist WCI Communities. You also have some companies that took quirky paths on the road to becoming real estate barons.

St. Joe was a paper and pulp company until it began to cash in on its ample and valuable land in the panhandle. As the largest private landowner in the state, it soon began changing the business of Florida real estate. Levitt came into its own by transforming orange groves into developments.

The Florida housing market slump has impacted its players. St. Joe has now backed out of the actual home building market, handing over the grunt work to Southeastern developers like Beazer Homes. Levitt accepted a big buyout offer last month that values it at half of where it was two years ago.

WCI has been portrayed as the poster child of coastal condo cancellations. Lennar has had to quadruple the amount of buyer incentives it provides to woo anyone interested in buying.

Downfalls can be found in hot markets all around the country. The problem is exacerbated in the Sunshine State not just because of high Florida home mortgage payments, but due to the spiraling tabs of home insurance and property tax statements.

The real estate insurance market in Florida has become a problem, especially in the coastal, storm-ravaged hotbeds. Higher home insurance rates mean Floridians have less disposable income, and also make property ownership appear less attractive, especially to investors who now have higher holding costs before flipping properties for profit.
It doesn’t get any better on the property tax front.

Florida caps property tax increases for current homeowners - it isn’t until a home is sold that new, higher tax rates kick in. The spike can startle homeowners who bought their homes and budgeted their payments based on the seller’s property tax bills.

In short, someone who buys a new home for the same price at which they sold their old home would likely get slapped with thousands in new taxes.

Florida has made some moves to ease the blow. Voters have agreed to double the homestead exemption for senior citizens in the fall. The government is now proposing that the tax break go to all primary homeowners, along with making the property tax caps portable for new homes.

Many of these suggestions would be moot if property taxes are swapped out for a consumption tax. The debate will likely get fierce. Tourism officials will resent out-of-towners bankrolling free rides for locals, although most states tax hotel stays at higher levels than their state tax rates.

Renters will also shout even louder, though it’s naive to think that they are immune to their landlords’ rising ownership costs. If tax moves encourage the development and purchase of rental property, wider supply should help lower monthly rents.

The proposal to abolish property taxes would only present a partial break to non-primary homeowners like landlords, but renters should see some form of relief, or at the very least avoid the rent hikes that are coming down the pike if the problems are left unchecked.

South Florida home prices for single-family homes inched downward in Fort Lauderdale and West Palm Beach-Boca Raton for January, as Miami registered an increase. The number of sales in each area fell.

The 5 percent rise put the Miami housing market at $395,900 in January, up from $376,300 during the same month the year before. The number of homes sold dropped 9 percent, to 528 homes from 580 homes.

In December, the median single-family home price in Miami was $380,100 on 639 home sales.

In Fort Lauderdale, the 2 percent median price decline was to $364,500 from $370,500, as the number of homes sold declined 17 percent, to 458 homes from 552 homes.

In December, the median single-family home price in Fort Lauderdale was $367,600, still out of the range of most hopeful Florida mortgage loan borrowers.

The 1 percent decline in West Palm Beach-Boca Raton pulled median prices to $388,000 from $393,700, as the number of homes sold declined 15 percent, to 496 homes from 586 homes.

Near South Florida, year-over-year January median prices declined:
- 7 percent in Fort Myers-Cape Coral, to $266,900 from $287,200, as the number of homes sold declined 34 percent, to 492 homes from 751 homes
- 8 percent in Fort Pierce-Port St. Lucie, to $241,000 from $261,500, as the number of homes sold declined 27 percent, to 252 homes from 343 homes
- 8 percent in Melbourne-Titusville-Palm Bay, to $202,500 from $219,100, as the number of homes sold rose 13 percent, to 333 homes from 296 homes
- 12 percent in Punta Gorda, to $199,400 from $227,400, as the number of homes sold declined 20 percent, to 155 homes from 194 homes

As prices drop, individuals should take note. This is a great time to apply for a Florida home mortgage. Do so before values rise once again.

Here is a commentary from a Naples housing insider:

It was a headline that attempted to shut a residential real estate market down: Naples, Florida most over-valued housing market in U.S.

Talk about manipulating a Florida housing market coming out of one of its largest sales volume years in history, one based on home buyers’ perceptions of a fairly valued market. And, if readers didn’t look past the headline, it disabled them from making a housing decision in this Southwest Florida community.

The Naples housing market is known internationally for it’s seasonal residents wealth, miles of pristine beaches, and uninterrupted glorious weather.

Though I am based in Chicago, I have spent several weeks each January for the past five years in Naples. I saw Florida home prices increase methodically up the appreciation ladder until the headline imposed plateau. The price climb mirrored many other real markets around the country. Here’s an overview of what I heard from Naples real estate agents, concerning the post-headline year, 2006.

The common thread was fear among buyers, sellers, appraisers, and developers. One agent said that after the headline broke, real estate appraisers started to question their own opinion of value on recent sales they were currently appraising. In hindsight, many believed they learned the power of headline, and if media proclamations were made in the future, they would know how to assimilate them.

Charlie, Katrina and Wilma also coupled with the headline, placed pensive-prone buyers in neutral and seasonal owners in sell mode. Increased building improvement, insurance, repair and maintenance costs and expenses from hurricane damage, played havoc with fixed income household budgets, causing Florida mortgage activity to decrease.

The first round of transplanted retirees from the 1970’s and 80’s began in 2006 to liquidate second homes in Naples because of declining health and mobility. Many popular condominiums that had for years had long waiting lists for units, now had multiple ones available. Plus, developers had begun a large surge of new construction that ventured to the western edge of the Everglades. The timing of these two unrelated events converged to substantially increase inventory levels.

The average age for Collier County residents decreased to the mid-forties from the mid-sixities during the headline period. Thus beginning a huge shift in demographics, for a market historically seen as one devoted to seasonal or second home ownership.

The new younger resident’s are: full-time residents, a majority are graduate school educated, relocated retail or service managers, and have chosen Naples specifically as their destination. Baby Boomers not quite retired still contribute to a smaller sales segment in the market, and are actively pursuing second home or rental investments.

The upper-bracket segment of the market continues to be strong. Demand for multi-million dollar properties in the Port Royal area south of Old Naples is especially popular.

Florida home mortgage loan applicants are out in the market, drafting purchase contracts and not just “kicking curtains.” Low-ball offers are common, but sellers who have priced their home correctly are not entertaining them. Limited investors have returned to the Naples market. One agent told me that there were many deals to be had, but savvy investors haven’t seen firsthand the post-headline reality.

Motivated sellers comprise 80-85 percent of the current inventory, unlike the common notion that sellers are willing to sit on a property for several years.

Florida mortgage rates slid downward in the past week as the housing market continues to falter in the Sunshine State and mortgage lenders are worried it will have negative effects on the economy.

The 30-year fixed-rate home mortgage - the industry’s most common home loan, and considered the benchmark loan for tracking market trends - averaged 6.22 percent, down from 6.30 percent last week.

According to Freddie Mac’s mortgage market survey, which the government-backed lending giant conducts on a weekly basis, last year at this time, 30-year mortgage rates averaged just 6.26 percent.

“Mortgage rates eased a little more this week, as market participants were concerned over how much negative impact a slowing housing market may have on economic growth,” Frank Nothaft, vice president and chief economist for Freddie Mac, said in a statement.

Meanwhile, 15-year mortgage rates, a popular choice for Florida home mortgage refinancing, averaged just 5.97 percent, down from 6.04 percent last week.

Borrowing conditions still favor buyers as the market slumps. One year ago, average mortgage rates for 15-year Florida home loans came in at just 5.89 percent.

As for 5-year adjustable-rate mortgages, they averaged 5.96 percent, down from 6.01 percent last week. Last year, when mortgage applications for such loans began to slow dramatically, it was 5.32 percent.

The 1-year adjustable-rate Florida mortgage, meanwhile, averaged 5.49 percent, down from 5.52 percent last week. A year ago at this time, it averaged 5.32 percent.

Next week’s release of new and existing U.S. home sales might offer a more complete gauge of the housing industry’s strength. Florida mortgage rates could fluctuate more significantly then.

“In addition, the second estimate of economic growth in the fourth quarter of 2006 will be released next week and should further provide insight into what extent the housing market is affecting the economy,” Nothaft said.

First, the good news from housing consultant MetroStudy:

• New housing starts in Palm Beach County hit their four-year low in the last three months of 2006, dropping 62 percent from the fourth quarter of 2005.
• Total inventory - including model homes, finished vacant homes and homes under construction - fell to a four-year low in 2006 as well.
• Overall housing supply declined 4 percent in the fourth quarter of 2006 compared with the same period in 2005.

Decline, decline, decline. This is the good news?

In these South Florida housing market times - when it’s quite possible to be “upside down” on your house (to owe more than it’s worth) or to lower your asking price and still not get an offer - declining housing starts, construction and inventory of homes are all good news.

Any recovery, however, could well be postponed into the second half of the year. Most analysts don’t even agree on whether the market has hit bottom, even as Florida mortgage rates remain near historic lows.

The inventory of existing homes, which was up 71 percent Palm Beach County alone in December, may grow as “re-listers” - people who couldn’t sell in 2006 - are likely to try again in the spring.

Analysts expect a further uptick in the region’s new-foreclosure filings as high-risk (bad credit Florida home loan) borrowers continue to default on loans and lenders tighten once-loose credit standards.

Many borrowers were investors who artificially spurred demand - and prices.

“Are home builders ramped up production to meet surging demand during the housing boom,” said Michael Larson, a real estate analyst with Weiss Research in Jupiter. “But it turns out a big chunk of that demand surge wasn’t ‘real’ demand.

“It was investor demand - people buying up one, two, three or more homes at a time to flip, rather than people just looking for a place to live.”

In Palm Beach County, new-home sales dropped 36 percent in just one year - comparing the fourth quarter of 2006 to the same period in 2005 - according to MetroStudy in West Palm Beach.

Further proof the local housing market has gone bust: Palm Beach County buyers closed on only 976 new homes in the fourth quarter of 2006 - down drastically from its boom-time peak of 3,123 closings in the third quarter of 2003.

Credit Suisse, a global financial services firm, estimates that investors accounted for 20 percent of all U.S. home sales in 2005. That percentage was even higher in the South Florida housing market, analysts believe - and the steep and speedy decline in new-home sales in Palm Beach County and the Treasure Coast seems to support that position.

Yet, as investors pulled back and sales stagnated, new-home construction continued - albeit at a slower pace. Inventory inevitably piled up, and investors who failed to flip for profit when the slowdown came got caught holding the house.

Amazing buyer incentives have resulted for those who are in position to buy.

Granite countertops in the kitchen and new cars in the garage, even. One new condominium in Delray Beach, is offering to pay the first year’s Florida home mortgage for buyers, worth as much as $40,000.

What’s next? New-home starts and sales generally move in the same direction when supply and demand are balanced. Even during the hectic boom years, when demand went through the roof, so to speak, sales rose accordingly.

But beginning in 2005 and lasting through 2006, sales began to go down but housing starts didn’t. Starts began to outpace sales. Supply then began to exceed demand. That’s not good.

Nationwide, the inventory of new single-family homes hit an all-time high in July. In Palm Beach County, the finished vacant inventory of new homes has now climbed to its highest level in 17 quarters - 1,259 finished vacant units, according to MetroStudy.

Besides euphoric investors, the lowest Florida mortgage loan rates in 40 years also spurred home buyers, accounting for up to 15 percent of the unsustainable new-home demand.

The high percentage of so-called “subprime” (bad credit) loan originations suggests that’s true: They accounted for 24 percent of all loan origination dollars in 2005, compared with a mere 9 percent in 2003.

Local mortgage rates should remain favorable throughout 2007, according to mortgage specialist Sahnger of Palm Beach Financial Network.

Continue reading this article in the Palm Beach Post by following the link:

Those with a Florida mortgage often wish to be done with it as soon as possible. They want to be full-fledged homeowners.

Below, financial analyst Don Taylor responds to the implications of just such a scenario:

Q: How would prepaying my mortgage affect my taxes? I’ve read several articles in reference to “prepaying mortgage” not being a good idea. My dream is to be mortgage free and own my home outright. Is this a nightmare instead of a dream?

A: If you use the mortgage interest deduction on your income taxes, then prepaying your mortgage reduces your interest expense, and by doing so, that interest deduction. IRS Publication 936, Home Mortgage Interest Deduction, has everything you need to know about that deduction.

Not everyone who owns a home can use the Florida mortgage loan interest deduction, and where the mortgage interest expense doesn’t do much more than replace the standard deduction, prepaying the mortgage only has a marginal impact on their taxes - the margin being the difference between itemized deductions and the standard deduction.

Read more about what the tax benefits of home ownership are today.

Your goal to be mortgage-free isn’t a nightmare. Keep the dream. I think that it’s a great goal for homeowners to have the house paid off before they retire. What I counsel is to not abandon other financial goals, such as retirement savings, to focus solely on paying off the house.

My rule of thumb is, if you expect to earn more on your other investments, on an after-tax basis, than the effective (after-tax) rate on your mortgage, then don’t prepay your mortgage.

For example, if you’re skipping out on contributing to a 401(k) plan and missing the company match, you should be contributing to the 401(k) up to the limit of the company match before making any additional principal payments on your mortgage.

Late payments for residential national and Florida mortgages shot up by 15.6 percent in the fourth quarter, U.S. regulators said last week in a report showing record earnings by commercial banks and thrifts in 2006.

The Federal Deposit Insurance Corporation, which insures deposits at more than 8,600 banks and savings institutions, said the increase in late mortgage payments followed a 5.2 percent increase in the third quarter.

Noncurrent mortgage loans - payments that are more than 90 days late - grew by $3.1 billion in the last three months of 2006 after rising by $974 million in the third quarter, the FDIC said.

Richard Brown, FDIC’s chief economist, said regulators are seeing emerging signs of distress among subprime loans, especially with hybrid home loans that subject borrowers to higher monthly payments after introductory interest rates.

“While the degree of credit distress in these portfolios is still well below the peaks that we saw during and after the 2001 recession, it seems likely that their performance will get worse before it gets better,” Brown said.

Bank regulators are considering new rules on popular loans for subprime borrowers with less-than-stellar credit that carry low introductory rates but can rise over the life of the loans.

Consumer advocates have warned that loose underwriting standards will soon have homeowners buried under mortgage debt.

Brown said that total subprime Florida home loans outstanding amount to about $1.3 trillion, of which $700 billion are held by private asset-backed securities issuers.

That means banks, thrifts and other mortgage lenders are holding about $500 million in subprime mortgages, Brown said.

Financial institutions insured by the FDIC held about $2.2 trillion of mortgages for single to multifamily homes at the end of 2006.

“We know for certain that more than three quarters of the mortgages held by all FDIC-insured institutions are prime loans,” Brown said. “The actual percentage is certainly higher - perhaps as high as 85-90 percent.”

For the fourth-quarter FDIC-insured commercial banks and savings institutions posted net income of $35.7 billion, 9.3 percent higher than the fourth quarter of 2005, but lower than $38.1 billion earned in the third quarter.

The FDIC said the industry’s performance in the last three months of 2006 was stronger than the numbers indicate because restructurings at a few large institutions resulted in understated income and expense items.

“The banking industry continues to perform well,” FDIC Chairman Sheila Bair said in a statement, “even as an inverted yield curve and weakening mortgage market have made the operating environment more challenging.”

Robin Boyle arrived in the Florida Keys two years ago, enthused about a new job and new life in paradise. Now she’s moving to Michigan.

She imagined that she and her husband, who lived in Key West in the 1960s, would enjoy a slower pace of life before retirement. Florida home mortgage costs being what they are, however, the couple couldn’t afford more than a trailer or an apartment.

In a state where growth is booming, and the population is even supposed to double by 2060 the Florida Keys are losing residents. Monroe County, which comprises the Florida Keys, has lost population every year between 2000 and 2005, dwindling by 4 percent to just 76,329 residents.

By contrast, up near Jacksonville, Flagler County was the nation’s fastest-growing county during the same period, its population surging by 53 percent to 76,410 residents. Across the state, the increase has driven up almost all land values and lured new businesses.

But in this tropical paradise, the traffic is thinner than in the rest of the state, and at least one elementary school in Key West is expected to close it doors forever. The islands are also losing workers vital to the economy, including health care workers and police officers.

What’s behind the population drop? It’s not that the carefree lifestyle of the Keys has lost its appeal, says Robbie Hopcraft, who owns a Florida mortgage company and has lived in Key West for 14 years. It’s that it’s simply too expensive for most Americans.

The population decline in the Keys is the result in part of geography and growth management. A string of islands offers only so much land upon which build, and strict building codes have also driven up the price of housing.

But more worrisome to many residents is an upswing in hurricane activity that battered Florida in 2004 and 2005. Local property taxes and Florida home insurance rates have skyrocketed since then, prompting many people to pack up and leave.

“What you see in Key West is a compressed kind of microcosm of problems that unfold over a longer period of time on the mainland,” Maureen Ogle, historian and author, says. “When the price of insurance goes up, it’s going to affect a place like Key West a lot faster and harder.”

Hopcraft describes the Florida home insurance spike in the Keys as a crisis.

His policy on his two-bedroom, 800-square-foot home has risen to $8,000 a year. A year ago, he joined with other residents to establish a grass-roots lobby organization, Fair Insurance Rates in Monroe, or FIRM.

“Most of the people here are working people. They have dive shops and charter fishing boats and lobster fishing boats, or they own their own restaurant or business,” he said. “A lot of them are struggling.”

Yet many who work in the Keys can’t afford to live there.

In a county where home prices begin at $500,000, developers are replacing trailer parks and locally owned motels with high-end condos and hotels.

To create more nearby affordable housing options, Monroe County leaders plan to offer county-sponsored housing for its teachers, police officers, firefighters, and other workers.

It was a simple pitch.

Or at least it seemed like one.

Investors would put little to no money down to take out construction loans that a real estate developer would use to build modest homes in a fast-growing sector of the West Florida housing market.

When finished, homes would be flipped for tidy profits of $30,000-40,000 apiece.

Too simple, perhaps.

Nearly two years since the developer started marketing the investment plan nationwide, work on the homes has come to a halt, leaving 482 investors with half-built houses and thousands of dollars in construction liens.

Coast Financial Holdings, which owns the bank that made many of the Florida home loans, has disclosed that $110 million, or 20 percent of its portfolio, could be in danger. Its shares have fallen 46.5 percent this year, and banking regulators are investigating.

“It was strictly a passive investment,” said Paul Matera, a retired contractor from West Islip, N.Y., who signed up for two houses and introduced dozens of others to the plan.

“You didn’t pick out the model of the house. You didn’t pick out the exact location. Everybody signed papers without reading what they were signing.”

During the boom that ended in 2005, tons and tons of money poured into Florida real estate from investors ranging from the ultra-rich to middle-class people such as like doctors, teachers and mid-level managers. Florida was one of the biggest recipients of this type of investment wave because housing in the Sunshine State often deemed a sure bet.

Like the day traders who drove up Internet stocks in the late 1990s, these scores of investors, aided by cheap Florida mortgage loan costs, helped drive a Florida housing market boom over the edge.

“It was a groundswell,” said Jerry Manning of J.J. Manning Auctioneers, a company which markets and sells homes in the Northeast and in South Florida. “Everybody thought that they were going to be a real estate mogul.”

Last year, however, a number of such plans started failing, causing pain to investors, builders and Florida mortgage lenders. Beyond their inherently speculative nature, many of the investments were never fully investigated and were poorly monitored.

Now some lenders and investors are starting to wake up to a harsh day-after reality.

“You will have a market correction, and the correction will make regional homeowners unhappy as Florida home prices fall,” said John Lonski, the chief economist at Moody’s Investors Service. “Regional mortgage bankers will find their livelihoods threatened.”

So far, the slumping market has not claimed a major casualty in Florida, though lenders to people with weak credit have started shutting down and regional home builders in formerly hot markets are hurting.

Transeastern Homes, which builds homes in Florida, is in settlement talks with lenders who contend it is in default on its debt totaling hundreds of millions of dollars.

WCI Communities, which builds condominiums in Florida and in other areas, recently hired Goldman Sachs to advise it on strategic options, including a possible sale of the company.

“We’re going to see much bigger builders and much bigger lenders facing bankruptcy because so much of the building has been on a speculative basis,” said Jack McCabe, a real estate consultant in Deerfield Beach.

Many borrowers where steered toward home loans that started out as construction debt and convert into traditional mortgages when the house is built.

“I’ve got my father stuck, my brother stuck, an ex-wife stuck,” said Carl Cirinelli, a partner at Seashore who previously lived in New Jersey.

Continue reading this Lakeland Ledger article by following this link: