That’s the viewpoint of a Palm Beach Post columnist, who believes that the state of Florida mortgage rates pales in comparison to the potential impact of severe weather on the housing market. (more…)
A Florida real estate developer has just purchased 537 acres of the Florida Research Park in Palm Beach County.
It is touting the sale as one of the last contiguous tracts of buildable land in the South Florida real estate market. (more…)
How are the widespread housing market and Florida mortgage concerns having an impact on the construction industry in the state? (more…)
Leave it to television to drive a point home.
With the housing boom that has gripped the nation for the past five years finally fizzling, we are left with nothing to do but watch. Rising Florida mortgage rates may be throwing some cold water on our home buying options, but our collective lust for land remains… and has morphed into a strange new obsession. Instead of shopping for a house ourselves, we’ve taken to watching other people do so… on the tube.
HGTV has had surprising success with “House Hunters” and “What You Get for the Money,” while “Location, Location, Location” on BBC America follows people in search of real estate as well. If you get tired of house hunting and want a change of pace, well, you can watch other people on the other side of the real estate game try to unload their homes. HGTV’s “Designed to Sell” and A&E’s “Sell This House” and “Flip This House” (not to be confused with TLC’s “Flip That House”) take a look inside the lives of homeowners trying to sell.
“These shows are not really for people that are going to buy and sell a home. They’re for people who have a fantasy of buying and selling a home,” said Jeffrey Sconce, Associate Professor at Northwestern University.
We’ve moved beyond the remodeling / makeover mania of a few years ago, when everyone was “Trading Spaces.” In the past year, about 20 new real estate shows have appeared on HGTV, Fine Living, Discovery Home, A&E and TLC. Averaging nearly a million viewers per episode, “House Hunters” is the most popular. The greedier “Flip This House” is a close second, with an average of 802,000 viewers per episode.
These are big numbers for low-budget cable TV shows. Why are they so popular? They’re Real Estate Lite: An arduous process condensed into easy-to-digest, made-for-TV clips. Check one of these shows out sometime and you will not see much of the following…
Never mind the softening market. Americans are obsessed.
“All of America right now is having a love affair with real estate,” says New York real estate mogul Barbara Corcoran, founder of the Corcoran Group.
Almost 70 percent of Americans are homeowners. With millions of people talking about their property appreciation, it was just a matter of time before the Reality TV descended on real estate. Let’s face it, watching others struggle can be compelling. Maybe not edge-of-your-seat viewing, but if you’re surfing and happen to find one of these shows, you can get sucked in.
“Real estate lends itself very, very well to television. It touches people. It’s storytelling at its best,” HGTV President Judy Girard said. “It’s a framework where people are bringing their lives, their hearts and souls into buying a house or selling a house.”
While window-shopping, couch-sitting audiences for these real estate shows are small compared with network TV, they attract the middle class viewers that advertisers desire. Hence, viewers are treated to a bevy commercials for Home Depot and more spots for Benjamin Moore paints than you can shake a brush at. In 2004, HGTV had two real estate shows. Now three of its top five shows fall into that category, and the network plans to add four more within the next year, including “International House Hunters.”
“A lot of people go to open houses,” said Vincent Hurteau, a D.C. real estate broker and president of Continental Properties, who is also shopping his own real estate show idea. “They love to see how other people live. And they love to know what things cost. Open houses are a way to that. Now they can do that on TV.”
Maybe we have been going about it all wrong with this Internet thing. Coming soon to a cable channel near you: Florida Home Loan TV!
We took a look at the housing market report card in January … so now it’s time for February to receive a closer inspection.
The real estate industry has been contributing more than its fair share to recent economic growth. While the resale market has been cooling for some time, the levels of unsold inventory remain below historical averages. The “soft landing” that most economists are predicting seems to be unfolding, although we know the market is strong in many areas and quite weak in others.
Our grading system of the economy and the housing market is a “bell curve” model, with statistics at an all-time high receiving an “A.” In this grading system, it is OK to be a “C” student.
Economic Growth: C-
Economic growth remains solid. More than 2 million new jobs were added during the 12 months ending in January, which is a growth rate of 1.6 percent. The unemployment rate declined slightly to 4.7 percent. Retail sales increased 6.3 percent over the previous year. Inflation inched up slightly to 2.2 percent, which is still well below its historical average of 4.2 percent.
Leading Indicators: C
The leading indicator index is up 2.1 percent on an annualized basis over the last six months, which is somewhat encouraging for our outlook for 2006. As a result of the increase in the Fed Funds rate at month end, the spread between the Fed Funds rate and the 10-year Treasury index inverted for the first time since March 2001. The stock market started 2006 with relatively significant improvements, with the Dow Jones gaining 4 percent over the prior 12 months and the NASDAQ, S&P 500 and Wilshire 5000 gaining 12 percent, 8 percent and 11 percent, respectively.
Mortgage Rates: B+
Fixed rates fell slightly in January, and adjustable rates ticked up slightly. The average fixed mortgage rate fell to 6.12 percent, and the one-year adjustable mortgage rate was 5.2 percent at month’s end. The percentage of home loans with an adjustable rate stood at 29.5 percent in January.
Consumer Behavior: C+
Consumer confidence continued to rise in January to 106.3. Consumer sentiment decreased only slightly during the month to 91.2.
Existing-Home Market: B+
The median existing-home price fell slightly in December to $211,000. Annual sales volume decreased to 6.6 million sales per year, with declines in almost every region of the country. The inventory of existing homes rose slightly again to 5.1 months. The pending home sales index fell in December, but remains strong at 116.4.
New-Home Market: B-
Annualized new-home sales rose 1.5 percent in December to 1.27 million units, ending the year up 1.8 percent from the total volume in 2004. The median new-home price fell to $221,800, and the Housing Market Index fell to 57 in December, which is just slightly above the historical median. The supply of unsold homes remained flat, at 4.9 months.
Housing Supply: C+
Annualized housing starts decreased to 1.93 million in December, with single-family starts dropping to 1.64 million permits.
What does all this mean for those looking for a Florida home loan? While the housing industry may finally be cooling off, that simply means it’s a prime time for buyers. Act now if you wish to receive fair prices and rates on your Florida dream home.
If the real estate boom is over, no one told these people.
When Connie Johnson of Brandon, Fla., hosted an orientation for prospective Tampa Bay area Realtors last month, she gazed at 165 freshly licensed, hungry agents itching to get started.
Hadn’t they read a newspaper (or real estate blog) in the past few months? The St. Petersburg Times reports that while the bloom may not be off the real estate rose, its petals have definitely begun to wilt.
“People think, “I got my real estate license and I’m going to make a fortune.’ But first you’ve got to get clientele and that’s not easy to do when there are 8,500 Realtors in Tampa,” said Johnson, a veteran Realtor of 19 years who works for Re/Max ACR Elite Group Inc.
The Tampa Bay Association of Realtors swelled by about 2,000 agents last year. Throughout Florida, the number of Realtors and sales people has nearly doubled from 79,331 in 2001 to 154,558 in 2005.
But don’t think that a majority of these new agents are destined for stardom. Some might, but most are a day late and a dollar short, heading into a Florida real estate market that even optimists say will contract this year. Industry groups predict a 5 percent decline in home sales, which would make 2006 the third strongest in history, but still mean a step back.
“We would expect our membership to hold even this year. We’re entering a period of slower sales,” said Walter Molony of the National Association of Realtors.
That message has yet to reach the Ed Klopfer and Bob Hogue schools of real estate, considered Tampa’s top two. The Sarasota-based Klopfer churned out about 25,000 graduates in each of the past two years, with his 63-hour, $339 class for real estate sales associates being the most popular. He also trains mortgage brokers, inspectors, condo managers and appraisers.
Hogue, based in St. Petersburg, dispenses advice to students dreaming of mountains of cash. Students who finish his classes, pass an exam from the state’s Division of Real Estate and get a license that lets them sell houses.
“It’s not the license. It’s how good the customer service is once you have the license,” Hogue said. “Those people who recognize that, it doesn’t matter if the market is going up or down. They’re going to do great.”
Heather Barrow is among the neophyte Realtors with a license and a desire to make a name for herself in the business. The University of Florida grad left her accounting job with Ernst & Young for a career as a Realtor. In December she joined Smith & Associates, the largest independent real estate company in the Tampa Bay area.
No sales yet for Heather. But she’s been showing homes to a handful of prospective buyers, mostly in south Tampa, an area she has known since childhood. The median home price in the Tampa Bay area was $223,200 in December, and with Realtors making / sharing 4 to 6 percent commission upon closing, there’s plenty of money to be made.
“Hopefully in the next couple weeks I’ll have a sale,” said Barrow, who’s 26 and recently married, and whose husband just started a second career as a mortgage broker.
Because there are few restrictions, the field is popular among people seeking flexible jobs to supplement family incomes. One sale pays for the state license, sometimes many times over. Since real estate agents are paid by commission, there’s little risk in hiring them. Earning a livable wage? That’s another matter.
A Realtor with less than two years’ experience earned about $12,850 last year, according to the national association. Incomes improve as the agent gets experience, with median incomes rising to $58,700 after six years and the true veterans — people with 26 years or more under their belts - earning close to $100,000.
“We always tell the new person it’s going to be a full year without income before they make it,” Smith & Associates CEO Robert Glasser said.
Lesson learned? That real estate career you have been talking about starting might want to be put on hold. Unless you are really good at sales and can see yourself doing it for a number of years. With increasing Florida home loan rates expected this year and overvalued markets showing signs of cooling off across the state, it will be tough going out of the gate.
The following is excerpted from a weekly question and answer session in which readers’ queries are responded to by Robert J. Bruss, a licensed real estate broker and industry expert.
~~~~~~~~~~~~~~~~~~~~~~~~~
Q: I have been reading about the home seller acting as the lender in some cases. It makes sense from the home buyer’s view, but what about the home seller? If the seller sees a large profit, up to $500,000 is tax-free for a married couple. What’s the use of that gain, though, if they can’t take advantage of other investment possibilities? Can they receive any tax benefit for carrying back the mortgage for their home buyer? Do they have to pay income tax on the interest income?
A: Yes, interest income is always taxed as ordinary income, but the big advantage for sellers who carry a mortgage for their buyer is the tax-free home sales proceeds — up to $500,000 for a qualified married couple and up to $250,000 for a single home seller — with a high yield. Also, easy financing typically results in a quick easy home sale at a high price.
In today’s investment market, where can a seller invest the proceeds to earn at least a 6 percent annual return with the safety of a mortgage or deed of trust? If the home buyer defaults, the seller can foreclose and either…
Q: As a senior, three years ago I deeded my home and acreage to my only son to save him from probate after I died. Well, I survived cancer and am still living in my home while my son farms the acreage (he, his wife and two children live nearby). The problem is that now I want to move to a better climate like Arizona or Florida, and don’t have any money because I gave away my property. I could easily sell the property, but I no longer own it. Of course, my son doesn’t want to give it back or sell it and give me the sales proceeds. What can I do?
A: Once you give away real estate, there is no way to get it back unless there was fraud, duress or a mistake involved. This situation is a strong lesson to owners not to give away real estate before passing away.
Q: I buy land in my LLC (limited liability company), then develop it into lots for residential neighborhoods, and sell the lots to builders. Is there any way to minimize my tax liability to receive long-term capital gain tax rates? When you are in the highest tax bracket, it almost isn’t worth the work after they get paid.
A: Unfortunately, you are taxed as a real estate “dealer,” and not as a long-term investor, which means your profits are taxed as ordinary income rather than at the 15 percent federal income tax rate for long-term capital gains — which is much lower. You can buy some properties for long-term investment, however, and leave others for short-term “flipper” profits that will be taxed as ordinary income. Consult your tax adviser to learn more.
Like countless other residents of the state, Thelma Williams of Merritt Island, a community near Tallahassee, noticed a dramatic rise in her homeowners insurance bill this year. Williams was able to stomach the $600 increase because she needed the hurricane coverage. What she didn’t realize, according to the News-Press, was that the bill wasn’t just for her home.
Her bill included more than $100 extra to insure someone else’s beach house.
She is picking up the slack for Citizens Property Insurance, whose $515 million deficit in 2004 will be spread out amongst all other clients. And now, after having their accounts battered by storms in 2005, Florida homeowners again will be hit with an assessment. This time, the deficit is projected at $1.4 billion — meaning surcharges of 17 percent on a typical policy.
About 97 percent of it will be for homes exclusively on the coast, including 5,700 with values over $1 million.
“I’m a fair person,” Williams said, but the surcharges give her pause. “It’s a double-edged sword, isn’t it?”
Bankrupted two straight years by storms, lawmakers and residents fear the damage a truly catastrophic hurricane would cause Citizens, the second largest Florida insurance provider. Citizens is allowed, by law, to add on to all property insurance premiums as much as 20 percent a year from each of its three business accounts. It is therefore capable of 60 percent surcharges on owners’ already escalating premiums.
This perpetual subsidy of homes on the coast has residents demanding a change in who pays to rescue the state insurance pool.
“When you are looking at people inland paying their own share of insurance premium and then having to subsidize someone’s second home, that doesn’t seem just. Can’t we give those folks a break? To me it only seems logical that the people who are paying to prepare for the storm and then paying again to recover not be taxed a third time by paying someone else’s homeowners insurance,” said Jeff Grady, president of the Florida Association of Insurance Agents.
The agents’ association, along with certain legislative and real estate groups, propose using the sales tax windfalls that hurricanes generate to cover Citizens’ deficits.
“Let the storm-begotten taxes cover the storm-begotten losses,” said Representative Bob Allen, a Merritt Island Republican.
State chief financial officer Tom Gallagher, a candidate for governor in 2006, finds himself alone among Florida’s top political leaders in supporting the bailout. Officials have their own plans for the Florida tax windfall, from sales tax holidays to property tax rebates.
House Insurance Chairman Dennis Ross contends that Citizens’ coastal rates don’t cover its coastal risks, despite repeated efforts to raise premiums, including an average 80 percent rate hike currently under review. The Lakeland Republican believes that bailing out the company would set a bad precedent, and proposes a new and separate insurance pool for second homes and businesses. Charge higher rates, and in the event of a deficit, let them be the ones to pay it.
That’s contrary to Citizens’ basic premise — providing available, affordable insurance to Florida’s economy, one that is concentrated on the coast.
“I believe I can defend protecting the homestead property,” Ross said. “We want to protect the policyholders in this state from a continuous blank check to Citizens.”
How this is resolved remains to be seen, but it appears a popular solution will be tough to find. With a widespread money shortage and differing views among industry and political forces, the state’s property owners may have no choice but to grin and bear these increases, making the total cost of their Florida home loans and insurance even more expenses.
– Manhasset, N.Y.-based Mida Commons, LLC, has purchased the Shoppes of Margate, a 53,000-square-foot shopping center at 300-366 S. State Road 7, from Spiegel & Spiegel PA for $7.2 million. The Fort Lauderdale office of Marcus & Millichap Real Estate Investment Brokerage Company brokered the deal.
– Miami-based Key International, Inc., has obtained $130 million in mortgage financing for construction of The Ivy, a 504-unit condominium project at Southwest Third Street and South Miami Avenue in Miami. Chicago-based Corus Bank provided the financing.
– In Boca Raton real estate news, the town’s Woolbright Development, Inc., has announced its upcoming plans to build The Collection at Vanderbilt, a 253,000-square-foot shopping center. Construction is scheduled to begin in mid-January, and marks the company’s entrance into the Naples real estate market.
– Davie-based Weitzer/Kislak Sawgrass LLLP has opened an onsite sales office for Tao, a 396-unit condominium project, at 2681 N. Flamingo Road in Sunrise.
– Miami-based Continental Real Estate Company has been hired by 10800 Biscayne LLC to manage and lease Bayshore Executive Plaza, a masive 97,400-square-foot office building at 10800 Biscayne Blvd. in Miami. Continuing the state’s widesprad condo conversion trend, owners plan to convert a portion of the building to residential condominiums.
– Boca Raton-based contracting firm Kaufman Lynn, Inc., has completed Contractors Business Park, a $16.8 million office/warehouse project at 2701 Vista Parkway in West Palm Beach. The 320,000-square-foot project is owned by CD74 Contractors Business Park Ltd., and marks yet another sign that Palm Beach real estate continues to sizzle.
For the fifth consecutive year, the Florida real estate market sizzled. In fact, few areas around the country boomed louder than Southwest Florida.
In the 12 months ending Nov. 30, the median sales price for existing homes in Charlotte County, Englewood and North Port skyrocketed 41 percent, from $167,700 to $236,900, according to the Florida Association of Realtors and the University of Florida Real Estate Research Center.
The Charlotte market was not far behind the Fort Myers-Cape Coral area, which saw a 49-percent median price jump to $295,400 over the same 12-month period. By comparison, the statewide median sales price rose 31 percent over the same period, from $191,300 to $250,500.
While area home prices have continued to soar, however, the blistering pace of local home sales have cooled considerably, with 15 percent fewer home sales recorded in November than in the same month a year ago.
Nancy McClary, broker associate with Coldwell Banker Morris Realty and immediate past president of the Punta Gorda-Port Charlotte-North Port Association of Realtors, characterized the slowing pace as expected, healthy and extremely temporary.
“The market is definitely seeing a slowdown,” she said. “But it’s really just pausing to catch its breath, and that’s a good thing. There are very few buyers right now and there’s a large inventory of available homes. But this is just a plateau.”
McClary said she expects the market to heat back up in the coming months, with no backsliding in either prices or pace. This goes along with the expectation of others experts in the South Florida home loan world.
McClary cited the significantly lower mortgage rates. She also added:
“The people up north are just getting their first big winter blasts of snow and cold weather, and a lot of people up there have just been laid off. I think you’re going to see a lot of people in the coming months look at the size of their heating bills and electric bills. I think a lot of them are going to lose power in snowstorms in the freezing cold, and ask themselves: ‘Why should I stay up here. At least down in Florida when they lose power they don’t freeze to death.’
It’s difficult to argue with that logic. As McClary put it, when discussing the state of Florida home loans: “As long as we have the sun and they have the snow, they will come.”
