April 29, 2013

Buying Into A High-Stakes Poker Game

The Sun Sentinel reports from Florida. “When GL Homes opened its eighth Valencia community last weekend, the Sunrise-based builder ended up with 72 contracts at Valencia Cove. The 823 homes are selling from the high $300,000s to low $600,000s. GL held a lottery so buyers could select their lots in the 55-and-over community. Earlier this month, the builder had another lottery for 11 model homes at Valencia Reserve, the 1,043-home Boynton development that now is sold out. And buyers camped out overnight for 18 lots at The Bridges near Boca Raton. ‘The market is really exploding,’ said Marcie DePlaza, division president for GL. ‘Between the lotteries and the camp-out, it’s been crazy.’”

“South Florida’s housing recovery is sneaking up on some sellers. Their homes are flying off the market in days or weeks, and the severe shortage of inventory is keeping them from quickly finding a new place. It took only a few weeks to find a buyer for Tracy Sachs’ five-bedroom Parkland home, but she immediately grew disillusioned when she started looking for homes to buy. ”We started panicking that we had nowhere to go,’ said Sachs.”

“Just as she and her husband, Mark, were seriously considering offering money to the buyer to let them out of the contract, they got a call from Jon Klein, their real estate agent. He told them the buyer’s financing had fallen through, and the deal was off. The couple immediately took the home off the market. They’re redoing the floors, painting inside and out and making other improvements. They want to wait at least a couple years for the housing market to settle down. ‘I was truly relieved,’ Sachs said.”

“Klein said he tells sellers they have to start looking the minute they sign a contract on their existing residence. ‘I had one client say to me that she had to go to the gym first,’ Klein said. ‘I had to tell her, ‘What’s more important? The gym or buying a house? You’re going to be homeless.’”

From WFTV. “Florida realtor figures show 51 percent of single-family home sales are all cash. WFTV learned cash buyers are moving quickly to grab deals and out-negotiate buyers who need a mortgage. When an Apopka house sold last December, the seller had few fears the financing would fall through, because buyer Rob Arnold offered $62,500 in cash. ‘Somebody like me, I buy ‘em and resell ‘em. At some point, I buy ‘em. Once they’re sold, I can buy some more,’ Arnold said.”

The Tampa Tribune. “Rising prices and bidding wars are back in the Tampa Bay area. Dale Hunter, who owns a Tampa real estate firm called Vanguard Real Estate, said he sometimes gets offers on homes within hours of listing them for sale. The sales go through quickly, he said, because the investment firms pay with cash and don’t have to wait for financing to come through. One problem emerging from the hot real estate market is a tie-up in some home appraisals. Appraisals may not be able to keep up with the change in home prices.”

“For example, a home that sold for $100,000 in January might fetch a price of $110,000 today. But an appraiser might value the home at only $105,000 based on the best available statistics, said David Donaldson, a senior loan originator at VanDyk Mortgage. That mismatch between appraisal and sale price can hold up a sale, he said. Nevertheless, Donaldson was bullish on real estate. ‘It’s a fantastic time, and anybody that does not own a home, should be trying to buy one,’ he said.”

The Tampa Bay Times. “After shrinking 10 percent during the bust, the typical new American home built last year grew to an unprecedented 2,300 square feet, U.S. census data show. Homes in the South ballooned even bigger, to nearly 2,400 square feet. Buyers are ‘able to purchase a little more home for their dollar,’ Tampa Bay Builders Association executive VP Jennifer Doerfel said, ‘and they’re trying to get into those homes quickly before the prices increase.’”

“When looking for a new home, Jolyn and Mike Schweitzer were open to townhouses or condos of any size. Instead, they upgraded, buying a 3,500-square-foot home off Clearwater’s Lake Chautauqua, with lofty ceilings, an office and an exercise room. ‘We felt this was a good investment, so we went to the top of our budget,’ said Jolyn Schweitzer, 58. Except for when their four adult children stay over, ‘I will never have to go upstairs.’”

The Herald Tribune. “If the housing market continues at its current rate of appreciation — a combination of strong demand from buyers and dwindling supply of homes for sale — prices could be back to their boom-time peak within seven years, according to a new analysis of data by the Herald-Tribune. ‘Prices are definitely going up everywhere right now,’ said Shannon Moore, broker and owner of Green Lion Realty in North Port, who represents foreclosure investors. ‘I see that continuing for at least the next three years.’”

“Several speed bumps stand in the way. The first is an estimated shadow inventory of 11,102 foreclosures expected to hit Southwest Florida’s housing market during the next few years, according to RealtyTrac. ‘We still have a lot of distressed inventory, and furthermore, at some point the national economy has to begin wresting with the debt service,’ said Dennis Black, a real estate consultant in Port Charlotte. ‘The price increase we have been seeing, particularly from the Wall Street funds, is speculation at its highest level.’”

“By far the biggest driver of Southwest Florida’s recent real estate appreciation has been institutional investors which have been buying foreclosures by the score for use as rentals. Because those companies are paying as much as 45 percent more for their purchases than the homes are worth — as determined by appraisers through comparable properties in those neighborhoods — these recent foreclosure-buying sprees are forcing some smaller investors and other homeowners to overpay for their purchases.”

“Those inflated purchases will now become the new standard for real estate ‘comparables’ used by appraisers — leaving values that are much higher than market conditions would otherwise merit, said Jack McCabe, a real estate consultant in Deerfield Beach. ‘We’re going to go through the whole thing we did last decade all over again,’ McCabe said. ‘Except, while last time it was the flippers and speculators pushing the market up, now it’s these hedge funds.’”

The Orlando Sentinel. “A while back, a Brevard County builder of luxury homes told me he had no choice but to go the cash-only route because appraisals were coming in so low, lenders wouldn’t give his potential buyers mortgages. University of Central Florida economist Sean Snaith calls the rate of cash transactions ‘unsustainably high’ and worries that average buyers are still having trouble getting mortgages. ‘We’re not going to get a healthy housing market with 50 percent of the transactions being cash,’ Snaith said recently. ‘The financing system has to allow the average buyer to get a mortgage.’”

“A rational housing market provides a sense of economic stability. It encourages owners to spend on home-improvement projects – which, in turn, creates jobs and pumps oxygen into the larger economy. But it thrives only if there’s enough credit available to keep the gears turning for average buyers. It’s unreasonable to expect middle-class Floridians to come to the closing table with enough cash to purchase a house. After all, they’re buying into homeownership, not a high-stakes poker game.”

The Jacksonville Business Journal. “There’s limited inventory, and real estate agents say any decent home put on the market draws multiple offers. So it might be a good time to sell — unless you’re one of the 54,000 folks who bought a home in Northeast Florida at the height of the real estate market. If you bought at the peak — mid-2006, with a median price of $210,000 — you’re likely underwater on your mortgage. That’s part of what’s creating the inventory crunch — so many folks can’t sell.”

“‘Unfortunately, it’s a long, hard slog for those folks,’ said John Tuccillo, chief economist for Florida Realtors. ‘It’s a matter of timing. If you bought your house in 2000 and sold it in 2009, the bottom, you still made money. If you bought in 2006, you may never make the money back. So it’s a matter of timing, but I think the market is moving in a positive direction. The folks in the market now will be benefitting over the next couple years.’”

The News Press. “The battle over a pricey Cape Coral home bought on the cheap at a foreclosure auction by two south Fort Myers men may not be over. After a Friday morning court hearing held shortly after Bob Mosher and Stan Garczynski took possession of the home, the lawyer for the former owners said the banks might fight to claim the waterfront property that was in the process of being foreclosed.”

“Nickie and Jim Haggart were evicted from the home Friday. They bought the property for $599,000 in 2004 and put more than $250,000 into it, but Nickie Haggart said they stopped making mortgage payments five years ago after being hit hard by the economic downturn.”

“The banks filed to foreclose on the home and, while that was pending, Chase Bank, the lender, continued paying the property taxes and home insurance but ignored a water assessment impact fee, Cohen said. As a result, the city placed a lien on the property that totaled $619.58 plus unspecified interest, penalties and attorney fees. It then foreclosed on the lien and the home went to auction in January, where Mosher and Garczynski snapped it up for $4,350.”

“Before the real estate market crashed, the 2,991-square-foot house was listed for $1.2 million. It is now assessed at $387,906.”

Bits Bucket for April 29, 2013

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