So How About This Real Estate Market ?
So How About the Real Estate Market
With these uncertain times in the market, so goes the anxiety and all else that goes with it. Everyone is looking for answers and without pulling any punches, this is my assessment.
First off, let me qualify myself and you can take it for what it’s worth. I’ve been licensed in Real Estate since 1986 and have done business in up markets and down markets. I’m Licensed in more than one state and have conducted or participated in over 2, 500 sales and marketing campaigns. I’m an Auctioneer, have done appraisal work, worked within the Financing Community and consulted in sales ranging from many states and even the US Virgin Islands. I read continuously and study trends in markets including Florida.
In fact, I study the Florida market because it is my home, my business and my livelihood. Like you, I’m concerned about Insurance rates, Taxes and the cost of housing for all who love to live in our paradise called SW Florida. Enough said? OK!
I read enough articles from so-called experts that I’ve learned to read between the lines but mostly I learn from people I meet in my every-day business. If the reports disseminated by the experts, the media, and economists were on time and accurate, we would still be ahead of the game. If you want to know where the market is heading and where it’s been, ask a Professional, Local Realtor that lives and breathes this market.
I speak of the SW Florida Market, of course.
With that said, the values of our homes and land differ. Let’s talk about existing homes for the moment. Our homes built between the 1950s to 2006 have had a rough road but things will pick up. I’ll tell you why in a moment.
A simple rule of thumb is this, our market escalated furiously from late 2004 through 2005. The market actually dropped on August 12th 2005. We experienced an MLS change-over in mid August that diminished our market exposure nationally. Our local board decided that a change had to occur during that period. (In my opinion, it was a personal vendetta.)
The media had been bashing Real Estate for some time, day after day talking about the Bubble Bursting. Well, as usual they had a major impact on the market and values. Remember, perception is reality. This was also based on economic forecasters and to be fair, they were right regarding over inflated prices and affordability. (Realtors already knew this!)
Keep in mind one thing, all disaster areas, including Northridge, CA, Rita & Katrina hit areas and others experienced booms after a major storm, earthquake or catastrophic event. The studies show this.
We experienced a housing shortage and there were not even rentals to be had after Charlie. (Cat 4-5 Storm hitting PG & PC)
Now comes the builders. Builders have always led us into housing busts from over-building. This is economics 101. (By the way, they’re still dong it, although many have stopped.)
Now come the insurance companies (no lost love there!) that cry and complain even though they were supposed to have a fund set aside form Hurricane Andrew for catastrophic events. That’s another story which I won’t get into right now.
With the price increases, so go the taxes. The counties have made oodles of money from increasing home inventories and values escalating. (Now they cry too because they say they’re broke. Not to worry, they always get bailed out unlike the people that live in the private sector that lose their homes, sometimes their marriages, jobs and more.)
With the demand being artificially high, taxes and insurance going through the roof, the price of living in SW Florida is less affordable for the time being.
That is slowly changing thanks to our new Governor.
If you consider the pocket areas that are doing well like Seattle, WA, NC, NM, UT and Tennessee, not to mention WY, Montana and even parts of Texas, the entire market is in a slump.
Much of this stems from the over-zealous mortgage market and lenders that offered easy qualifications that made the American Dream available to just about everybody. Many of these loans were adjustable rate mortgages that started at a lower than market rate and then adjusted upwards. Many even had negative amortization which means that at the end of the year, the home owner actually owed more on the home than at the beginning.
We could go on and on about the mortgage market but to put it simply, many mortgage brokers made loans that probably should not have been made. The mortgage brokers and banks/lenders made a killing during these times. If you read many articles, the borrower is at fault because they should have known it was too risky and they would most likely default. Nonsense! Yes, it was the borrower’s responsibility and they should have known better but haven’t we all been taught that the banker knows best, when a loan is most appropriate and using their guidelines when a loan should be made? Aren’t they the trusted gatekeeper?
The lenders are guilty of greed and equally responsible for the sub-prime mortgage market mess and are paying the price as well. Alan Greenspan was not the culprit!
In fact, everyone is paying the price. Look at the falling prices. Joe and Sally owned their home for 10 years, have still made a large gain in appreciation and now look to sell and move on. They cannot sell at yesterday’s prices! They can only sell in today’s prices. Still selling at a gain, they are not losing and in fact, they are hit the least hard.
The people that are hit the hardest are those that can no longer afford their homes due to job-loss! This is the figure that will trickle down through the economy that has not really hit the big spotlight yet. Don’t worry, it’s coming. It will not only hit the construction industry but every facet of our economy. (This is economics 101 and there’s no time to explain this in detail. Just trust me on this one. It can cause economic collapse!)
Yes everyone knows that most purchases made in 2005 was not a good short-term investment and in fact, the property has actually gone down in value. According To some experts, parts of our market area are still over-valued by 30+%.
With people’s credit being damaged beyond repair in a Credit-Score Society, how will they bounce back in the future? This is why the government and other related industries must come to the aid of many people that are normally trustworthy and make a contribution to society as good, upstanding citizens. Remember the RTC? (Resolution Trust Corporation)
The government devised entity was created to bail out the Savings & Loan Companies.
This is all essential to keep our economy afloat and should only be used as a last resort.
That’s another subject too.
Now what you’ve been waiting for; the forecast from a Local Realtor that is up-to-date, unbiased, not forecasted by some big Wall Street Company, and not projected by a study group out of any University or even NAR. (National Association of Realtors)
These are all good sources so don’t get me wrong, but by the time you hear it on TV, read those articles in publications or even hear it in a seminar or see it on a website ultimately trying to sell you something in the end, it’s old news and often not directly related to our local market. (Charlotte & Sarasota Counties) One thing to keep in mind is this, Real Estate is Local in Nature!
For the remainder of 2007, prices will fall. The Season will help to prop up the local market as winter sets in and people up north realize that buying a home for their own use and one that they will own for 5 years or longer will remain one of the most solid investments they can make. Quality of life should play into the equation and after all, if all you ever looked at was strictly an investment and thought the sky could fall at any time, life will pass you by. Time is all we really have, isn’t it? SW Florida offers some of the most beautiful things on earth and if you like to golf, boat, fish, the cultural activities and warm, temperate winters, tropical zone 9 (SW FL) offers the quality of life in the Continental US that fulfills dreams. There are so many good reasons to live here and those that do, know this.
Beginning in 2008 the market will remain sluggish but consistent. Sales will be more in line with 2002-2003 and then slow slightly again. By the fall of 2008, the market will begin to bounce back at a slow pace as the inventory is consumed and then in 2009, the market will continue a slowly climb upwards. Interest rates will begin to rise by late spring.
So where will it bottom out? Many people wonder this. Bottoming out does not happen on one day at a given time. You’re seeing it right now! If you wait for the media to get a hold of it, they will tell you sometime in the middle of 2009 that it’s time to buy. Nothing could be further from the truth. Savvy investors know this. Many savvy investors sat on the sidelines during the 2004-2005 boom! They are always ahead of the media and forecasts.
When you see a report about sales, it’s usually at least 90 days old or more. Your Local Realtors (Good ones) see the trends as they happen live in their everyday business and in meeting with people while seeing real-life situations unfold.
So here’s the advice! If you’re a seller and you wish to sell within the next six months, be sure your price reflects today’s market. This will most likely be a painful price for you. If you bought in 2005, you’re most likely going to lose money. (Approx. 35-37% of the initial purchase price)
If you must sell, be prepared to bring money to the closing table if you have a high mortgage balance or you should contact your lender. Try to work with them and ask about a Short-Sale. This is a sale that is less than you owe on it. Lenders do not like to own real estate so if they are pragmatic, they may work with you. Ask for the Loan Resolution Dept, Work-Out Dept., Short-Sale Dept. or for someone that has the authority to send you some documents spelling out the conditions for a short sale under the lender’s guidelines.
Don’t get caught speaking with someone that has little or no authority. They can often be annoying and will waste your time. Always ask for a Supervisor if possible. (Sometimes you may get frustrated speaking with a person that merely gives you the run-around and their real job is to answer the phones; Power-Freaks with some sort of personal vendetta or past problem)
Follow it up with a registered mail to the right address. If nothing else and you cannot get past the so-called Phone-Answering Person, get the address to send a Request for Work-Out, Short Sale or Resolution Dept. Try to get a Supervisor’s name if possible. Write it down and keep a record of all the numbers and people you spoke with.
For those of you that are just fishing to see if your home will sell and it’s over-priced, forget it! Pack it in, wait 2 years and then try again. Hey, enjoy your home and beautiful surroundings. Do some landscaping etc.
Many Realtors and Appraisers are having a very difficult time evaluating current true market values right now. Keep in mind also that an Appraisal or CMA/Estimated Value is not worth the paper it’s printed on if it doesn’t have a live, warm body backing it up that is Ready, Willing and Able to buy your home. Did you see the word Able?
This means qualified!
With some tighter mortgage underwriting guidelines, some buyers that qualified in 2005 would not qualify in today’s market.
Is there still mortgage money to be had? The answer is YES! Don’t let the media scare you into thinking they are not making any new loans. There are fewer lenders however they have ample supply of money to lend to qualified buyers. Believe it or not, there are still some very attractive programs available to you if you contact the right people. Mortgage Brokers have a good source of the varying programs and which ones might fit you best. Buyers will need to put some money down.
Now for you buyers, if you don’t see the writing on the wall, let me just say this, NOW REALLY IS THE TIME TO BUY! Don’t let me say I told you so but I’m sure I will say that to several people after the market turns, which will be within 18-24 months.
The interest rates are low right now but if inflation rears its ugly head, it could head higher. My prediction on interest rates; they will remain low for 6 more months then head higher. Inflation is here right now, even though they won’t admit it! They are falsely holding down interest rates to help prop up the economy. Don’t let me get caught saying I told you so here either but I know I will.
Have you been to the grocery store lately milk-bread-juice etc., paid to fill up your gas tank, bought anything that has gone up in price often due to gas prices? Even items from China are inching up in price.
I rest my case.
By the way, if you’re not patient, ready to do your homework and want to take a risk, you can get caught up the foreclosure market with every other Tom, Dick & Harry from the media hype. That’s another subject and unless you have cash, thick skin and are buying only for investment, don’t go there. Your family and spouse will badger you forever with the long, wasted, frustrating experience that unfolded.
Last but not least, if you see a home being auctioned either on-line or on-site that you can inspect and have ample time to gather all of the necessary information to make a good decision, you may want to pursue that. This is a clear indication of a realistic, highly motivated seller that has a need to sell. This helps you sort through the home supply. Don't bother with a seller that is not realistic or motivated to sell at today’s prices.
Well, there you go; just a glimpse of our local market and an experienced Realtor/Auctioneer’s hands-on outlook at our real estate market. I’ve very seldom been wrong but hey; I’m only human. I’ll make a bet with you though! Go out there and find yourself a great buy and nice home!! Good Luck!!
(About the Author) Bill Hoyle is a Realtor, Licensed in more than one state, an Auctioneer and is a Freelance Writer and has been printed in The National Assoc. of Realtors Magazine, The Florida Association of Realtors Magazine, The Toledo Board of Realtors Magazine, Various other publications and has taught continuing education and seminars including The Florida Association of Realtors Convention near Orlando, FL.
He may be reached at: 941-235-3528 or bill@accordingtohoyle.com
Bill is President of The According To Hoyle Group, Inc. and Licensed with Shells Realty in Punta Gorda, FL
Permission to edit, alter or re-author this article may only be obtained from Bill or Terrie Hoyle of The According To Hoyle Group.