Oct. 21, 2019

Fed Calls Housing the Economy’s Bright Spot

While the overall economy has shown signs of sluggishness, a NY Fed report is optimistic about new-home trends and strength in the overall housing market.

NEW YORK – The economy shows signs of sluggishness – but not the housing market, according to a new report released by the Federal Reserve Bank of New York. Consumer spending is softening and wage growth is “moderate,” but the housing market has rebounded, according to the Fed.

“Housing activity indicators displayed further gradual improvement in August,” according to the report. Over the last three months, single-family housing starts and permits have rebounded. New home sales gained 7.1% in August month over month and are 18% higher than a year earlier. Existing-home sales saw a 1.2% increase in August.

Homebuilding has also seen some increases, surging 12.3% in August to reach the highest level since June 2007, according to the U.S. Commerce Department. A good portion of that has been in the multifamily sector, which includes apartments.

“A still-strong labor market and low mortgage rates could continue to provide support to housing,” the report notes.

The report did note the shortage of for-sale homes as one major hurdle that could limit continued growth in the housing market.

“Favorable labor market conditions and a substantial decline in mortgage interest rates continue to act as positive forces,” the report notes. “Inadequate inventories in affordable price ranges continue to be a drag on sales and fuel home-price increases.”

Source: “U.S. Economy in a Snapshot,” Federal Reserve Bank of New York (October 2019) and “Federal Reserve Report Cities ‘Rebounded’ Housing Market,” HousingWire (Oct. 15, 2019)

Oct. 17, 2019

Builder Confidence Hits 20-Month High

As far as builders are concerned, the housing rebound is expanding. NAHB’s attitude index rose 3 points to 71 in Oct., and anything over 50 is considered positive.

WASHINGTON – Builder confidence in the market for newly built single-family homes rose three points to 71 in October, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI). Sentiment levels are at their highest point since February 2018.

“The housing rebound that began in the spring continues, supported by low mortgage rates, solid job growth and a reduction in new home inventory,” says NAHB Chairman Greg Ugalde.

“The second half of 2019 has seen steady gains in single-family construction, and this is mirrored by the gradual uptick in builder sentiment over the past few months,” adds NAHB Chief Economist Robert Dietz. “However, builders continue to remain cautious due to ongoing supply side constraints and concerns about a slowing economy.”

All the HMI indices posted gains in October. The HMI index gauging current sales conditions increased three points to 78, the component measuring sales expectations in the next six months jumped six points to 76 and the measure charting traffic of prospective buyers rose four points to 54.

Looking at the three-month moving averages for regional HMI scores, the Northeast posted a one-point gain to 60, the Midwest was up a single point to 58, the South registered a three-point increase to 73 and the West was up three points to 78.

Derived from a monthly survey that NAHB has been conducting for 30 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

Oct. 15, 2019

Unconventional Mortgage Loans Making a Comeback

In 2018, unconventional mortgages hit their highest level since 2008 – but they were still only 3% of 2018’s loans compared to 39% in 2006.

NEW YORK – The number of unconventional mortgages last year reached the highest level since the 2008 crisis – but they still comprised less than 3% of loans made in all of 2018 compared with 39% in 2006 right before the housing bust.

Moreover, many of today’s loans are only slightly unconventional, says Inside Mortgage Finance’s Guy Cecala. He says most lenders are still required to make a good-faith effort to determine that a borrower has the “ability to repay.”

Lenders that underwrite unconventional mortgages also usually try to offset risk, and they do that by using a large down payment to counter the risk of a high debt-to-income ratio, limited documentation, or an interest-only loan.

Loans that trigger negative amortization no longer exist, and interest-only loans are being used once again as short-term loans for largely affluent people who are buying costly homes with a hefty down payment, notes Cecala.

Posted in National News
Oct. 14, 2019

Out-of-Staters Often Overestimate the Cost of a Florida Home

Florida is a big state. Many people imagine only South Florida, but the state has miles of undeveloped coastline and a lot of smaller cities with relatively low housing prices.

NEW YORK – A number of housing markets in Florida are affordable – but not due to a downturn in the market. Home prices and sales in the Sunshine State have been growing at a faster pace than the rest of the nation, says Florida Realtors chief economist Dr. Brad O’Connor.

“It’s always been a pretty affordable place to buy a home – especially if you’re a retiree looking for sunshine and warmth,” O’Connor says.” The median home price in Florida is $298,500, compared with the national median of $289,000. “You won’t be able to buy a beach house for these prices. But there’s a lot more to Florida.”

Why are Florida homes affordable? There are several reasons, including plenty of land and a surprising amount of undeveloped coastline. Most of the state’s higher-priced homes – the ones that come to mind when Northerners consider a Florida retirement – are concentrated in South Florida, where there is a scarcity of land.

Florida homes also tend to be smaller and incomes tend to be lower. Further, the supply of available homes isn’t as tight as in other markets.

“We’re one of the few places (where) they’re building homes. That also helps to relieve prices in our state,” says O’Connor.

It’s important to note that hurricanes generally don’t impact home prices much.

According to GOBankingRates, the 15 Florida cities with real estate bargains (median prices lower than the state and national medians) that are also desirable based on their high livability scores from AreaVibes are:

  • Timber Pines (median list price of $180,000)
  • Altamonte Springs ($198,000)
  • Coconut Creek ($200,000), North Port ($228,900)
  • Temple Terrace ($231,200)
  • Tavares ($233,450), Whiskey Creek ($253,000)
  • Cape Coral ($256,000)
  • Port Orange ($263,945)
  • Punta Gorda ($269,500)
  • Dunedin ($279,000)
  • Rockledge ($279,945)
  • St. Cloud ($281,995)
  • Lakeland Highlands ($288,950)
  • Venice ($289,000)
Oct. 10, 2019

3 Florida Cities in Top 10 ‘Best Places to Retire’ list

U.S. News & World Report: Out of 125 cities ranked, 10 Fla. cities are in the top 50. In top 10: 1) Fort Myers, 2) Sarasota, 5) Port St. Lucie and 6) Jacksonville.

WASHINGTON – U.S. News & World Report released its 2020 Best Places to Retire in the United States list, and all Florida cities were in the top third, with three metros in the top 10.

The magazine says its rankings “offer a comprehensive evaluation of the country’s 125 largest metropolitan areas – up from 100 last year – based on how well they meet Americans’ expectations for retirement, with measures including housing affordability, desirability, health care and overall happiness.”

The report lists four Florida metro areas in its top 10.

Up from No. 2 last year, Fort Myers tops the list at No. 1 due to increases in desirability, health care quality, job market strength and happiness. Sarasota jumps from No. 3 to No. 2 due to increases in desirability, health care and job market scores, despite falling in the areas of happiness and housing affordability.

In addition, two metro areas not previously ranked broke into the top five, including Port St. Lucie, at No. 5 thanks to ranking high due to desirability, happiness scores and retiree tax policy.

At No. 6, Jacksonville was still in the report’s top 10.

2020 U.S. News best places to retire rankings – top 10

1. Fort Myers

2. Sarasota

3. Lancaster, Pa.

4. Asheville, N.C.

5. Port St. Lucie

6. Jacksonville

7. Winston-Salem, N.C.

8. Nashville, Tenn.

9. Grand Rapids, Mich.

10. Dallas-Fort Worth, Texas

Florida city rankings in U.S. News 2020 report

1. Fort Myers

2. Sarasota

5. Port St. Lucie

6. Jacksonville

14. Miami

15. Lakeland

17. Tampa

19. Melbourne

22. Orlando

33. Pensacola

54. Daytona Beach

“Deciding where to retire is an important part of your life plan,” says Emily Brandon, senior editor for Retirement at U.S. News. “When considering potential retirement spots, you should look for an affordable cost of living, proximity to health care services and a strong economy, especially if you plan to work part-time.”

The 2020 Best Places to Retire were determined based on a methodology that factored in happiness, housing affordability, health care quality, desirability, retiree taxes and job market ratings. These measures were weighted based on a public survey of individuals across the U.S who are nearing retirement age (ages 45-59) and those who are of retirement age (60 or older) to find out what matters most when considering where to retire. Survey respondents said happiness and housing affordability were their most important criteria when selecting a retirement spot. Data sources include the U.S. Census Bureau and the Bureau of Labor Statistics, as well as U.S. News rankings of the Best Hospitals.

Of the 10 least desirable retirement cities ranked by U.S. News & World Report, five are in California, including the four at the bottom of the list. Of the rest, two are in Louisiana, and one each in Alabama, Oklahoma and Tennessee.

© 2019 Florida Realtors®

Oct. 7, 2019

UCF Economist: Recession No Threat to Florida

ORLANDO, Fla. – Sean Snaith, director of the University of Central Florida’s Institute for Economic Forecasting, expects Florida’s economy to grow faster than the U.S. economy over the next three years.

His third-quarter economic forecast indicates that the state’s “powerful” economy will produce a higher percentage of jobs than the nation and attract more job seekers from other states through 2022. Snaith predicts that much of the job growth will come from the professional/business services, education/health care services, and construction sectors.

“Florida’s economy continues to hit on all cylinders, and there are no economic storm clouds on the horizon,” he says. “Our biggest challenge over the upcoming years will revolve around how best to manage and facilitate economic growth.”

In addition, Snaith says the fundamentals of the state’s housing market remain “solid,” and economic and job growth and the influx of retiring baby boomers should continue to support the upward trend on sales.

“Low inventories of existing homes for sale and lagging housing starts growth contribute to an environment where home prices continue to rise,” Snaith adds. “The shortage in the single-family market will be rectified as the pace of single-family housing starts to ramp up over the next several years. Single-family housing starts in 2022 are expected to increase by 79.7% from 2014 levels.”

Oct. 3, 2019

Study: Florida No. 1 in Welcoming New Residents

Lendingtree.com: In 2016, new residents brought $30.2 billion into Fla., with about 72% of that increased income coming from new residents age 55 and over.

NEW YORK – Using IRS data from 2016, LendingTree found Florida the most popular place to move. New residents that year bought in a combined adjusted gross income of $30.2 billion.

According to the study, the age 55 and up demographic accounted for about 72% of incoming adjusted gross income to the state. In a look at household income, people who earned more than $100,000 annually accounted for 85% of the state’s income growth in 2016.

“We are seeing first-hand the highest percentage of affluent buyers go to Florida. Several factors have come together between lifestyle, great value (and) quality of living combined with the boost from tax reform,” says Shahab Karmely, CEO of New York-based KAR Properties, who has developed two ultra-luxury condo projects in Miami. “Buyers have huge purchasing power and pay fewer taxes for the rest of their lives, so they think, why not move there?”

“I’m seeing more people moving here from California,” says Noam Ziv of the ELAD Group, developer of the luxury ALINA Residences in Boca Raton. “It’s definitely become an emerging market for us. Since the taxes are extremely high there, Florida is perfect if you like the casual beach lifestyle.”

Ziv says the “schools in Boca are top-rated. You can actually move your family here and work remotely from your company headquarters in New York, which we are also seeing more of.”

 “Over the last few months, we have noticed a significant increase in buyers from the Northeast and Midwest,” says Jay Parker, CEO of Douglas Elliman Florida. “While historically, many purchases in South Florida were vacation homes or investment properties, now more than ever we are seeing buyers relocate to become full-time South Florida residents. Similarly, many of the buyers are relocating their businesses as part of the relocation.”

“A year or two ago, New York buyers were coming here to avoid state income tax,” says Chuck Luciano, principal and founding agent of Compass Boca Raton. “Now we see them coming for the truly good value they get when they trade New York for South Florida.”

Sept. 26, 2019

For Buyers, Happiness is More Important than Financial Return

Study: The real estate industry promotes the financial value of property, but owners care more about the happiness it provides and emotional attachment to “home.”

NEW YORK – The real estate industry promotes the financial value of property, but owners care more about the happiness it provides and emotional attachment to “home,” according to a study from Bank of America.

The latest Bank of America Homebuyer Insights Report explores the attitudes, preferences and behaviors of the modern homebuyer. The fall report finds that 93% of American homeowners say owning a home makes them happier than renting did, and 83% wouldn’t go back to renting.

But the happiness for homeownership is more emotional than financial. Most credit their happiness to an emotional attachment to their home and believe that owning a home has changed them for the better.

Other insights from the 2019 Fall Bank of America Homebuyer Insights Report include:

  • 76% pursued new interests after buying a home, including landscaping/gardening (47%), cooking/baking/grilling (45%), and interior design/remodeling (33%).
  • More than two-thirds of current homeowners say their relationships with family and loved ones have changed since purchasing a home, and 78% are satisfied with the quality of their social life.
  • The financial well-being of homeowners is significantly higher than that of prospective buyers (77% vs. 42%).
  • 58% of homeowners believe a home is a place where you make memories, compared to 42% who believe it is a financial investment.
  • 69% think it would be difficult to let go of their home thanks to the memories they have there.
Sept. 25, 2019

NAR 3Q Survey: Most Americans Say ‘Good Time to Buy’

63% believe it’s a good time to buy a home, and 34% believe that strongly. Mortgage rates are at historic lows, and NAR Economist Yun sees no sign of optimism fading, though a strong-intensity dip could indicate “concerns about the direction of the economy.”

WASHINGTON – New consumer findings from the National Association of Realtors®’ (NAR) third-quarter Housing Opportunities and Market Experience (HOME) survey find that more than half of polled Americans believe it’s a good time to buy a home.

Optimism fared well in the third quarter of 2019 as 63% of people said they believe that now is a good time for a home purchase, with 34% of those respondents saying they believe that strongly.

NAR’s Chief Economist Lawrence Yun says the favorable outlook also contains a degree of caution.

“Mortgage rates are at historically low levels, so I see no sign of the optimism about home buying fading,” he says. “However, the fact that slightly fewer (Americans) are expressing strong intensity compared to recent prior quarters is implying some would-be buyers have concerns about the direction of the economy.”

Among those that stated that now is a good time to purchase a home, the silent generation (those born between 1925 and 1945) were most likely to express that belief. Seventy-five percent from that demographic said that now is a good time to buy. They were closely followed by older boomers (those born between 1946 and 1954), as 72% from that age group agreed that now is a good time to purchase a home.

Asked whether now is a good time to purchase a home, 54% of those who have an income under $50,000 answered “yes,” and optimism increased as household incomes increased. In the $50,000 to $100,000 bracket, 64% said it’s a good time to buy a home; and among those who have an income of $100,000, 72% said that it’s a good time to buy.

“Not surprisingly, as incomes increase, the process of buying a home is less of a strain,” says Yun. “This has always been the case, but in this third quarter survey, we see it to an even greater extent – high earners are more open to buying a home.”

Selling a home
The NAR survey also asked respondents about their thoughts on selling a home in the current market: 74% said now is a good time to sell a home – a modest increase over 73% last quarter. Of those respondents, 45% said they “strongly” believe it’s a good time to sell, while the remaining 29% said they hold that belief “moderately.”

Sellers in the West region were most likely to hold this sentiment, and 81% said “now is a good time to sell.” In comparison, 67% in the Northeast said now is a good time to sell a home.

In regard to selling, the poll found that those in the higher wage brackets were more likely to state a belief that it’s a good time to sell a home: 82% of those who earn more than $100,000. However, of those who earn less than $50,000, only 64% said it’s a good time to sell.

Economic outlook
Fifty-two percent of those surveyed said they believe the U.S. economy is improving – more than half but still a decrease from the second quarter of 2019, when 55% said they believed the economy is improving.

Millennials (those born between 1980 and 1998) were the most pessimistic. Only 49% said the economy is improving while 51% said it’s not improving. Of those in the silent generation, 54% said the economy is improving. By location, 40% of those in urban areas believe the economy is improving compared to 62% in rural areas.

© 2019 Florida Realtors®

Sept. 24, 2019

Foreclosures Don’t Destroy Everyone’s Credit Score

Study: The year after a foreclosure, 7% of ex-owners have a credit score above 680 and 2% above 740; and all credit scores increased by about 10 points each year.

NEW YORK – A strong housing market over the last few years has put the foreclosure crisis in the rearview mirror, yet many Americans are still haunted by their past housing challenges.

However, new data shows that they should be able to comfortably leave their past behind.

The U.S. had more than 600,000 homes in foreclosure in 2018 – the lowest number since the days of the 2008 financial crisis. Foreclosures peaked at 2.9 million in 2010.

Post-foreclosure homeowners saw it ding their credit score and impact their ability to buy real estate, so LendingTree researchers analyzed how credit scores trend after a foreclosure by assessing the loan terms offered to borrowers with a foreclosure on their record compared to those without.

In general, foreclosures don’t affect a credit report forever, and after seven years they totally drop off the report. However, it’s not an all-or-nothing impact, and loan terms tend to improve before those seven years are over.

At first, a foreclosure can cause credit scores to drop by 150 points or more, but many borrowers still maintain a high score afterward, LendingTree researchers found. In fact, 7% of borrowers end the year of foreclosure with a score above 680 – and 2% finish above 740.

Credit scores also tend to increase by about 10 points per year after a foreclosure, researchers note. More than 30% of consumers with a foreclosure on their credit file have a credit score of 640 or higher within a year of the foreclosure but that percentage jumps to 46% after three years.

Consumers who went through foreclosure may be able to re-emerge as a homebuyer in as little as two years, though they tend to pay a premium. Borrowers with a credit score above 740, for example, paid an average mortgage rate of 5.02% compared to 4.70% for borrowers who did not have a foreclosure on their record, according to the study.

“The foreclosure dominates your credit score in the first two years after,” LendingTree researchers note. “This is evident from interest rates not correlating to credit scores when borrowing two years after foreclosure. However, when borrowing after three years or more, the expected pattern emerges with higher credit score borrowers paying lower interest rates.”

Researchers note that a $250,000 mortgage faces an extra $17,135 in borrowing costs for borrowers with a score above 740 who take out a mortgage just two years following a foreclosure. But that falls to $4,580 for those who wait at least three years after a foreclosure to get a new mortgage.

Source: “The Cost of Foreclosure,” LendingTree (Sept. 4, 2019)