Thursday, June 29, 2006

Soaring Real Estate Prices in Florida

Soaring real estate prices, competition for land, shrinking grants for faith-based housing projects and the rising costs of construction have nearly crippled efforts by South Florida churches to boost home ownership among low-income residents.

It's getting more difficult every day.

We're here to help with affordable housing, but we can't do it because of the high price of construction and land. It's getting pretty ugly.

The Nehemiah Project, named after the Biblical figure who rebuilt Jerusalem in the fifth century B.C., has reconstructed 80 single-family homes in Florida City. By offsetting construction costs with government grants and free labor from church volunteers, the group was able to sell four-bedroom homes for $160,000 each, Azan said. Similar new homes in the area are selling for more than $400,000.

But recently, the major source of Nehemiah's grant money has all but dried up, Azan said. The group received just $20,000 in Miami-Dade County grants this year, compared to an average of $100,000 in previous years.

As one of several faith-based housing developers in South Florida, the Nehemiah project's plight is not unusual. Community activists say faith-based groups have been overwhelmed by the rising demand for low-income housing at a time when many of them can no longer compete with commercial developers for land and building contracts.

Community development corporations aren't producing units fast enough.

You can't just rely on the faith-based community to do that which the private sector and government ought to be doing. It just isn't going to work.


Belinda Floyd, 54, a secretary with Mount Bethel Human Services in Fort Lauderdale, turned to a faith-based group after struggling to save for a home on an annual salary of $26,000. The city of Fort Lauderdale referred her to New Visions CDC, a faith-based group in Fort Lauderdale with home buyer education classes and several affordable housing projects in Broward.

Through the church-based program, Floyd qualified to buy one of 19 houses in Roosevelt Gardens, developed by New Visions in conjunction with Lennar Homes, a private developer. The houses cost between $130,000 and $200,000.

Floyd, who now lives in a rented apartment with her 76-year-old mother, picked a corner lot and applied for county subsidies to defray the down payment with the help of the church. She plans to move into the three-bedroom house in October, if the county grants come through.

They were very encouraging. They always said, "Don't worry about a thing. God has the last word."

Jacqueline Tufts, executive director of New Visions, said enrollment in the group's monthly home buyer's class -- the first step toward getting one of the lower-priced houses -- has risen in recent years. At the same time, affordable contractors and properties have become scarce.

It's been very difficult finding builders that will complete the projects within our budget. We're still keeping it affordable only because of subsidies.

But federal grants that keep prices low are diminishing. The U.S. Department of Housing and Urban Development has cut grants to faith-based organizations in recent years, according to a study conducted by the Roundtable on Religion and Social Welfare Policy at the Nelson A. Rockefeller Institute of Government.

Religious leaders say housing has become a pressing concern among congregants. The median price of a single-family home in South Florida jumped from $150,000 in 2000 to $340,000 in 2005, according to a Miami Herald analysis.

The Rev. Henry Nevin of St. John Institutional Missionary Baptist Church -- once a thriving Overtown congregation with more than 2,500 members -- started a faith-based community development corporation more than 20 years ago to provide affordable housing to neighborhood residents. The church has helped build more than 40 homes and apartments, and is nearing completion on 14 town houses on 16th Street and Northwest First Avenue. The pastel houses, which sit on a barren street across from an FPL power plant, are priced between $115,000 and $139,000.


Some faith-based housing projects fail due to mismanagement.

In 2002, Miami officials cut funding to several home ownership programs when groups failed to produce enough new properties. Among the groups that lost funding: Word of Life Community Development Corp., a defunct faith-based group that took in hundreds of thousands of grant dollars to build houses and renovate storefronts around Overtown and Liberty City. The group built only two houses.

The BAME Development Corp., a faith-based group affiliated with The Greater Bethel African Methodist Episcopal Church, never finished a 40-unit building called New Hope Overtown, although the group's former executive director collected close to $400,000 in administrative funds over several years while ostensibly overseeing the project.

The group's past failures have made it harder to get grants, said Don Patterson, BAME's new director. BAME now plans to complete 745 units of affordable rentals in Overtown and Little Haiti by 2009.


Some experts say faith-based community development corporations, which first came about in the 1970s and flourished in the 1990s, may have difficulty surviving the spike in real estate prices.

In a tight housing market, it would be very difficult to start or sustain a faith-based development effort.

Leaders of some faith-based groups say they are considering raising prices to compete with the open market.

David Alexander, president and CEO of St. John's Community Development Corp., said the group's board is discussing whether to build affordable or market-rate units in a planned housing and commercial project on Third Avenue in Overtown.

Units in the $70 million, twin-tower apartment and shopping complex would sell for $150,000 if priced as affordable, or upwards of $250,000 if sold at market rate, Alexander said.

In Fort Lauderdale, New Visions has plans to develop mixed-income properties to offset the cost of affordable housing.

We have to keep up with the market. That's the only way we can stay afloat.

Thursday, June 22, 2006

Even Foreclosure Hawks Hurt by Sagging Real Estate Market

They gather outside the courthouse every day for the latest real estate auction. Some are professional investors; others come to ply skills gleaned at get-rich-quick seminars.

All of them are trying to scoop up homes that belonged to others who died, divorced, were thrust into bankruptcy or fell too far behind on their mortgage payments and failed to sell.

But these days, those investors are having a harder time finding good deals, as the once red-hot housing market cools amid rising mortgage interest rates.

Many homes that do end up in court are saddled with more than one mortgage and have little or no equity - so the investors take a pass.

"In the last six months or so, it has been like this," said James Lee, who has mined trustee auctions for investment property for 15 years.

When home price increases were stronger, investors could buy a property and sell it a few months later for a hefty profit.

"Now you're getting into the market where there's plenty to buy, but there's nowhere to sell it," said Peter Winn, owner of San Diego-based Westminster Investments.

The number of homes up for grabs could increase in the coming months based on signs that more homeowners are having trouble making mortgage payments.

In the last quarter of 2005, the most recent data available, the rate of mortgage delinquencies rose nationally to 4.7 percent, up from 4.38 percent in the year-earlier period, according to the Mortgage Bankers Association. It marked the first increase in three years, the group said.

As home prices soared in recent years, many buyers had to take out more than one mortgage with low-interest, adjustable rates to close their deals. Those rates are now climbing, forcing many homeowners to drain their equity to cover larger payments then try to sell their property to stave off foreclosure.

Nationwide, foreclosures hit a historic low last year at about 50,000. But that figure has more than doubled since then, according to property tracker

Real estate experts said that number is still very low and noted that, traditionally, the overwhelming majority of strapped homeowners have avoided foreclosure by selling their home or somehow coming up with a payment.

As the market slows, however, finding buyers in time to avoid foreclosure can become more difficult, said Brad Geisen, president and chief executive of

That could aid well-funded investors who buy directly from homeowners and may no longer have to compete with buyers who took advantage of cheap borrowing in recent years to drive up prices.

"There's definitely a turn," Gelsen said.

Some experts are forecasting Armageddon-level increases in foreclosures in overpriced markets during the next few years. But some economists counter that a mortgage crisis is unlikely unless there is a major economic downturn with heavy job losses.

Still, other factors suggest problems ahead for the housing sector.

Historically, borrowers who run into trouble paying their mortgage tend to do so within the first three to five years of the loan period.

Currently, more than half of the nation's $9.2 trillion in outstanding residential mortgage and home equity loans are less than three years old, said Doug Duncan, chief economist for the Mortgage Bankers Association.

Another potential trouble spot: About 24 percent of all home loans are adjustable, which can be risky if borrowers end up paying far more than they bargained for as the Federal Reserve hikes interest rates.

"Adjustable rate mortgages always have a slightly higher delinquency rate than fixed-rate mortgages," Duncan said.

California, where the median price of a home hit $468,000 in April, leads the nation in the percentage of homes purchased with adjustable rate mortgages.

An increase in the number of homeowners in trouble could mean big business for companies like Dallas-based HomeVestors of America, which provides training, marketing and, in some cases, financing for its investor franchisees.

The company, which proclaims, "We Buy Ugly Houses" in its advertising, operates in some 30 states, targeting distressed homeowners and others who need to sell property quickly.

The company projects its franchisees will purchase 8,000 homes this year, up from 6,500 in 2005 and 4,800 in 2004.

Less than 5 % of deals now made by HomeVestors franchisees involve foreclosed homes. But CEO John Hayes expects that to increase.

"I am certain that as we've seen in the last few months more incidences of pre-foreclosure activities, we're going to see an increase a year from now," Hayes said.

Housing Sellers and Buyers Deadlock

Home buyers and home sellers are in a virtual stalemate in Central Florida, with housing prices holding at lofty 2005 levels while more properties are hitting the market and lingering longer.

Who will blink first?

With the inventory of existing homes for sale up fivefold in a year, owners, agents and new-home builders in Central Florida are pulling out all the stops -- except lowering prices -- to move houses and attract the attention of prospective buyers.

The average resale home spent 27 days on the market last summer during the red-hot market -- a historic low for the Orlando area, according to Orlando Regional Realtor Association records. But that average has since grown to 49 days and climbing. Although 49 days is not a long time in historic terms, the 22-day shift in the average means that some homes are taking months longer to sell than their owners anticipated.

Some real-estate agents have boosted their marketing with added fliers and "talking houses" equipped with small AM radio transmitters. But many sellers are clinging to unrealistic price expectations, Central Florida agents say.

"They not only think it's still 2005, they think it's the summer of 2005 -- the peak of the market," said Barbara Brady, a Realtor at Coldwell Banker Residential Real Estate in Orlando.

Thomas Kingery had bought and sold four homes through the years and knew the drill, but the 38-year-old Windermere resident was worried earlier this year that he might be stuck trying to sell his latest house.

Realtors he interviewed advised him to price his home at least $10,000 lower than he thought it was worth. Faced with the cooling market, Kingery and his wife, Lisa, tried a different tack: They paid $500 to Florida Flat Rate Realty to list the house for them in the Realtors' Multiple Listing Service and were willing to pay a 3 percent commission to the agency that brought the successful buyer to the table.

Bottom line: They recently sold the house for $470,000 and cleared a small profit without having to slash their price -- though the whole process took 70 days.

"It worked out well," Kingery said. "I saved about $10,000" by avoiding the usual full commission of 5 percent to 7 percent. "This is one way to keep more in your pocket in a slow market."

So far, local sellers are not making drastic cuts in their asking prices, Realtors and other industry experts say. But the pressure to do so is building.

"The trend is definitely downward," said Chris McCarty, economist and director of the survey-research center at University of Florida's Bureau of Economic and Business Research. "And it's going to continue."

Nationally and throughout much of Florida, median home prices are beginning to slip, especially in places where the price escalation was most rapid -- such as Naples, Miami, Fort Myers and Fort Lauderdale, McCarty said. Rising interest rates are making loans less affordable, and speculators who bought homes with riskier financing, such as interest-only mortgages, have been selling despite the declining market, adding to the inventory and downward price pressure.

A Harvard University study released last week found that nearly one-third of U.S. home buyers last year used riskier mortgages such as interest-only financing or "payment option" loans that give the buyer the ability to skip a payment.

Many of those homes were bought by speculators, McCarty said, and as those properties are unloaded for less than top dollar, "it lowers the value of other homes around them."

Orlando and Tampa are not as likely to see major drops in their median prices as some South Florida locales, he said, because their values did not rise as much. Still, prices in the Orlando area could be flat or slow to rise for some time -- significantly weaker than in recent years under the best of circumstances -- and certain homes -- particularly those priced $300,000 or more -- will be tough to sell, McCarty said.

"How many people can afford to live in $300,000 homes without an interest-only loan?" he said. "By the fourth quarter and the first quarter [of 2007], you'll see the full brunt of the declining real-estate market."

Pricing a home so that it sells within a reasonable period of time is one of the talents a Realtor brings to the table, said Coldwell Banker's Brady, which helps explain why homes sell faster when listed through a Realtor. But persuading clients to sell their homes now for less than their neighbors did last year is a challenge, she said.

Some agents are adding more informational fliers in weatherproof tubes near the home's front entrance, or providing recorded messages that potential buyers can hear via radio transmission as they drive by. But face-to-face sales contact works best, Brady said.

"I don't believe in those" fliers or recorded messages, she said. "It doesn't allow you to talk directly to the customer."

So often, she said, "If you just listen to the buyer, you may have these alternatives that they may not be aware of. They may see the square footage [listed on a flier] and think, 'Oh, that's not enough space.' They may not realize they can easily add a suite, for example."

Pamela Ryan, an agent with Kelly Price & Co., has been selling homes in Central Florida for 25 years and said she is "definitely working harder -- 12 to 15 hour days, seven days a week." That's because while there are many more listings, house hunters are still active, sales are taking longer to close, negotiations are lengthier, and some agencies are turning down potential listings after analyzing the offering and concluding that the odds of a sale were not good in today's market.

But the record number of homes available for sale makes it a gold mine for agents with knowledge of the local markets, she said.

"We're very honest. I tell a seller, 'We have to be the best home at the best price, to sell,' " said Ryan, who specializes in the Winter Park and Maitland areas.

"People can take their time. They [buyers] don't feel that sense of urgency," said Ellie Musgrave, an agent with Signature GMAC in the Dr. Phillips area. Sellers are beginning to respond to the growing inventory and lengthening time on the market by setting prices at more competitive levels.

"Reality is setting in," she said.

Builders of new homes and condominiums have more options than existing-home sellers, and they have been pouring resources into marketing and deals in recent months.

Cambridge Homes, for example, has been offering buyers a Mini Cooper automobile with certain homes, or upgrades of similar value. The Vue condominium sales office in Orlando has installed a Kohler tub and granite counters to entice more people to peek inside. Other new-home sellers have been pitching discounts on certain lots of $10,000 to $99,000, though such deals have strings attached.

Condos in particular are skimming away first-time buyers who in years past would have been competing for single-family homes of $200,000 or less, said David Tanner, a top-selling agent in Signature GMAC's Winter Park office.

Orlando has seen an explosion in new-condo construction in recent years, especially downtown; last year it was the second-biggest condo-conversion market in the nation, according to one study.

"Developers [of condo conversions] will pay your closing costs and homeowner-association fees for the first year," Tanner said. "So you can have someone with $1,000 down, and they can get into a condo. Where else can you do that?"

Tanner, 37, said he recommends that existing-home sellers use deal sweeteners as well. "Clients need to help with the closing costs, maybe a home warranty. Throw in some kind of incentive."

Nationally, some home builders are scaling back on projects, profits are slipping and stock values are taking a hit. UF's McCarty said home foreclosures are rising -- and will continue to rise as many homeowners with adjustable-rate mortgages face higher payments they will be hard-pressed to afford.

"People will start lowering prices even more" to sell in the weakening market, McCarty said. "A lot of people knew this would happen, but a lot of people were just hoping that it wouldn't."

Solid Housing Data Helped Soothe Some Concerns

Construction rises in May 2006.

Construction of new homes and apartments, down for three straight months, staged what may turn out to be a temporary rebound in May 2006.

Despite the one-month improvement, analysts said higher mortgage rates would continue to buffet the once high-flying housing market for the next two years. But they said potential home buyers could see some benefits in the form of more builder incentives being offered.

The Commerce Department reported that builders started construction at a seasonally adjusted annual rate of 1.957 million units last month, a better-than-expected 5 percent gain from April when construction had fallen 5.5 %.

Saturday, April 08, 2006

Miami Housing Market Shows More Signs of Softening

Miami home prices wobbled in February, as the region's formerly red-hot sellers market continued to evolve into a more balanced market between buyers and sellers.

Prices for existing single-family homes in Miami-Dade were up 19 percent on a year-to-year basis but continued to drop on a month-to-month basis, for the third consecutive month. The median price of a single-family home in Miami-Dade now stands at $368,700.

Similarly, Broward single-family home prices were up compared to February last year but down compared to the previous month. A median priced single-family home is now $360,800. In January it was $370,500.

Meanwhile, condominium prices were up on both an annual and monthly basis.

The number of single-family homes and condos sold in February dropped significantly compared to the February of last year. February sales were largely up compared to the number of homes sold in January.

In recent months the inventory of homes for sale has increased dramatically and the days needed to sell a home has increased. Some say this is a so-called soft landing from the markets record highs and insist the market is remains strong but moving at a steadier pace. Others worry the Miami Housing Market is cooling and poised for price declines.

Miami'sHousing Market Continued to Cool in January 2006

Miami's housing market continued to cool in January 2006. Sales of existing single-family homes declined dramatically across the region, compared to January 2005.
Palm Beach County sales fell 39 percent, Broward's dropped 36 percent and Miami-Dade's fell 28 percent. Meanwhile, prices aren't appreciating as they were last year.
Palm Beach County's median price for January was $393,700, up just 9 percent over January 2005 and down roughly 4 percent from December.
Broward's median of $370,500 and Miami-Dade's median of $376,300 were flat compared to December. The median price means half the homes sold for more, half for less.
Existing condominium sales also were down across South Florida during January.
Nationally and locally, the sales slowdown is good because it lessens the chances that there will be a bone-jarring plunge in home prices, the "bubble" bursting scenario that many experts have long debated.
The Orlando area hit a record high 12,015 existing homes for sale in January 2006.
But Metro Orlando sales in January were up 6.2 percent from a year ago, and the median price rose 25.4 percent to $242,050, though that was less than one percent higher than in December, continuing a price flattening that began in mid-year.

Miami Housing Fueled an Explosion of Jobs

Now, home prices are settling down. They have soared an average of 110 percent in Miami-Dade and Broward counties since 2000. Prices are expected to rise this year, but by only 5 percent to 10 percent.

The jobs, wealth and consumer spending tied to real estate will slow as well. Still, a housing market slowdown is likely to simply cool South Florida's red-hot economy rather than plunge it into recession.

No industry is more directly tied to the real estate boom than construction. Those jobs alone accounted for 10 percent of Florida's record job growth last year.

Miami Housing Bubble's Bust

This year is shaping up a lot like 1987. Back then, we saw speculation in commodities and stocks in general (though in a much, much milder form than exists now). We also had a new Fed chairman -- Easy Al Greenspan succeeded Paul Volcker as chairman that summer. And, ultimately, we had a stock-market crash.

For such an event to happen, a number of market forces will need to align themselves in a certain way. Given the impossibility of predicting when that alignment will occur, we can only try to position ourselves as it develops -- though, in the very short run, I have almost no shorts, as the path of least resistance seems higher for the moment.

Certainly, there have been plenty of data points suggesting trouble in various formerly hot markets of the U.S., including Miami.

Best Time To Sell Your Home in Miami: Sooner Is Better

It used to take several years to sell something in the $8 million to $10 million range.
The last few years it's taken more like six months. There's never been depreciation in the super-luxury market in Miami, but things might slow down--and there's been lots of talk about a potential correction in the condo market. If you do intend to sell, you should put your property on the market as soon as possible. You have a higher chance of getting a quick offer now. We don't know what's going to happen in the future, nobody has that crystal ball. And don't wait until the summer, when it's hot and rainy.