South Florida Home Prices Decline Slowly

South Florida Real Estate

Miami, Florida – Data through December 2009, released today by Standard & Poor’s for its S&P/Case-Shiller Home Price Indices, show that the U.S. National Home Price Index fell in the fourth quarter of 2009, but it has improved in its annual rate of return compared to third quarter reports.

The S&P/Case-Shiller U.S. National Home Price Index, which covers all nine U.S. census divisions, recorded a 2.5 percent decline in the fourth quarter of 2009 versus the fourth quarter of 2008. While down, it’s a significant improvement over the annual rates reported in the first, second and third quarters of the year, at -19.0 percent, -14.7 percent and -8.7 percent, respectively.

In December, the 10-City and 20-City Composites recorded annual declines of 2.4 percent and 3.1 percent, respectively. These two indices, which are reported monthly, have seen improvements in their annual rates of return every month since the beginning of the year.

“As measured by prices, the housing market is definitely in better shape than it was this time last year, as the pace of deterioration has stabilized for now. However, the rate of improvement seen during the summer of 2009 has not been sustained,” says David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s.

“In the most recent months, we are seeing fewer and fewer MSAs reporting monthly gains in prices. Only four cities saw month-to-month improvements in December over November when you look at the raw data. We are in a seasonally slow period for home prices, however, so it is not surprising to see better statistics in the seasonally-adjusted data, where 14 of the markets and the two monthly composites all rose in December. Similarly, the National Composite fell by 1.1 percent in the fourth quarter, but rose by 1.6 percent on a seasonally-adjusted basis.”

As of the 4th quarter of 2009, average home prices across the United States are at similar levels to what they were in the summer of 2003. The 4th quarter values fell when compared to the 3rd quarter; however, the decline in the annual rate of return has significantly improved.

The 10-City and 20-City Composites continue to show improvement in their annual rates of return. In fact, all 20 metro areas and the two Composites saw improvement in their annual returns compared to November’s data. Only three cities – Detroit, Las Vegas and Tampa – still showed double digit annual rates of decline as of the end of 2009. Miami, Phoenix and Seattle all moved above such rates with December’s report.

Looking at the monthly statistics, 15 of the 20 metro areas showed a decline in December over November, with Chicago posting the sharpest decline, down 1.6 percent. Las Vegas finally posted its first positive print in more than three years, with +0.2 percent. The Southwest continues to be a bright spot, with San Diego posting its eighth consecutive monthly increase, and Los Angeles and Phoenix both posting their seventh. Three of the markets – Charlotte, Seattle and Tampa – posted new low index levels as measured by the past four years.

In other words, any gains they might have seen in recent months have been erased and December is now considered their current trough value, according to the data.

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Homebuilding forecast: Modest growth in 2010

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Miami – Jan. 20, 2010 – The fragile housing recovery should gather momentum this year as the economy strengthens, but high unemployment at least through 2011 will make for a slow turnaround, housing experts said Tuesday.

The panel of economists at the International Builders’ Show in Las Vegas agreed broadly on the outlook for the housing market and economy. Both, they said, had turned a corner, but there are slim prospects for a swift rebound.

“It won’t be a strong recovery, but it will be a recovery,” said David Crowe, chief economist for the National Association of Home Builders.

His forecast calls for sales of new and previously occupied homes to weaken after tax credits for homebuyers expire in April. But 2010 sales of new homes will be up by more than one-third, he said, and almost 7 percent higher for resales.

Crowe also sees home prices remaining stable going forward, though some cities may still see some slight declines in the coming months.

“I believe we’ve seen the worst of the house price declines ... The stage is set for the consumer to return,” Crowe said.

He expects builders to ramp up construction this year, with newly built homes totaling around 700,000. That would be a 25 percent increase over his tally for 2009. While he anticipates the economy will add some jobs in the April-June period, he projects unemployment will peak this year at 10.2 percent and then fall gradually to around 8 percent by the end of next year.

But homebuilders’ fortunes have brightened in recent months. Low interest rates and an $8,000 tax credit for first-time home buyers helped stoke demand for homes. The incentive was scheduled to expire at the end of November, but Congress extended the deadline through April and added a $6,500 tax credit for current homeowners who move.

Still, recent figures have raised doubts about how strong demand will be in the coming months.

New homes sales tumbled 11 percent in November from October to the lowest level since last spring. The number of people preparing to buy a home in November also dropped.

That’s left many homebuilders nervous that demand is weakening. Homebuilders’ confidence, measured by an NAHB’s index, fell this month to 15. It was the second-straight monthly decline and the lowest level since June.

The index reflects a survey of 504 residential developers nationwide. Index readings below 50 indicate negative sentiment about the market.

David Berson, chief economist for mortgage insurer PMI Group, said he expects mortgage delinquencies and foreclosures to climb this year. But he anticipates that banks and other mortgage companies will continue to hold properties on their books, rather than dumping them on the market at depressed prices.

“That does mean it will be longer before we start to get a real recovery in home prices,” Berson said. “By the time we get to 2011, the majority of the states should have price gains.”

He projects home prices fell almost 13 percent in 2009 from the prior year. His forecast calls for home prices to decline about 5 percent early this year, but end the year flat.

Freddie Mac Chief Economist Frank Nothaft, meanwhile, said he sees home prices to decline 3 percent this year. His forecast calls for mortgage rates to remain below 6 percent this year.

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New rules curb closing surprises - Miami Real Estate 800-819-5466

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McLEAN, Va. – Jan. 19, 2010 – Buying a home should be a joyful experience, but all too often, the mortgage settlement process leaves consumers confused, angry and paying more than they anticipated.

The reason? Closing costs and fees that are significantly higher than the lender’s original estimates. Borrowers find themselves faced with two unappealing choices: Pony up or walk away and start searching for another house.

Now, after years of wrestling with different factions of the mortgage industry, the Department of Housing and Urban Development has adopted rules designed to prevent last-minute closing surprises. The rules, which took effect Jan. 1, will reduce closing shocks and save homebuyers money, says Timothy Dwyer, CEO of Entitle Direct Group, a title insurance company. In addition, he says, “You’ll be better informed and educated.”

The biggest change involves the good faith estimate, the form lenders give consumers when they apply for a mortgage. The good faith estimate isn’t new, but in the past, the document wasn’t particularly helpful to consumers, says Sylvia Alayon, vice president of operations at the Consumer Mortgage Audit Center. What has changed:

Consistency. Lenders are now required to use a uniform three-page document when they give prospective borrowers a good faith estimate, says Vicki Bott, deputy assistant secretary for single-family housing at HUD.

Lenders also are required to provide the document within 72 hours after prospective borrowers apply for a loan.

This will allow consumers to figure out a loan’s total cost, including fees, and compare loan offers on an apples-to-apples basis, Bott says. “We encourage consumers to shop for the best rates and fees, and not just the best rate,” she says.

Transparency. Many borrowers who bought homes during the housing boom later discovered that their loans contained hidden bombs that made their mortgages unaffordable. The new good faith estimate requires lenders to disclose features that could drive up costs. For example, the document requires lenders to disclose whether your interest rate will rise – as would be the case with an adjustable-rate mortgage – and if so, by how much. Lenders will also be asked whether the loan includes balloon payments or imposes penalties for paying the loan off early.

“All of these are really important questions,” says Helene Raynaud, vice president of housing for the National Foundation for Credit Counseling. “It will be able to raise red flags for consumers.”

Trade-offs. Some lenders offer borrowers a lower interest rate in exchange for higher upfront costs -- or vice versa. A new table in the good faith estimate (see box) helps borrowers compare how different interest rates and settlement charges will affect monthly payments.

Reliability. Lenders are required by law to give mortgage applicants a copy of their settlement costs, known as a HUD-1, at least one day before closing. In the past, though, many borrowers discovered that the costs shown on the HUD-1 bore little connection to those provided in the good faith estimate.

The new rules will make it much more difficult for lenders to depart from their good faith estimates, Bott says. The new HUD-1 includes a line-by-line comparison to the good faith estimate, making it easy to identify any change in costs.

Lenders are prohibited from increasing costs they control, such as origination and processing fees. Fees for third-party services, such as appraisals and title insurance, can increase no more than 10% from those provided in the good faith estimate, as long as the borrowers use providers selected by the lender. The limit doesn’t apply if borrowers select their own third-party providers.

Other costs that aren’t subject to the 10% limit include the initial deposit for the borrower’s escrow account, daily interest charges and homeowner’s insurance.

HUD has published a guide for homebuyers, Shopping for Your Home Loan: HUD’s Settlement Cost Booklet. You can find it at www.hud.gov

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Aventura Real Estate - Feds: More than 100 arrested for mortgage fraud.

South Florida Real Estate-

A federal prosecutor says a crackdown on organized mortgage fraud this year has yielded 105 arrests from Jacksonville to Fort Myers.

A. Brian Albritton, the U.S. attorney for Florida’s middle district, announced the results of the nine-month investigation at news conferences Tuesday in Fort Myers and Tampa.

Albritton said the fraudulent loans totaled more than $400 million and involved more than 700 properties.

Defendants include mortgage brokers, real estate agents, lenders, sellers and buyers. Albritton called the problem an “epidemic.”

Florida’s middle district includes a swath that extends from Jacksonville to Fort Myers and includes the Orlando and Tampa areas.

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Rates on 30-year loans rise to 5.03 percent - Miami Real Estate 800-819-5466

Miami Beach - Rates for 30-year home loans climbed to 5.03 percent this week, the third consecutive weekly increase.

The average rate inched up from 5 percent a week earlier, mortgage company Freddie Mac said Thursday. The last time the average was higher was the week of September 24, when rates averaged 5.04 percent.

Rates had hovered below 5 percent for nearly a month until last week. They hit a record low of 4.78 percent in the spring, but are still attractive for people looking to buy a home or refinance.

The rates have advanced despite action by the government to prop up the housing market and stimulate the economy. The Federal Reserve has pumped $1.25 trillion on mortgage-backed securities in an effort to lower rates on mortgages and loosen credit.

Rates on 30-year mortgages traditionally track yields on long-term government debt.

Still, lenders have tightened their standards dramatically, so the best rates are available only to borrowers with solid credit and a 20 percent down payment.

Freddie Mac collects mortgage rates on Monday through Wednesday of each week from lenders around the country. Rates often fluctuate significantly, even within a given day, frequently in line with long-term Treasury bonds.

The average rate on a 15-year fixed-rate mortgage rose to 4.46 percent from 4.43 percent recorded last week, according to Freddie Mac.

Rates on five-year, adjustable-rate mortgages averaged 4.42 percent, up from last week’s 4.4 percent. Rates on one-year, adjustable-rate mortgages rose to 4.57 percent from 4.54 percent.

The rates do not include add-on fees known as points. The nationwide fee for loans in Freddie Mac’s survey averaged 0.7 points for 30-year loans. The fee averaged 0.6 points for 15-year, five-year and one-year loans.

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Fannie Mae allows investors to mortgage more properties.

Miami Florida Real Estate

Fannie Mae modified a policy that allowed real estate investors to have only four financed properties. The number can now be five to 10, depending on whether certain eligibility, underwriting and delivery requirements are met. Florida Association of Realtors® (FAR) President Cynthia Shelton raised the investment issue with Fannie Mae officials last week.

“Many of our members have voiced concerns about Fannie Mae limiting investors to four properties,” says FAR Vice President of Public Policy John Sebree. “This comes as good news.”

The change is noted in a just-released update of Fannie Mae’s “Multiple Mortgages to the Same Borrower Policy.” The change is effective March 1. To qualify, borrowers must meet Fannie Mae’s criteria. They cannot, for example, have a history of recent bankruptcy, or a delinquency payment over the past 12 months.

Fannie Mae offers more information about its new policy in Announcement 09-02, released on Friday. To download the policy guidance (PDF format) and get more information on qualifying and underwriting, go to: https://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2009/0902.pdf

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Vulture funds may lift real-estate market in South Florida 305-936-2489

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MIAMI – For about a year, so-called vulture funds have circled South Florida’s besieged real-estate market, waiting for enough carnage to force deep discounts on large blocks of unsold condominiums. Some think last week’s meltdown on Wall Street may herald the arrival of that moment.

As many as 100 investment funds are shopping for South Florida real estate, hoping to buy extremely low during the current crisis. Their main target: condominium towers where developers and their lenders can’t sell enough units to pay off the loans used to build them.

“The bottom fishers, if you will, have been standing around the sidelines,” said Victor Lopez, a former Hyatt development executive now assembling commercial deals. ‘A lot of people out there are saying: ‘This is our time to get in.’”

If he’s right, it would be one of the clearest signs yet that South Florida’s beleaguered real-estate market had bottomed, bringing the region closer to a recovery. If vulture investors are buying, the view goes, it’s safer for others to start buying as well.

The funds come to the table with cash, but also a catch: a demand that the developers and banks accept a deep discount, typically between 40 and 50 cents on the dollar.

Despite all the attention these funds receive in the media and in real-estate circles, only one or two significant bulk condo deals have actually closed, according to several people involved in the market.

“Literally, a day doesn’t go by that I don’t get a call from potential investors,” said Ramiro Ortiz, president of Coral Gables-based BankUnited Financial. “The problem is that the price is 50 cents on the dollar. I’ve got enough clarity to know that’s not what I want to do.”

Real-estate analyst Michael Cannon sees the fund industry overstating the crisis facing developers and their lenders. So far, he is seeing enough condo buyers closing on their units to let most developers pay off their construction loans as well as some of the secondary loans needed to build the projects.

“Nobody is panicking,” Cannon said. “It’s not there.”

But after concluding the most dangerous week for the U.S. financial system since the Great Depression, fund managers think they are left with more leverage.

“Two very large hedge funds called me yesterday. Literally, they’re flying into Miami,” said Gregory Rumpel, a hotel broker at Jones Lang LaSalle, the day after Lehman Brothers filed for bankruptcy. “These guys are saying, ‘Well, that’s probably the shock to the market – with Lehman and all the other jitters out there – we need to see some stuff released.’”

Vulture in lipstick

One senior lending executive at a major South Florida bank that wanted to keep anonymous said his staff so far has refused offers from the so-called vulture funds. But he predicts that resistance won’t last much longer.

“The market conditions don’t seem to be improving. At some point, you’ve got to cut and run,” said the executive, who spoke on the condition that his name not be published. “That vulture is starting to look a little bit like it has some lipstick on it.”

Some think Wall Street’s grim news will prove a wake-up call to the fund managers themselves, prompting them to decide that the debacle has climaxed and that it’s time to deal.

“When you talk to most of these vulture-type investors, they all say they want to buy when there’s blood on the streets,” said Peter Zalewski, a partner at Condo Vultures, which brokers sales of distressed condominium towers. “This is really the sign they’ve been looking for.”

Turning point

An actual turning point wouldn’t reveal itself for months as the complicated deals, involving dozens of condominiums, get finalized.

“We’ve been active in this market for almost two years now,” said Matthew Martinez, whose Coral Gables firm, Pangea Select, is helping funds shop for South Florida real estate. “We’ve made about 32 offers. And we’re closing on the first one as we speak.”

Fluctuating currency markets add to the urgency for many of the funds with investment dollars from overseas. “Israel’s here in a big way,” said Adam Greenberg, managing director of BayBridge Real Estate Group, which is representing about a dozen funds.

Peter Wells wants to spend about $600 million in investor dollars and borrowed money on Miami-area real estate, but so far, he can’t find a motivated seller. He’s a partner in Condo Capital Solutions, a Denver-based fund that is looking for bulk deals in Florida and Arizona.

“We’re starting to see a few deals that are starting to make sense,” he said. Banks “are now starting to get a little bit more realistic.”


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NAR: Pending home sales indicate market stabilization - Miami Real Estate

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WASHINGTON – Pending home sales are hovering in a narrow range, another indication that a stabilization is occurring in the housing sector, according to the National Association of Realtors® (NAR).


The Pending Home Sales Index, based on contracts signed in October, slipped 1.7 percent to a reading of 107.2 and is 13.2 percent lower than October 2005. The index had trended up from a cyclical low of 105.6 in July, and a decline from year-ago levels is narrowing. In September, the index was 13.6 percent below a year earlier, while in August the decline was 14.0 percent.


David Lereah, NAR’s chief economist, says a fairly steady pace of home sales can be expected for the next two months. “It’s important to focus on where the housing market is now – it appears to be stabilizing, and comparisons with an unsustainable boom mask the fact that home sales remain historically high – they’ll stay that way through 2007,” he says. “In addition, a temporary correction in prices distracts from the fact that it is primarily the number of home sales that affects the economy, and the number for this year will be the third highest on record.”


The index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed and the transaction has not closed, but the sale usually is finalized within one or two months of signing.

Miami Real Estate

An index of 100 is equal to the average level of contract activity during 2001, the first year to be examined and the first of five consecutive record years for existing-home sales. There is a closer relationship between annual changes in the index and year-ago changes in sales performance than with month-to-month comparisons.


Regionally, the PHSI in the Midwest slipped 0.6 percent in October to 95.8 and was 15.4 percent below a year ago. The index in the South declined 1.7 percent to 122.9 and was 9.3 percent below October 2005. In the Northeast, the index eased 2.1 percent in October to 88.0 and was 13.5 percent lower than a year earlier. The index in the West fell 2.7 percent to 109.5 and was 17.4 percent below October 2005.

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