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September 13, 2005
Study examines real estate flipping
Assign-Your-Contract.Com
ANAHEIM, Calif. -- Sept. 13, 2005 -- First American Real Estate Solutions® (RES) has released a new study examining the practice of real estate "flipping," or the reselling of residential properties for profit within 24 months of purchase. FlipYourPreConstruction.Com
The study, "Real Estate Flipping: Gold Mine, Mistake or Fraud," by Christopher Cagan, Ph.D., director of research and analytics at First American RES, examines the prevalence of -- and profits made from -- flipping residential real estate properties from 1999 through June 2005 in three of the hottest real estate markets in the country: Las Vegas, Miami and Orange County, Calif.
The study draws a distinction between legitimate flipping, which is defined as the purchase and quick resale of distressed or undervalued property for profit, vs. fraud, whereby the perpetrator uses false information in a real estate transaction to obtain unlawful profits.
Real estate prices have risen dramatically in recent years, with annual appreciations of 20 to 30 percent in some areas. The study shows that flippers obtained returns far in excess of those strong gains -- above 100 percent per year in many cases. The particularly profitable "sweet spot" of the elapsed time between purchase and flip sale is revealed through statistical analysis as being from three to six months of duration. Other key findings include disclosure of gross and adjusted rates of return for different types of flip resales and identification of specific zip codes where flipping was the most frequent and where the highest returns were obtained.
"While the market has done well overall, flippers have done even better," said Cagan. "During the past six years, flippers have exercised a level of strategic intelligence and savvy in their investments that proved to be even more profitable than the strong gains experienced by the general market.
"Among the strategies employed by purchasers who flipped properties within two years were investing in the hottest local markets; purchasing distressed, undervalued or foreclosed properties; and taking advantage of the psychology associated with a market experiencing higher than historical rates of appreciation to earn spectacular returns on their investments."
The study is derived from the pairing of the company’s analytics and its real estate transaction database. First American RES, a member of The First American Family of Companies, provides advanced property and ownership information, analytics and services.
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Posted by South Florida Realtor at 06:09 PM | TrackBack
The seller's dilemma: Is now the time?
Aventura-Homes.Com
WASHINGTON -- Sept. 13, 2005 -- Homeowners who currently are grappling with the decision of whether or not to sell must consider a number of contradictory economic indicators. While median residential prices are rising, surveys indicate that existing-home sales overall are declining.
David Lereah of the National Association of Realtors® (NAR) believes prices will continue to grow, citing the double-digit annual increases posted in 24 states and the District of Columbia during the second quarter.
An unexpected result of Hurricane Katrina, meanwhile, has been the continued lowering of mortgage rates. The more pessimistic view holds that the overall decline in the prices of new homes and sales attests to the gradual ebbing of the real estate boom. Fears of hurricanes are also spurring some owners of coastal properties to sell, driven by fears that the bottom could soon drop out. Katrina has driven up oil prices, making the transportation of construction materials more expensive.
Also, the rebuilding process will likely siphon construction workers and supplies away from other regions in the country, indicating a sustained slump in the market that has prompted some property professionals to advise their clients to wait at least a year before putting their homes up for sale, in the hope that the economy will have restabilized by then.
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Posted by South Florida Realtor at 06:07 PM | TrackBack
Senate OKs flood insurance borrowing bill
South-Florida-Realtor.Com
WASHINGTON -- Sept. 13, 2005 -- Congress agreed Monday to increase the borrowing authority of the federal program overseeing flood insurance to cope with the huge expected costs of claims from Hurricane Katrina.
The Senate, by voice vote, approved a House-passed bill that would allow the National Flood Insurance Program, a wing of the Federal Emergency Management Agency, to borrow up to $3.5 billion a year from the Treasury, up from the current ceiling of $1.5 billion. The legislation now goes to the president for his signature.
The program, established by Congress in 1968, currently covers around 4.5 million policyholders in more than 20,000 communities located in flood plains and other low-lying areas.
Participation is based on agreements between local communities and the NFIP under which the program offers protection at lower than full-risk rates in exchange for commitments from the communities that they will carry out steps to reduce flood damage risks in new structures.
The program is generally financed by premiums, but officials say it is certain that it will need substantial assistance to handle the hundreds of thousands of expected claims from Katrina. The program has paid $12.7 billion in flood insurance claims and related costs since 1969.
The bill is H.R. 3669.
On the Net:
National Flood Insurance Program: fema.gov
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Posted by South Florida Realtor at 06:03 PM | TrackBack
Hurricane worries: Is this the new normal ?
REAL ESTATE ISSUES
Home buyers, though, don't have the luxury of picking their seasons in Florida.
South Florida's housing market is in the midst of a historic building boom, with high-rise condominium buildings breaking ground at an unprecedented pace. The construction spree has many market watchers warning of a coming glut, but developers have justified their plans by citing Florida's appeal to Northeasterners, Latin Americans and Europeans eager to buy retirement homes and vacation getaways here.
Last year's hurricane barrage had market watchers worried that storm fears could halt the momentum. But the numbers didn't bear that out.
Home prices in Punta Gorda, where Hurricane Charley hit as a Category 4 storm, rose 34 percent in July, the second month of the hurricane season. Statewide they rose 33 percent.
''People thought last year's hurricane season was going to deter people from buying, and it didn't at all,'' said Bradley Hunter, South Florida director for Metrostudy, which analyzes the real estate market. ``I heard a lot of buzzing about that. There was no evidence people were deterred.''
But Hunter and other analysts said more active hurricane seasons would have them worried over a storm's more immediate impact: higher costs.
Rebuilding the Gulf Coast is expected to increase already strong demand for lumber, concrete and other building supplies nationwide -- with higher prices sure to follow. That would increase housing costs in a market where affordability and runaway prices are already major concerns.
''That's just what we need,'' Hunter said with a laugh.
Fernando Martinez, a vice president and partner at Caribe Homes, said his company tries to build houses that minimize hurricane anxiety, mainly by adding the convenience of accordion shutters. But after last year's storm season, those are hard to find.
Still, Martinez said he doubts busier hurricane seasons would turn off people to South Florida real estate, particularly given the region's strong building codes.
But consumers' location preferences might change.
''The comment I have heard is that maybe living right on the water isn't as nice as we all liked it to be,'' he said.
As a barometer of both a real estate market and tourism destination vulnerable to hurricane jitters, South Florida's post-2004 hurricane season performance also offers cause for optimism.
Miami-Dade home prices surged 28 percent in July over 2004 levels, and are up 21 percent since 2005 began. In Broward, prices went up 22 percent last year and 28 percent in July.
HOTELS' POPULARITY
The rates for Broward hotel rooms also jumped in July by 11 percent, while Miami-Dade room rates were up 12 percent. In fact, among the top 25 hotel markets, Miami boasted the second highest room rate in the country for the January-to-June stretch. And less than four years after the 9/11 attacks, first place went to New York City.
''I think that proves the point,'' Talbert said.
Dawn Soper, a real estate analyst in Miami, also sees hurricane concerns as short-lived, no matter how disturbing the destruction.
''You have the stigma, of course, after a hurricane, but we learned after Andrew it doesn't last long,'' she said.
Even so, some see Katrina as launching a new era of hurricane fears.
''You're talking about 10,000 people dead,'' said Julio Stieffel, a marketing consultant for the travel industry. ``That is a different hurricane than any other hurricane impression you've ever had. When you talk about hurricanes now, it's different than when you were talking about hurricanes last year.''
Psychological concerns aside, Lewis Goodkin worries about what accelerated hurricane seasons could mean for the nuts and bolts of real estate transactions. Even if buyers are willing, will insurers be?
''If you have a situation where insurance companies are getting increasingly conservative . . . that could have a substantial impact,'' said Goodkin, a real estate analyst in Miami. When he bought a condo on Brickell Avenue after Hurricane Andrew, ``I couldn't get a policy for the damn thing.''
South Florida's hurricane woes have never been a secret. From the University of Miami Hurricanes to the cyclonic swirl that decorated the stage for MTV's recent Miami broadcast, fierce storms are probably the region's most famous liability.
But what if the downside gets worse? If predictions of newly active hurricane seasons come true, where will that leave the Sunshine State's reputation as a tropical getaway and balmy place to own real estate?
It's a question getting more and more attention as images of spinning hurricane patterns and devastation dominate the national media.
''I'm hearing -- and I'm sure a lot of baby boomers are -- that we could be in a period of heightened hurricane activity for 20 years,'' said Jack McCabe, a real estate analyst in Deerfield Beach. ``I think a lot of folks are going to consider: Do we really want to invest a lot of money in real estate in areas prone to that?''
Last year, for the first time, four hurricanes hit Florida in a single storm season. And 2005 set its own record: seven named storms by Aug. 1, an unprecedented start, with three of them (Tropical Storm Arlene and Hurricanes Dennis and Katrina) slamming Florida.
With almost three months of hurricane season to go and Hurricane Ophelia menacing the Florida coast at press time, this year could surpass 2004's pace. Already, Katrina's assault on the Gulf Coast has set a new benchmark for the destruction and suffering a hurricane can cause.
Against that backdrop, the two main industries relying on Florida's appeal as a tropical getaway -- real estate and tourism -- are hoping public perceptions don't turn against them.
Last year's hurricane barrage had Florida's tourism gurus warning of an image crisis on par with the 9/11 terrorist attacks' impact on air travel. Visit Florida, the tax-funded state tourism bureau, wanted $30 million for an advertising campaign to reassure tourists and convention planners.
But as last hurricane season gave way to a string of heady room rates and healthy occupancy levels at hotels, that sense of panic dissipated. And with record hotel performance in South Florida throughout the current hurricane season, local tourism officials see storms causing only short-term travel drop-offs.
''The public is pretty sophisticated,'' said William Talbert, president of the Greater Miami Convention & Visitors Bureau. For Hurricane Katrina, which hit South Florida on a Thursday night, ``we saw some drop-off in occupancy that Thursday and Friday nights. But then a dramatic pickup on Saturday night.''
Long-term, Talbert said he doubts an increase in hurricanes will change the current storm-season dynamics. Vacationers and meeting planners, he said, would have a hard time insulating themselves from hurricane risks.
TROUBLING TREND LINE
''Hurricanes can go to Louisiana, Mississippi, Alabama, Georgia, Florida, North Carolina, South Carolina, all up the coast,'' he said. ``It's unlikely the marketplace is going to stay out of all those states for five months out of the year.''
The science is far from conclusive at this point, but it does appear the coastal states are at the beginning of a troubling trend line.
Climatologists say the Atlantic Ocean is in the midst of a routine upswing in hurricane activity. But other scientists warn global warming will create -- or has already created -- storms with far more destructive power.
The Association of British Insurers said in a June report that global warming could increase the wind speed of Atlantic hurricanes by 6 percent -- enough to push a Category 4 storm into Category 5.
And Ceres, a coalition of pension funds and environmental groups, last week issued a similar report saying climate change could force the insurance industry to scale back coverage and leave the government to pay more for reimbursements after catastrophes.
More frequent hurricanes, though, would lead to more frequent hurricane scares.
Steve Litvin, a professor of hospitality and tourism management at the College of Charleston in South Carolina, noted Charleston's tourism industry has pressed the National Weather Service to drop its five-day forecast for hurricane tracks because its broad swath needlessly implicates such a large area.
TRAVELERS' CONCERNS
While Litvin said he didn't agree with the bureau's strategy, he sees the hurricane tracks fueling traveler worries. Busy hurricane seasons will naturally compound that factor.
''I think it's going to dramatically increase the nervousness about it ahead of time, and the seriousness with which people will take warnings,'' Litvin said. ``From a vacation point of view, it just means if you're anywhere near that cone, you're just going to cancel.''
In contemplating its hurricane marketing response, Visit Florida has looked at how Toronto's tourism business weathered outbreaks of SARS disease and how Israel manages to woo visitors amid chronic terrorism concerns, said Dale Brill, senior vice president of marketing for Visit Florida.
Meanwhile, last year's storm barrage prompted Visit Florida to create an insurance program for conventions washed out by hurricanes. Seeing large groups as the most weather-leery, Broward County this year also began waiving rent at the Fort Lauderdale convention center during August and September.
''The reality that we're looking at is the fact that the public is so much more keenly aware of hurricanes and their seasons than they ever were before,'' said Nicki Grossman, president of the Greater Fort Lauderdale Convention & Visitors Bureau. ``Whether we're in some kind of new weather pattern, or [whether] people just hear that we are, we might as well just act like we are.''
Black Enterprise, publisher of the well-known business magazine, brought its annual golf tournament to Doral in the 1990s, but hurricanes plagued the last two outings: the 2004 tournament was all but washed out by Frances, while this year's event came on the heels of Hurricane Katrina's tear through South Florida.
But Earl Graves Sr., chairman and publisher of Black Enterprise, said the problems in 2004 didn't hurt attendance for the sold-out tournament this year. And he noted hurricane season -- not to mention South Florida's scorching summers -- offer a significant attraction for groups seeking to turn a profit from large events: cheaper rooms and lower costs.
''If we try to do it in the winter season, it will be even more costly,'' Graves said. ``They don't need us in the winter.''
For more information regarding the above property, please call Dean or Bonnie Isenberg at 305-936-2489 / 800-819-5466 or visit us on-line at A-Realtor.Com
Click Here To E-Mail The “I-Team”
Click Here To Request More Information About The Above Property