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November 14, 2006
Housing slump may be nearing end, industry economist says
Saying that “the worst may be over,” the housing industry’s chief economist said Friday that home prices must continue to come down in some regions before the real estate slump plays out.
“We need a price decline, we were overbloated,” particularly on the West Coast, David Lereah, chief economist for the National Association of Realtors, told attendees at his organization’s annual meeting here on Friday.
“In 2007, it will be a flat year, maybe 1 percent (sales) drop, and that’s it,” he said. “After 2007, we’ll be back to expansion again,” Lereah said.
But Steve Murray, a Littleton, Colo., industry consultant who followed Lereah on the podium at the convention, which drew an estimated 30,000 people, said he was less optimistic about the speed of the market’s recovery.
“Lereah said we’re at the bottom (of the slump), but in most markets we are going to slide some more,” Murray said. Citing interviews with executives at more than 100 large real estate firms, he said the pending sales data could be falsely reassuring.
“The fall-through rate (of contracted home sales) has gone from single to double digits,” Murray said the executives reported. “Buyers can’t sell their existing homes.”
“People who think this thing is going to turn around in six months are out of their minds,” Murray said in an interview before his speech.
Lereah forecast that 2006 sales will end up about 9 percent lower than in 2005, a record year. He anticipates sales of 6.47 million units, declining to 6.43 million next year. Prices nationwide will be down by about 2 percent, year over year, and will inch up by 1.5 percent in 2007, he said.
New-home sales will decline this year by 16.8 percent, to 1.07 million units, and will sink 8.7 percent further next year, to 975,000, he said.
Lereah said inventory is stabilizing, citing his trade group’s data on pending sales - homes that have gone under contract.
“It appears that inventory has peaked,” said Lereah, who now estimates a 7.3-month supply of available homes nationwide.
“We were hovering near 4 to 5 months’ (supply of homes fore sale) during the boom, and in some areas, such as Orange County, Calif., we were measuring it in weeks, not months.”
But Lereah said the national picture is positive. “I’m optimistic for 74 percent of the country,” where local markets are, at worst, flat. “The other 26 percent are in for some rough times.”
Struggling the most would be California, Southern Florida, Arizona, Nevada, and metro Washington, D.C., he said, where sellers particularly need to lower their prices.
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Posted by South Florida Realtor at 11:11 AM
Governor-appointed task force to present 50 property insurance fixes
Strengthening homes, continuing state support for Floridians’ insurance needs and eliminating an arbitrary method of deciding who qualifies for wind coverage were among 50 recommendations in the first report from a governor-appointed task force to solve the state’s property insurance woes.
The 115-page report – the product of seven meetings around the state since August with the public, legislators and industry experts – will be presented to the governor Wednesday in Tallahassee.
Much of the report focused on how state-created Citizens Property Insurance Corp., Florida’s insurer of last resort, operates.
One of the committee’s recommendations is to do away with the windpool boundary designations in the state that determine if homeowners can get wind insurance through Citizens.
“While certainly intended to create valid pockets of wind risk areas in the state, the 2004-2005 hurricane losses illustrate the boundaries are arbitrary and antiquated,” the report states.
Locally, state Rep. Bill Galvano, R-Bradenton, has crusaded against the disparity between the windpool boundaries in Manatee and Sarasota counties.
“That’s a good thing. That’s exactly what I stood up on the House floor and said several months ago – that they (wind boundaries) are arbitrary,” Galvano said. “That’s something that had to be addressed if any further bill was going to be meaningful.”
In Manatee County, the windpool only includes a section of the barrier islands 1,000 feet from the Gulf of Mexico, while Sarasota County’s windpool encompasses the city of Sarasota and extends eastward in the vicinity of Interstate 75 at some points.
The committee also recommended that commercial policies in Citizens be transferred to the recently created commercial joint underwriting association or a new state entity for commercial risk assumption.
John Laurie, a Bradenton insurance agent who served on a technical board advising the committee, feels the proposed revisions to Citizens are important.
“That’s big, because, as you know, people are paying assessments today for people who had property insured through Citizens, but (the former) were ineligible to get access to that very same safety net,” Laurie said. “That was unfair and needed to be corrected.”
A recommendation to increase funding for the state’s Hurricane Catastrophe Fund, which currently has about $15 billion to pay damages, is also significant, Laurie said.
“The CAT fund is the most efficient vehicle to allow us to have more availability and affordability in insurance coverage,” Laurie said. “So that’s a home run that the committee hit and I’m glad they made that recommendation.”
Other recommendations by the committee include:
• Expand the state’s My Safe Florida Home program that offers free home inspections and matching grants up to $5,000 for property owners who invest in storm shutters, roof tie-downs and other reinforcement features. Also, make clear what discounts on premiums policyholders can receive for investing in such features.
• Require insurers to offer dwelling limits for wind coverage that would only cover the outstanding balance of the mortgage.
• Seek federal funding for windstorm analysis and studies that is equivalent to the federal funding in place for earthquake data.
• Do away with a recently passed provision that residents of Florida must be homestead property owners in order to obtain policies through Citizens.
Though the move by the Legislature was to ensure that year-round residents didn’t shoulder the burden for insurance costs of snowbirds with winter homes, many believed the move would send the wrong message to people looking to invest in the state of Florida.
The committee, chaired by Lt. Gov. Toni Jennings, will continue to meet and discuss solutions through May 15.
What happens now largely depends on the governor.
Many are waiting for Bush to call a special session of the Legislature to put ideas into action to solve the problem of soaring insurance premiums and rampant policy cancellations in the wake of the past two storm years.
“It’s been reported widely that the governor is seriously considering calling the Legislature into special session in December,” said Florida Office of Insurance Regulation spokesman Bob Lotane. “I think the proposals that are generated by the committee will have a lot of weight in what the governor decides to do.”
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Posted by South Florida Realtor at 11:06 AM
November 10, 2006
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Posted by BonnieIsenberg at 11:29 AM
Allstate reduces rate increase request
Allstate Floridian Insurance, the state’s third largest home insurer, is lowering its proposed rate increase in the face of resistance from state regulators.
The company said Tuesday that it was still seeking a rate increase, but one that would average just under 20 percent statewide instead of nearly 25 percent.
Another Allstate company, Allstate Floridians Indemnity, made a similar move, notifying state regulators that it will seek a 26.4 percent increase on average rather than the 31.6 percent average increase it initially proposed.
Company officials said Allstate had originally included the cost of reinsurance for some policies that it now plans to shift to another company as it seeks to reduce some of its exposure.
If approved by the state Office of Insurance Regulation, the new rates would take effect around the end of the year.
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Posted by South Florida Realtor at 10:09 AM