Florida Mortgage Report

Florida Cities Take 6 of the Top 25 Spots in Foreclosure Stats With Miami in Front

RealtyTrac released their year-end 2007 Metropolitan Foreclosure Report, and while not on top, Miami was leading the state, passing by Ft. Lauderdale.  Back in November, the rankings were different, with Ft. Lauderdale leading the state and ranking 4th in the nation.

The foreclosure rate for the total US came in at 1.033% of households, with the foreclosure rate of the top 100 metro areas coming in at 1.382%.  Detroit led the nation with a rate of 4.918%, fueled by economic chaos in that area.  The remaining top 5 were (in order):  Stockton, CA (4.866%), Las Vegas/Paradise, NV (4.228%), Riverside/San Bernardino, CA (3.826%), and Sacramento, CA (3.189%).

As far as Florida goes, South Florida still leads the pack and 6 Florida cities made the top 25 rankings.  Here is a breakdown of the Sunshine State:

Rank	Metro Area	Foreclosure Rate
8	Miami, FL	2.724
10	Ft. Lauderdale, FL	2.632
20	Orlando, FL	1.932
21	Palm Beach, FL	1.924
23	Tampa/St. Petersburg/Clearwater, FL	1.908
24	Sarasota/Bradenton/Venice, FL	1.840
27	Jacksonville, FL	1.748

As you can see, all the major metro areas in Florida made the top 30.  What does that mean to you?  Great news if you are a buyer, especially an investor.  Bad news for Florida homeowners as the rates will keep pressure on the declining home prices.

WIN Loses in Florida

Undoubtedly you have come across those late night infomercials telling you how easy it is to make money in real estate investing, and as tired as you were you may even have called to buy a product or attend a seminar.  Well, Whitney Information Network is now settling with Florida consumers who attended seminars and complained about the material presented.  The amount...over $1 million.

According to the Sun-Sentinel Article, Whitney used infomercials titled "Star Trader", "Wealth Builder Workshop", and "Focus on Foreclosure" to draw in audiences.  State regulators reported that over 250 consumes complained about being charged for rudimentary information, misleading testimonials, and being asked to pay thousands more for "advanced classes".

So, the next time you are up late at night and find yourself flipping through infomercials, do yourself a favor, go back to sleep!  While some may be good, the vast majority are on at that time for a reason.

For more details, read the article as it includes a toll free number to the Attorney General's office if you think you may have a claim.

New Home Sales Hit Lowest in 12 Years

Surprise?  Get real, you should have been expecting it.  What is interesting is that of home prices.  Keep in mind that the prices on builder's homes does not take into consideration the incentives they are giving, and there are loads of them.

The seasonally adjusted numbers were 647,000, well below expectations of 715,000 and they dropped 9% from October to November.  Median prices dropped 0.4% as well, though the average price ticked up 0.5%.

Depending on what region you were in, you may have experienced large drops or even gains.  The Northeast dropped 19.3%, the Midwest dropped 27.6% and the South dropped 6.4%, but the West gained 4%.  Annual sales in the last year have dropped over 34% nationwide, the largest annual slide since 1991.

Will the end come soon?  Don't count on it.  Keep in mind though, that the two hardest hit regions had bad weather to deal with as well.  If you read my forecast for 2008, you can see I expect the bottom to show up in 2008 for Florida, though it is still a ways below the current level.

IndyMac Bails on Florida Homeowners

There is a major wave on changes on the horizon as the more conservative lender, IndyMac Bank starts the trend with the following:

Florida Guideline Restrictions

Transactions securing properties located in the state of Florida are subject to the following restrictions/limitations:

For all Loan Programs:

• All loans are restricted to Full Documentation
  
• Primary Residence transactions:
  
  - The maximum LTV and CLTV otherwise available for the transaction type must be reduced by 5%.
  - The Borrower’s current primary residence must be sold and closed prior to,
  or concurrently with Indymac’s funding.
  - If the to-be-secured property is a single family residence, condominium or planned unit development, it must be located within an established project. An established project is one in which 90% of the total project units have been sold, and the subject property has been previously occupied / owned by someone other than the developer.
  
• Second Home and Investment Property transactions are limited to a maximum 60% LTV / CLTV.

Thinking of investing in Florida?

Well, you might want to speed that thought as other lenders will likely follow suit, furthering reducing access to credit for investors, at least those who don't want to shell out the 40% down payment requirements.  Since cash is king and liquidity determines success, investing in Florida may be "drying up" soon.

But that is actually good news...

WHAT?!?

That's right.  Home prices in Florida, especially South Florida, will start getting "priced to reality" (what I like to call it), meaning house prices are going to drop dramatically, and quickly.  Once they do, the improvement in the market I have forecasted will take place.  It will take some time since there is over 24 months of inventory that need to move, but hope is on the horizon.

Investors, don't fret.  There will still be plenty of opportunity throughout Florida.

Miami and Tampa Home Prices Drop Double Digits, Leading the Nation

The S&P/Case-Shiller report for October came out and showed the twenty metropolitan areas it covers combined declined 6.1% year over year.  10 metro areas combined for a 6.7% drop, a new record.  11 of the 20 showed record low growth rates.  The index has fallen every month this year.

The report showed that Florida, represented by Miami and Tampa, led the nation in decreasing prices.  Miami and Tampa are the only two metro areas included in the report.  Miami was the biggest "loser" with a drop of 12.4%, with Tampa coming in second place with 11.8%.

Others in the double digits included Detroit with 11.2% and San Diego with 11.1%.  San Diego did come in as the biggest loser from the previous month, showing a 2.6% decline in prices from September.

Is there any area where prices are gaining?

Yes, real estate has always been "local", so there are areas seeing growth.  According to the report, Charlotte, NC, Portland, Or, and Seattle, WA are seeing year over year gains.

Top 5 News Stories of 2007

Taking a look back through the events of this year, there is been numerous stories across the US, so we look at the top stories of 2007..

#5 - Dow Tops 14,000 - Hard to imagine at this time, but back in July and again as recent as October, the Dow broke above 14,000.  Volatility remains in the markets.

#4 - Fed Moves - Since August 3, the Fed has been battling the worst credit crisis in nearly a decade and has moved to cut rates three times in an effort to bail out the markets and to keep the economy on track.  Our opinion is they over reacted as inflation already ticked higher, but time will tell for sure.

#3 - Toy Recalls - Recall after recall came out about Chinese products that contained lead-based paint, illegal pesticides, electric shock risks, and even laced with the "date rape" drug.  And most came just in tome for Halloween.

#2 - Record Oil Prices - While oil has backed off a little, we are still feeling the increased expenses in our wallets.  A lot of the increase came from the falling value of the dollar, along with fears of dwindling supplies and increased demand in growing places such as China.

and the #1 story, yet again...

#1 - Housing Contagion - Mortgage defaults, increased foreclosures, failing debt across the markets.  Between the US and Europe, more than $100B have been written off after downgrades occurred.  Add to that, we are likely to continue to see write off into next year.  The effects are spilling over into other areas of credit, including commercial paper.  2008 will likely see increased defaults in credit cards, auto loans, and more.

There you have it, no surprises as far as we can tell.  What does 2008 hold?  Who knows, but we can expect increased legislation of the housing industry, mortgages in particular, for good or for bad.  We can also expect to see more foreclosures, credit card defaults, and basically continued write offs for the foreseeable future.

Where do I see the Florida mortgage and real estate markets in 2008?

I see a slow improvement coming as reality sets in, particularly in South Florida.  I don't see a recovery per se.  Many in the real estate industry, both realtors ad mortgage brokers, will be bowing out under the financial strains of staying in business and not adapting to the new marketplace.  That can be good news for the consumer as most who fall out will be those you wouldn't want to work with anyway, though I am sure a few will be.

As for those who work in the industry, if you can adapt and persevere, you will be rewarded.  Slowing markets do not mean your business needs to slow also, rather it can actually increase in these times.  As for me and Solid Rock Mortgage Corporation, our plans are to grow in 2008 and beyond, still meeting our goal of being #1 in Broward County for mortgage planning services by 2012!

Can You Predict the Next Real Estate Bubble and When the Bubble is Over?

Dan Amoss over at Whiskey and Gunpowder makes a good correlation to various valuation calculations and the prediction of a real estate "bubble".  Namely he compares rent-to-price and price-to-income ratios to determine whether real estate is overpriced or not.

His post is about the next real estate bubble that will likely occur, showing justifiable reasons for that bubble to happen in Eastern Europe.  He uses Bulgary as his example where rent-to-price ratios (cap rates) run at just 3-4% and the price-to-income ratios are around 7-9.

If you apply those same calculations to Florida real estate, particularly South Florida, you could easily see the properties down here were overpriced and a "bubble" was due for bursting.  A bubble bursting is not a disaster, but rather a correction that needed to take place to sustain a normal marketplace.

So, when should the potential investor get in? 

When the cap rates start to look attractive again, namely getting back to around 10%.  If we start seeing cap rates greater than 10%, then properties are being undervalued, which increases the chances of making a great investment.

Why wait until 10%?  You don't have to, but 10% is a good gauge for when properties are valued correctly.  You may very well be happy making less than 10%.  You may also want to make more than 10%.  You have more options as to when you purchase, but do not try to time the market. 

Instead, focus on your investment objectives and find properties that meet those objectives.  Never forget that you make the profit on the purchase, not the sale!!!

What about the family just looking to move?

When to buy is subjective for them.  There are a lot of variables that you cannot control, including the timing of when you must move. For these types of buyers I suggest to not try to time the market and focus more on finding a home that you love and can afford.  If you find one, buy it regardless of the market conditions because you will be happy living in it and not worried about the "investment".

If you are unsure if a property meets your criteria for a purchase, contact me and I can help.  I will help ensure the property you purchase fits into your overall financial and investment plans and help you find the mortgage that is the best fit also.

Real Estate Forecast for 2008 (excerpt from You Magazine - December Issue)

Real Estate in 2008:
What Does the Future Hold?
2007 was a historic year in the real estate and financial markets, thanks to the highly-publicized subprime collapse and subsequent credit crunch. As the end of the year approaches, we know you are wondering what 2008 has in store. With this in mind, we turned to mortgage industry icon Bill Dallas for insights into what we can expect next year...

Keep Reading »

What Does Being an Airline Pilot and a Mortgage Planner Have in Common?

I still get people asking me why I do both professions.  The simple answer is that I love both.  It is hard to throw away something you love, especially when you are good at it.

Well, I feel the need to elaborate a little more.  There are similarities in both professions that are what drive me to do both jobs.  Namely they both revolve around the "planning" process and success is based on how well you plan. 

In flying, we work with dispatchers and other members of a "team", including ATC, though ATC has less of a role outside of the USA in many cases. 

Dispatchers plan a flight based on all of the ever changing variables:  winds, weather enroute, etc. and files the flight plan with ATC.  The flight crew (pilots) review the plan to make sure it makes sense and make adjustments if needed.  Then the pre-flight gets completed to make sure the airplane is safe and more adjustments are made to the plan if needed.  Once all of the passengers are on board, the "load" is computed and balanced, then sent to the pilots.  The pilots review the numbers and make adjustments to the plan if needed.  During the flight, pilots are constantly reviewing performance, ATC directions, and every other variable that goes into each flight and making further changes to the plan as needed, such as changing altitudes for smoother air. 

The end result is a safe flight and the client reaching their destination.  In flying, that destination is simply a point on the earth.  In finances, it is a different, moving target all the time.

That is where my love for mortgage planning comes in.  I work with a team of financial experts that work to help you achieve your financial goals and I am constantly looking for more teammates to help ensure that happens.

You see, everyone needs to have a plan, no matter what financial situation you are in.  Without a team of experts, it is not likely you will make it to your financial "destination".  In fact, you may not even know where that destination is or how to get there.  Chances are that you do not know how big of a role your mortgage plays in all of it either.

Mortgage planning is part of the role of a "dispatcher" as it relates to your financial "flight plan".  In financial planning, you should have a team of dispatchers, helping you maximize the efficiency of the plan and ensuring you are on track.

Mortgage planning will also help you navigate through or around the storms of life.  You know there will be at least one, so make sure you are able to navigate through it and reach your destination. 

There will undoubtedly be market turbulence as we are seeing right now.  Your mortgage planner should be there to review your situation and make adjustments (only if needed) to keep you heading towards your financial goals. 

I could keep going, but I think you get the point.  I love both jobs and they both have similarities in getting my clients to their destinations.  That is what drives me, seeing my clients, whether in an airplane or not, reach their destinations, whatever those may be.

Driving Through Broward? Chances Are You've Seen Plenty of Foreclosures

The foreclosure stats released last week showed a lot of gloom, but also a different picture than what is portrayed in the media and by the government.  Nevertheless, we cannot ignore some of the facts, and that is foreclosures are taking the market over.

If you are driving around South Florida, you have definitely seen a property being foreclosed on, even if you didn't realize it.  In the state of Florida, 2.19 percent of outstanding loans are in some part of the foreclosure process.

Miami-Dade County 20,475 foreclosures filed, or roughly 1 out of every 32 homes.  That's up nearly 10,000 from last year.  Broward County wins the race in South Florida, with 20,812 or roughly 1 out of 30 homes.

So, with this many homes, chances are your neighbor (or neighbors) are in foreclosure.  Now, don't get me wrong, not every foreclosure that is a subprime ARM holder that got screwed into a bad loan by an unscrupulous mortgage broker. 

For the real estate investors out there, this may be the best opportunity you ever get.  Once this economic cycle is completed, appreciation will return and affordability will have likely returned as well.