ATTENTION SELLERS:

http://www.floridarealtors.org/NewsAndEvents/n2-073007.cfm

Study: Foreclosures impact entire neighborhoodsMIAMI

– July 30, 2007 –

Mounting mortgage defaults across South Florida threaten to hurt more than just those homeowners who lose their properties to lenders.

Experts say foreclosures could drag down already sluggish housing prices throughout entire neighborhoods.

“Homeowners that are being foreclosed upon aren’t spending their Saturday afternoons mowing the yard,” said Greg McBride, a senior financial analyst at Bankrate.com in North Palm Beach. “So those people who are cutting the grass, trimming the shrubs and fixing the gutters will suffer.”

In the Tree Tops development in Wellington, where residents tend to their lots with care, one property near the entrance is in foreclosure and has been on the market for months. The vacant house has a rickety wooden fence, missing roof tiles and, until recently, a front yard full of weeds. A buyer just walked away from a $190,000 contract on the home, located about three miles west of the Mall at Wellington Green where comparable homes go for as much has $240,000.

As a result, neighbors trying to sell their wood-frame homes built in the early 1980s could have a hard time getting their asking prices, said Deanne Lee, 43, a real estate agent who lives one street from the house in foreclosure.

“It’s a scary thought,” Lee said. “I see this as just the beginning.”

In a national study published last year, two housing analysts found that for every foreclosure within one-eighth of a mile of a single-family home, property values decline by about 1 percent, and even more in dense developments. The study by Geoff Smith and Dan Immergluck is thought to be the only comprehensive look at the effect of foreclosures on property values, and is based on depressed values in Chicago in 1997 and 1998. Based on their study, the value of a typical Palm Beach County home near one property in foreclosure could drop at least $3,779. The county’s median-priced existing home in June was $377,900, according to the Florida Association of Realtors.

“One foreclosure may have a modest effect on nearby property values, but with four or five foreclosures, you’ll see a significant effect,” said Smith, director of the Woodstock Institute, a nonprofit housing group in Chicago. “You see neighborhoods start to decline.”

Smith recommends that neighbors of foreclosed homes postpone selling their own properties until the housing market improves. “But people often times don’t have that option,” he said.The numbers of homeowners defaulting on their mortgages and facing foreclosure are rising steadily across South Florida this year, according to Realestat.com, a Plantation-based company that compiles local housing statistics.

Analysts mostly blame the trouble on unconventional home loans made to risky borrowers hoping to get into houses and condominiums that shot up in value during the housing boom from 2000 to 2005.

Perfect foreclosure storm

The umber of Palm Beach County homeowners behind on their mortgage payments topped 1,000 in June, almost a fourfold increase from 259 a year ago. Actual foreclosures were flat last month. The worst is yet to come, however. Experts say foreclosure filings and late-payment notices from lenders are expected to peak this fall, leaving lenders with a glut of properties to sell by next summer.In Floral Park, a middle-class development of 40-year-old homes in suburban Lake Worth, a foreclosed house went on the market down the street from Joe Rodriguez. It sold recently for just more than $263,000.

As a result, Rodriguez is worried that he could have a hard time getting his $369,900 asking price, even though his four-bedroom corner property is bigger and includes a pool table as an incentive.

“It’s a bad sign,” Rodriguez said of foreclosures. “If the banks turn around and sell them for less, sure, it’s going to hurt [other sellers nearby.]”

Homeowners with late house payments usually are at least three months behind and have been notified that their lenders intend to foreclose. In many cases, people who secured adjustable-rate loans found they couldn’t afford the monthly payments once interest rates rose.During the housing frenzy, some of those people avoided foreclosure simply by selling the homes or refinancing. But that wasn’t as easy to do when the market slumped last year. With fewer buyers and thousands of properties for sale, cash-strapped homeowners can’t count on fast deals to bail them out of trouble.

What’s more, refinancing isn’t as easy now because home values are flat or dropping and lenders are tightening credit standards as borrowers default on home loans.Neighborhoods that stand to get hurt the most from the foreclosure crunch are newer ones with a large number of sales made near the peak of the housing boom in 2005, said Alan Hunter, a senior market analyst with Metrostudy, a West Palm Beach consulting firm.

Because lenders don’t want to be in the real estate business, they’ll likely sell those properties quickly and at a loss that will reduce home values.

“They’ll be bought by investors who will try to rent them out at a profit,” Hunter said.It’s becoming more difficult to determine whether price declines are the result of nearby foreclosures or the general decline in the housing market, real estate agents say. Regardless, the downward pressure on prices actually will be good in the long run for overpriced markets, including South Florida, said Mark Vitner, senior economist for Wachovia Securities.“It’s going to help speed up the adjustment process,” Vitner said. “More homes will get into the hands of more willing sellers – the banks or whomever. It’s a necessary thing.”

But that’s not what sellers want to hear. Re/Max agent Mark Plaxen is marketing a two-bedroom townhouse off Village Boulevard in West Palm Beach. Four months ago, the seller was asking $199,000 but has since reduced the price five times. This month it was listed at $174,900.

Plaxen just found out about another listing in the same development: a townhouse in foreclosure.“I’ll probably have to call up my seller and say, ‘It’s time to lower the price again.’”

Copyright © 2007 South Florida Sun-Sentinel, Paul Owers. Distributed by McClatchy-Tribune Information Services.

http://realestate.msn.com/Buying/Article_Forbes.aspx?cp-documentid=5008065&GT1=10130

Where will real estate bounce back fastest?

Prices have hit bottom in some cities and are heading back up, but recovery rates vary. Here are the places with the best prospects.

By Matt Woolsey, Forbes.com

When it comes to real estate, the questions on everyone's lips are: How low is low, and when's the perfect time to buy back in?

That moment has passed in Seattle and in Charlotte, N.C. Both metro areas hit bottom in the first quarter of 2006 and have since posted price gains of 12.3% and 6.3%, respectively, according to National Association of Realtors (NAR) data.

Ripe for investment? Philadelphia and New Orleans. Based on housing inventory and local economic conditions, both should hit price troughs by year's end and bounce back with moderate gains of around 4% in 2008.

In markets expected to recover more slowly, such as Boston and Denver, low buyer confidence coupled with a surplus of housing stock has lengthened the slump. NAR chief economist Lawrence Yun points out that buyers are looking for clear signs of a market bottom and are content to wait on the sidelines until then.

It's easy to see why. Most of the country's real-estate markets are feeling the effects of overproduction. A strong market hovers near a 1.5% vacancy rate, but the national average currently stands at 2.8%, and in cities such as Miami, Atlanta and Denver, figures hang around 3.5%. In addition, every nugget of good news (like the May Commerce Department report that said new-home sales are at a 14-year high) comes with bad news (median price growth is at a 10-year low).

So which other metro area markets stand the best chance of recovery, and when will that upturn occur?

Behind the numbers

Market corrections follow three basic recovery patterns: a V-shaped recovery where a market experiences a sharp, fast decline but comes out strong once it hits bottom; a U-shaped recovery, where prices decline gradually and recover slowly; and an L-shaped pattern, a hard, fast fall with a paltry price bounce-back after the market trough.

The differences between a V-shaped market and a U-shaped one have to do with barriers to growth. High vacancy rates and high investor share can hurt a market, but if the local economy remains strong and housing stock affordable, it's only a matter of how long it takes to absorb the excess inventory.

Tampa, Fla., is a perfect candidate for a V-shaped recovery, according to research from Moody's Economy.com, an economic analysis, forecasting and credit risk firm in West Chester, Pa. The local economy remains strong, and subprime lending is relatively low. Tampa's problem? A high investor share that led to high vacancy rates. When the market turned sour in 2005, more than 25% of Tampa homes were owned as investment properties. Investors are quicker to flee during a downturn, thus creating a glut of available housing stock. In Tampa's case, vacancy rates now stand at 3.5%.

"As investors exit, the market revives," says Mark Zandi, chief economist at Moody's Economy.com, as fewer speculative buyers result in a more stable market. "Tampa's a pretty affordable market, and first-time buyers can come in once prices fall."

Based on Moody's Economy projections, Tampa should burn off its excess inventory and hit a price trough in the first quarter of 2008, at which point prices are expected to increase by 10.6% the following year.

These projections take into account housing affordability, vacancy rates, the strength of the local economy and job market, investor share in 2005 and the share of subprime mortgages. Data are from Moody's, the Bureau of Labor Statistics and the Federal Reserve.

Predicting the bottom of any asset market, especially real estate, is a difficult thing. While these projections are based on sound data and advanced modeling by Moody's, no one can predict futures markets with absolute certainty.

Other bounces

Like Tampa, Phoenix is afflicted by high investor share (26.1%), and it has a vacancy rate of more than 3%. Good affordability rates and a surging job market suggest that once Phoenix bottoms out, price growth will be strong. Moody's projection model has Phoenix reaching its price trough in the fourth quarter of 2008 and then growing by 7.7% the following year.
Slower recovery rates are expected in markets such as Minneapolis and Boston, where a slumping local economy, slow job growth and negative migration numbers hamper long-term prospects. Along with other U-shaped markets, like Sacramento, that have double-digit subprime lending share, Zandi says it's going to be harder for these markets to get going again.
That doesn't necessarily mean V-shaped markets are in the clear. The labor markets in cities such as Las Vegas, Phoenix and San Diego, whose future economic success will be critical to recovery, are heavily in housing-related industries, according to Moody's. So long as those economies can weather their respective corrections, they should be all right.

"These markets are going to experience more substantial declines in the coming year," says Zandi. "Gauging the bottom is a very intrepid affair, and the job market is very important to recovery."

Real-estate markets with the best prospects for recovery


Rank
Market
Expected market bottom
Est. price appreciation after bottom
1
Tampa, Fla.
Q1 2008
10.60%
2
Phoenix
Q4 2008
7.70%
3
Las Vegas
Q2 2009
7.20%
4
San Diego
Q2 2008
5.30%
5
New Orleans
Q3 2007
4.30%

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FYI: prices for most properties have decreased to 2005 or 2004 levels - now is a terrific time to buy and lock in savings. If you are looking for something specific, please call or email me to get started - it's so easy and you can thank me later!

SELLERS:

With interest rates at a 10-month high, consider offering buyers an incentive - buy down their mortgage rate and they'll be happy as a clam! If you're using a realtor, ask them for to contact a trusted mortgage lender and get a quote for several different buydown options. If your braving this depreciatin market alone, then contact a trusted mortgage lender (if you have one) and ask for buydown quotes. Remember, realtors have tried-and-true referral lists for just these types of things...

It's a terrific way to get an edge in a market saturated with competition. However, it will not substitute for ENERGY-PRICING, i.e. pricing your home to sell and not just being an "MLS super-star".

best of luck...Rich C

Oh wow, things have been cooking in my neck of the woods. I mentioned in my last post that I have just joined Coldwell Banker Residential RE in Clearwater. My client response has been overwhelmingly positive and encouraging. So much so that every one of my sellers have decided to allow Coldwell Banker to continue marketing their homes.

At the risk of sounding like a Coldwell Banker "mark", they do have so much to offer that the learning curve is DAUNTING - but I've jumped right in and I'm having a blast.

Here's what's new:

NEW LISTINGS NEW LISTINGS NEW LISTINGS

820 Eldorado Avenue on Clearwater's MOST FAMOUS BEACH...Gulf-front 4/3, 3190 sf, multiple underbuilding parking. Phenomenally re-designed: Italian Cucini kitchen, Spa-like Master Bath, rebuilt Gulf-front lanai...so much more! $2,999,000...the LOWEST price per sf on the Gulf in Clw Beach

7430 Sunshine Skyway Lane S #902 at the Southern tip of St. Petersburg...TOP FLOOR 2/2, 1100 sf, dramatic water views...wow ....$289,000

Prices are dropping and Buyers abound (really) - BUT they are savvy and will NOT pay more than a home is worth - in fact, buyers are making under-value offers in hopes of not losing value once they move in. In our previously appreciating market, even if a home were priced too high, eventually the price point would rise high enough to meet that home's asking price - the exact opposite is now occurring. The price point continues to erode, yet many seller's pries are still above the market level. In this instance, the gap continually widens every day the market continues its descent to normal valuations.

What does this mean for you??? Sellers, get your stuff together and get those prices DOWN.

Unless you want to hold onto the property for an untold number of years to come, minimize those losses and price the property competitively - in many cases, that means being THE LEAST EXPENSIVE home on the block.

It's called "ENERGY-PRICING" and it creates a perceived sense of value for buyers...

Happy hunting!
Rich