Market Neither Boom Nor Bust

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Southwest Florida experienced an unfamiliar new type of real estate market in 2013: a relatively normal one.

But that doesn’t mean the market’s immune from forces that could push it into either boom or bust.

Those were the conclusions of three real estate authorities who presented their takes on the year Tuesday night at The News-Press Market Watch: Focus on Real Estate.

Speaking before a sold-out crowd of about 900 at Harborside Event Center in downtown Fort Myers, presenter Randy Thibaut of Land Solutions said it’s important to look at what’s actually happening now, not the giddy feelings people have now the recession’s fading.

“There’s a lot of myth, a lot of boom, all kinds of things going on in the market. So I’m going to focus in on the facts,” said Thibaut, who specializes in sales and development of large tracts of land.

Southwest Florida’s real estate market has had “the frat party and the hangover” in the wild swings of the past 14 years, and now it’s moving into a new phase, presenter Denny Grimes of Denny Grimes & Co. and Royal Shell Real Estate told the crowd.

Now, he said, nine years after the boom ended, the area’s real estate market has returned to something approaching normal, and that’s a good thing.

“You generally don’t get that opportunity this soon” after a meteoric rise followed by a violent contraction, Grimes said.

There’s little likelihood the recovery will turn into a bubble of unwarranted speculation, Grimes said. “We would need four years of 20 percent increases to get to peak value. We are nowhere near a bubble.”

The retiring baby boom generation will fuel future growth, he said, because this area is an attractive retirement venue. “We offer water, warmth and way of life.”

Grimes predicted a sustainable real estate industry is on the horizon, saying that “2014 will usher in a rational boom” for at least five years.

But the presenters didn’t sugar coat the problems still lingering from the recession.

Financing, for example, is still hard to get from lenders who were burned by the sharp drop in values that followed the boom, said presenter Stan Stouder, a founding partner of CRE Consultants who handles commercial property sales and leasing.

“Why do they call it funding?” Stouder cracked. “There’s nothing fun about getting a loan today. They want you to guarantee every deal 100 percent.”

The deals that were made in Lee County in 2013 by and large were done without a lender’s help, he said. “Sixty-five percent of the commercial real estate deals had no financing at all.”

Thibaut noted that labor costs are rising because of an acute shortage of skilled tradesmen. Many qualified workers moved away after building slowed to a crawl after the boom ended.

“We’ve got to do something” to lure them back at a faster pace, he said.

But there are limits to the most careful planning and predicting, Thibaut said. “Predicting the future of where our home building industry’s going to go is like predicting where a hurricane’s going to go.”

Act Now to Refinance Your Home Before It’s Too Late

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(Florida) – There has never been a better time to refinance your home. That’s because of a little-known government program called the Home Affordable Refinance Plan (HARP). This allows Americans to refinance their homes at shockingly low rates, and reduce their payments by as much as $4,905 a year.

But here’s the catch – like most government programs, this is likely temporary. But the good news is, once you’re in, you’re in. If the thought of a lower payment, fewer years on your mortgage, and even taking some cash equity out of the deal is appealing, the time to act is right now.

A true middle-class stimulus package

This is unknown to many, but the Home Affordable Program is for the middle class. If your mortgage is $625,000 or less, you most likely qualify. Basically, the Government wants banks to cut your rates, which puts more money in your pocket (which is good for the economy). However, the banks aren’t too happy about this – here’s why:

  1. You can shop several lenders, not just your current mortgage holder
  2. Your home’s Loan-to-value (LTV) can be 80% to 125%

You think banks like the above? Rest assured, they do not. They’d rather keep you at the higher rate you financed at years ago. That’s why the pressure is on time-wise. The Middle Class seems to miss out on everything (did you ride the last stock bubble? Probably not). Thus, it’s almost a no-brainer to jump on this now. You should act fast in order to refinance your house at these near historic low refinance rates. If your mortgage rate is currently higher than 3.11%, you can greatly benefit:

  • The average monthly savings is $250. Can you use an extra $250 a month?
  • Many homeowners not only save every month, but depending on their current rates, they can also shorten their term.
  • Get cash now – because the rates are so low, besides the benefits above, many homeowners also opt to take a little cash equity for home improvements, a vacation, or a nice boost to the savings account.

Here is an example of how much can be saved:

Here’s an example of what can be saved by a rate of 3.25% and 6.75% (which is around what many homeowners have when they got loans years ago):

Refinance Example

So this means over the life of your mortgage, you could save more than $150,000. That’s just by lowering your “already good” rate of 6.75% to an even lower 3.25%.

This is why it’s a no-brainer – you will likely lower your payment, possibly shorten your term, AND also get cash. There’s zero downside. This is how powerful that little word called “interest” is. The middle class never sees “breaks” like this. So this is your chance to get “in”.

But how do you find these rates?

Here’s the trick – there are a few free websites out there that will compare mortgage rates for consumers, and allow them to choose the best one (that’s a great thing about the internet – it allows you to do business with lending institutions all over the country).

Our research found that RateMarketplace, one of the country’s largest and most respected refinance comparison websites, is one of the few companies with HARP lenders on its network, and is currently assisting homeowners like you to obtain further information regarding superb mortgage rates.

We like RateMarketplace, because there’s no obligation and their service is fast & easy. It takes about five minutes, and the service is 100% free. You have nothing to lose except money stress.
But you do have to act now.

Sellers Getting Ahead of Spring Rush

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The spring selling rush may already be under way, as some home owners are already throwing their properties on the market to take advantage of rebounding home prices and improved equity.

Paul Reid, a real estate agent with Redfin in Temecula, Calif., says some sellers are listing properties earlier than usual in anticipation of the spring season.

Sellers are “nervous about what the spring is going to bring,” says Reid. “They don’t know if everybody will list this spring — then you’ll have a big counterbalance toward too much inventory — or if there’ll be a crunch again. They figure they’ll get out ahead of the market, list, sell, and be done with it.”

Inventory shortages persisted last year, when supply was at a 12-year low leading into the spring. The shortages helped boost home prices, but gave home buyers limited choices and sparked bidding wars in many markets. New-home construction is now at a third of its 2006 peak, which likely will keep inventories tight this spring. But, economists say, improved home prices will likely convince more sellers to sell this year, and that should relieve the inventory crunch in many markets.

Builders Ready to Ramp Up Production in 2014

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Builders are expected to increase new-home production in 2014, but the sector continues to grapple with several challenges that could hinder its progress, economists said at the National Association of Home Builders International Builders’ Show this week in Las Vegas.

“Consumers are back, pent-up demand is emerging, there is a growing need for new construction, distressed sales are diminishing, and builders see it,” says David Crowe, NAHB’s chief economist.

However, builders continue to face rising costs for building materials, tight mortgage credit conditions, difficulties in obtaining appraisals that reflect builders’ prices, and limited availability in labor and developed lots, Crowe says.

Borrowing costs will likely inch higher this year since mortgage rates are expected to climb when the Fed begins to taper its $85 billion per month bond-buying stimulus program. Still, “regarding mortgage rates, we’ve gone from dirt cheap to cheap, and I think we will see a gradual rise of about a half a percentage point to 5 percent in 2014,” says Frank Nothaft, Freddie Mac’s chief economist. Even then, he adds, “most markets will remain quite affordable.”

New-home sales are averaging 8.7 percent of total home sales – just barely half the historical average of 16.1 percent, according to NAHB. Crowe projects 1.15 million total housing starts in 2014, up nearly 25 percent from the 2013 total of 928,000 units. Single-family production is expected to increase 32 percent in 2014 to 822,000 units, and then rise an additional 41 percent to 1.16 million units in 2015.

Consumer confidence has returned to pre-recession levels and household budgets are mending. Household formations are on the rise and are averaging 620,000 compared to 500,000 during the housing downturn.  For comparison, during the housing boom, the U.S. was producing 1.4 million additional households each year.

Multifamily starts are projected to be at 333,000 in 2014, up 9 percent from 2013, Crowe says.

Home sales will benefit from pent-up demand in household formation, which was restrained during the Great Recession, says David Berson, senior vice president and chief economist at Nationwide Insurance.

“At least 3 million fewer households formed over the past five years than would normally have been expected,” he said. Many college graduates, for example, moved back in with their parents, which limited new household formation.

Wells Fargo Lowers Credit Requirements for FHA Loans

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Wells Fargo has announced that it will accept lower credit scores for loans backed by the Federal Housing Administration.

“We have dropped our FICO minimum for FHA from 640 to 600,” says Wells Fargo Executive Vice President Franklin Codel, adding that the move is a way for the bank to start “opening up our credit box more.”

Codel says the bank is looking to expand mortgage-credit availability now that it has significantly reduced its repurchase risk. Wells Fargo was among several banks that had to pay millions to Fannie Mae and Freddie Mac to resolve repurchase claims from loans that were bought by the GSEs and then went sour during the housing bust.

Codel says that Wells Fargo also implemented the qualified mortgage underwriting requirements a month before the Jan. 10 deadline.

Codel says Wells Fargo was “monitoring the production flows” to determine which loans would be rejected under the new QM rules. “We found very, very few,” he adds.