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Now is the time to buy!
By Alison Markham, Broker-Associate, GRI, Realtor® | February 27, 2008
How to Counter Florida’s Real Estate Critics
Now is the time to buy!
“Nobody is buying homes anymore.”
Nationally, 2007 was the fifth-best year of sales in U.S. history, according to Lawrence Yun, senior economist, National Association of Realtors® (NAR). “Now that mortgage conditions have improved, some postponed activity should turn up in existing-home sales over the next couple of months, and I expect sales at fairly stable to slightly higher levels,” he says. NAR statistics indicate existing-home sales for 2007 will probably total 5.66 million, rising to 5.70 million this year and 5.91 million in 2009. In Florida, approximately 160,000 existing homes and condominiums were purchased during the first 11 months of 2007, according to FAR statistics. That’s a decrease from the market’s peak in 2004-05, but still a healthy level of activity (http://www.realtor.org/press_room/news_releases/2007/nar_puts_housing
“Home prices will only go lower.”
The housing market is not having a “going out of business” sale. While some sellers are cutting their prices, others are not. In fact, FAR statistics show just a 5 percent statewide decline in home prices and a 3 percent decrease in condo prices over the past year. Historically, a rapid jump in home prices has been followed by a period of stability, not decline. “In Florida, residential prices shoot up quickly and then stabilize,” says economist Hank Fishkind, Ph.D. of Fishkind & Associates, Inc., Orlando. “Even when there is excess supply, prices don’t tend to come down.” (http://media.floridarealtors.org/statistics/statisticsfull.htm)
“Renting makes more financial sense.”
For someone who plans to stay put more than two or three years, home ownership usually makes more sense financially. The key benefits include annual tax benefits, “forced savings” from paying down the mortgage and potential appreciation in value. “Owning a home is one of the best builders of wealth,” says Todd Nordstrom, a sales associate with Esslinger Wooten Maxwell, Miami Beach. “There is a huge difference in net worth between renters and owners.” In fact, the most recent Federal Reserve Survey of Consumer Finances shows the median net wealth of a homeowner household is $171,700 compared with just $4,800 for a renter household. (http://www.realtor.org/PublicAffairsWeb.nsf/Pages/TPHousingasanInvestment)
“Historically, home values don’t rise.”
Think back to what your parents paid for their homes, and it’s clear that residential values have increased substantially over the years. Nationally, home prices rose 88 percent from 1995 to 2005. “Historically, home prices rise 1.5 to 2 percentage points faster than the rate of inflation, says David Lereah, NAR’s former chief economist. In Florida, the median sales price for existing singlefamily homes in November 2007 was $215,800 – a 52.5 percent increase over the five-year-period since November 2002, according to FAR records. (http://www.realtor.org/home_buyers_and_sellers/buy_now_talking_points.html)
“Mortgage money is scarce.”
Lenders today are ready, willing and able to provide mortgages to qualified Florida buyers, according to professionals around the state. “As long as you have at least 5 percent down on a first-home mortgage, you can get financing,” says Kathy Lollis, a sales associate with Century 21 First Realty, Tallahassee. In addition, there are special programs for firsttime buyers that require even smaller downpayments, such as a 3 percent FHA guaranteed loan. “In the move-up market, there are plenty of banks ready to make loans to owners who have made their monthly payments on time,” adds Lollis. “Overall, there’s an abundance of mortgage money available today.” (http://www.hud.gov/buying/loans.cfm)
“It’s hard for someone with bad credit to get a mortgage.”
A buyer with bad credit can still buy a Florida home using a larger downpayment. Lenders have tightened their rules but are still willing to make loans to all types of buyers. “It’s important to remember that buyers with bad credit are only about 5 percent of the total mortgage market,” says Randy Martin, a sales associate with RE/MAX 200 Realty in Winter Park. “If you can put down a significant downpayment or document your income, you can still qualify for a home loan.”
“Mortgage fraud is widespread, making lenders more cautious.”
Even though mortgage fraud was widespread during the recent U.S. boom market, that’s not the case today. “As home prices stabilize and sales volumes return to more normal levels, lenders are doing a far better job in analyzing mortgage applications,” says Tony Garcia, a district sales manager for The Keyes Company’s Homestead and Florida Keys branches. “They have put the brakes on fraud, while continuing to issue loans to qualified buyers.”
“Home prices in Florida are too high.”
From Key West to Pensacola, Florida offers a vast array of homes and condominiums at almost any price imaginable. While luxurious oceanfront residences can easily cost $1 million or more, most Florida communities offer homes at highly affordable prices. In fact, Florida homes remain a bargain for buyers from major U.S. metropolitan areas, Europe, Latin America and other world markets. “There are amazing opportunities for purchasing homes in Florida,” says Maria S. Wells, brokerowner, Lifestyle Realty Group, Stuart. “In many areas you can’t possibly build a new home for what you can purchase in a resale. Now is the time for buyers to get a Florida home for a terrific price.”
“Nobody is moving to Florida anymore.”
That’s simply not true. Florida continues to benefit from an incoming population flow that includes both U.S. and international migrants. While population projections vary, economist Hank Fishkind expects Florida will add about 265,000 new residents in 2008. That’s down from 418,000 in 2006 and 303,000 in 2007, but Fishkind expects the state’s population to rise by 288,000 in 2009 and 332,000 in 2010.
“First-time buyers are being priced out of the market.”
First-time buyers can purchase modestly priced homes and condominiums throughout Florida. Many lenders also have special mortgage programs for firsttime buyers with low downpayment requirements and reduced interest rates that cut monthly payments. “I just sold a home to a teacher with limited income who received a 30-year fixed-rate mortgage for under 6 percent,” says Teresa Dyer, broker- owner, Realty One in Panama City Beach. “It was very easy to get her into the home she desired, and the bank was very supportive.”
“Retiring Baby Boomers have no retirement savings, so they will be forced to sell their homes at bargain prices.”
Like every generation, the Baby Boomers vary widely when it comes to savings: wealthy, moderate and none at all. However, there is no evidence that the Boomers are going to sell their homes at bargain prices, regardless of their level of savings. “The real situation is that many Boomers built up substantial equity in their homes in the past decade,” says Phil Wood, president, John R. Wood Realtors, Naples. “They do not want to give that equity away when they know that better times will be back in the near future.”
“Inventories of unsold homes will only get larger.”
Inventories of homes and condominiums for sale have stabilized in most Florida markets. While the number of homes on the market remains substantially higher than during the peak years of 2003-05, there is no evidence that inventories will increase in 2008. In fact, the inventory totals today include many homes offered at yesterday’s higher prices. “Don’t let the inventory numbers fool you, because they seem worse than they actually are,” says Lynn Savits, a sales associate with Coldwell Banker’s Aventura office. “When you subtract the homes that are overpriced in today’s market, the actual number of active listings is much smaller.”
Source: Richard Westlund, a Miami-based freelance writer.
© 2008 FLORIDA ASSOCIATION OF REALTORS®
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