Monthly Archives: January 2010

One For The Books

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Final year end official stats are in and as expected, 2009 set all kinds of records.  Every single quarter of 2009 was a transaction record, so it’s no surprise that the entire year set a transaction record as well.  2009 saw 16,260 single family home sales compared to 8,272 last year for a whopping 97% increase over last year.  2005 saw 12,123 home sales, so 2009 eclipsed that lofty mark as well, but this time it was done in a more healthy way, if you can believe that. 

Lee County Single Family Home Sales by Qtr
Lee County Single Family Home Sales by Qtr

2005 sales were fueled by regular home sales and builder sales from previous years that took until 2005 to complete and close.  We’re not seeing any builder sales, pent-up or otherwise because today’s home prices are well below replacement cost, so builders cannot afford to build today as they would lose money on each deal.  So what’s different about 2009 vs. 2005? 

The main thing is housing affordability.  At the height of the market single family home prices were about $322,000 and now they’re at $94,500.  This makes it much more affordable for families that still have jobs.  Obviously if you’ve been affected by the economy and a job loss, almost any mortgage payment is too much, so when we mention affordability we’re speaking to people who are blessed with a job.  We also have low interest rates which positively affect affordability. 

Property taxes are lower which greatly reduces the monthly payment as well, further adding to affordability.  We still have a home buyer tax credit which is up to $8,000 for first time home buyers and $6,500 for existing buyers.  Nationwide December sales slumped because Congress waited until end of November to extend and expand this credit, but we expect sales nationwide to pick up again.  Locally sales were up 40% over 2008, so the tax credit expiration didn’t affect us much as everyone is trying to get in on these rock bottom prices. 

First time home buyers are in steep competition with investors for the best buys as well.  For years we would tell investors property in SW Florida just won’t cash flow unless you put a bunch down.  This isn’t true anymore, so investors are coming in and scooping up these artificially low values and either renting them out for a positive cash flow or flipping them for a generous profit. Cash flow is the rent or income earned minus expenses, like debt service, property taxes, repairs, vacancy and collection losses, etc. In preparation for our annual State of the Market Report I started flagging several home sales that were flipped in 2009, sometimes a few times. 

Today’s prices are too low, especially at the bottom end of the market, and 2009 saw 5 of the last 6 months with rising median prices.  We hear from our sources that there are more foreclosures on the way.  Banks study default rates and can predict how many will foreclose in the future; because once a homeowner gets behind, statistically they don’t catch up very often.  While the worst may be behind us, we believe we may have more to go.  This fact and the job market should keep prices relatively stable until the economy turns around.  We may see escalating prices going forward, and if so it will be because we are undervalued on a cash flow basis no matter what the job market is, but we believe true price appreciation will occur once the job market stabilizes. 

The commercial market is currently experiencing an adjustment similar to what the residential market has gone through in years past, as commercial tends to lag residential.  This could put pressure on some banks, so 2010 may be a year to watch the banking sector for mounting losses on the commercial side.  In the next few weeks we’ll have detailed analysis in out State of the Market report.  You can view last year’s report at www.Topagent.com in the Housing Statistics section.  We have additional graphs you can view there as well. We’ll be unveiling this year’s report online and on The Future of Real Estate show broadcast also on the website. 

Sales are off to a boom in 2010 with many sales contracts happening right now, so 2010 will be another fun year to track.

Stimulus Funds Available In Lee County

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We have all questioned what happened to the stimulus funds only to find that there are monies available from the package in Lee County here and now.  The word needs to get out. It is imperative that those who qualify and have a desire to own a home apply for the assistance. Getting people in homes as a result of this funding will inadvertently benefit the market in all price ranges and all sectors.  We will cover that aspect later.

There are currently two programs with funds available: 

HOME DOWN PAYMENT ASSISTANCE   Qualified persons or families can receive up to 20% (not to exceed $20,000) of the purchase price for a single family home.  The single family home must be located in unincorporated Lee County and could be a condo or PUD (Planned Unit Development) or even a double wide mobile home 1976 or newer provided the land is owned underneath the mobile home. The home cannot be a duplex, have an attached or detached mother in law quarters or have a swimming pool.   If all of the funds are not utilized as either down payment or closing costs the balance of the funds will pay down the principal balance.  The funds cannot pay debts or collections, home inspection fees or home repairs. 

The homebuyers household income must meet HUD guidelines. The income for all members of the household will be considered.  Non occupying coborrowers will be considered on a case by case basis.  The home must be affordable for the occupants so the income of the non occupying coborrower will not change the mortgage amount  or sales price.  The coborrower may enhance the credit worthiness.  All assets (including interest income)  will be considered when calculating annual income such as checking/savings accounts, IRA’s, CD’s, cash value of life insurance, etc.. 

Income Limits-HUD Guidelines for Down Payment Assistance
Income Limits-HUD Guidelines for Down Payment Assistance

HUD guidelines 

A ten year second mortgage will be placed on the property.  No interest will be charged and there are no monthly payments.  At the end of the ten years and if the property has been occupied and homesteaded each year a satisfaction of mortgage will be given and the second mortgage will not have to be repaid.  However if the property is sold or leased during the ten year term or not owner occupied or homesteaded, then the prorated balance of the second mortgage will be due and payable.   The second mortgage is self amortizing and will reduce 10% per year.  Does anybody check?  We are told this criteria will be verified. 

The property must pass Lee County’s minimum housing quality standards inspection.  The inspection will be performed by the Department of Human Services inspector.  The house must not exceed HUD guidelines for the number of persons allowed per bedroom.  The property must be existing and have had a certificate of occupancy for at least one year.  It cannot be occupied by tenants that are not purchasing the home. 

There are other rules and regulations all of which make sense and are easy to work with.  Funds are available on a first come first ready basis.  It would make sense to this writer that you get yourself in position to receive the assistance if at all possible. 

The lender applies for the assistance from Lee County on the borrowers behalf.  The lender completes the lender referral form and several required documents including a fully accepted purchase contract.  There is a $50 charge which can be paid by cashier’s check or money order from the purchaser.  Make this non refundable application fee payable to Lee County BoCC. 

NEIGHBORHOOD STABILIZATION PROGRAM 

Lee County is now in the business of buying and rehabilitating foreclosed homes in targeted areas and then selling them to buyers at prices less than what was paid for them.  This is all possible due to the $18 million infusion of stimulus funds.  First of all, the county purchases properties below the appraised value.  Professional contractors go to work on them making the properties very good buys in price and condition.  The county will not raise the price of the homes as the economy improves.  These homes will stay affordable. Some of the target areas include Lehigh Acres, San Carlos Park, East Ft Myers, North Ft Myers, South ft Myers, Pine Manor and Page Park.  Go to nsp.leegov.com to view maps of the target areas. 

The incredible part is that the county will provide a silent second to the home buyer which means that the county may have purchased a home for $60,000 and then spend $$$ fixing it up and sell it for $30,000.  The buyer is paying on the $30,000 mortgage.  If the buyer stays in the home 15 years the silent second is forgiven.  If the buyer decided to sell, rent or refinance before the 15 years have passed the buyer may be obligated to repay the subsidy partially or in full. 

This program is not for investors or second home buyers and only for the buyer’s primary homesteaded residence.  The NSP program is not restricted to first time home buyers but the buyer cannot currently own a home and must be a resident of the United States.  Buyers accepted into the program must complete an 8 hour homebuyer education class. 

Take a look at the income guidelines for a pleasant surprise. 

Down Payment assistance From the County
Down Payment assistance From the County

The NSP program looks at the income of the buyer from a low, moderate or middle range. The low income buyer can get up to 50% of the sales price as a silent second subsidy.  The moderate income buyer will qualify up to 40% of the price of the home and the middle income buyer at 30%.

Chinese Drywall-What You Need to Know

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We recently had a guest on “The Future of Real Estate” Video Show who opened my eyes on how to effectively test for Chinese drywall, and shed some interesting facts on the subject.  To clear up a few myths, not all Chinese drywall is defective, and not all American drywall is good.  Most of the problems associated have come from China though, thus the term Chinese drywall.

Watch Segment 1

watch Segment 2

Most people don’t really care how a car engine works, they only care that it works, and it gets them where they want to go.  I won’t go into a lot of detail about how drywall is made, and that the tainted drywall was made with fly ash, a residue of coal combustion more commonly used in concrete mixtures.  This scrubbing of the smokestacks emissions creates calcium sulfate, or gypsum, which can then used to make wallboard.  American manufacturers gather the gypsum from the smokestacks after the scrubbing, which produces a cleaner product.

There are no set standards by the Federal government, so it’s hard to even use the word defective in the proper light as there is no standard.  People are concerned that defective wallboard gives off fumes that can corrode copper pipes, blacken jewelry and silverware, and possibly sicken people.

Shipping records indicate that imports of potentially tainted Chinese building materials exceeded 500 million pounds during a four-year period of soaring home prices. The drywall may have been used in more than 100,000 homes, according to some estimates, including houses rebuilt after Hurricane Katrina.

The drywall apparently causes a chemical reaction that gives off a rotten-egg stench, which grows worse with heat and humidity. The Chinese drywall is also made with a coal byproduct called fly ash that is less refined than the form used by U.S. drywall makers.

Most of the drywall in question came into the country in 2006, following a series of Gulf Coast hurricanes and a domestic shortage brought on by the national housing boom.

We found an innovative inspector who has been able to successfully test for a compound called Strontium using an X-Ray gun.  This X-ray gun can test each board in a home which is important because a home may have some defective drywall mixed in with acceptable drywall.  In the past, inspectors were forced to remove drywall or inspect air conditioner coils, plumbing, mirrors, etc.  None of these inspections were guaranteed or scientific because at lower temperatures the effects of the drywall can be masked to some degree.

Chinese Drywall Laser Gun
Chinese Drywall Laser Gun

Visual inspection of corrosive metals and the unique odor of Hydrogen sulfide (H2S) are certainly signs of bad drywall in a home. However, Drywall Science LLC is able to scientifically identify, using portable X-Ray technology (XRF), “defective” drywall from acceptable drywall by revealing high concentrations of strontium (Sr). This unique Sr signature for defective drywall was first reported by Unified engineering and later confirmed by the EPA and CPSC.

Chinese Drywall Laser Gun Results
Chinese Drywall Laser Gun Results

There is also concern about “Off-Gassing.”  Off-Gassing occurs when infected drywall releases chemical compounds and infects otherwise good drywall.  The good drywall literally absorbs the bad chemical compounds associated with the defective drywall.  Insulation and other materials may also absorb unwanted compounds, so simply removing a few pieces of defective drywall in a home may not cure the problem.

Some experts say to effectively remediate a home, all drywall, insulation, and porous materials, should be removed and replaced. The bottom line is it’s essential to determine if a home actually has bad drywall before considering remediation options.

We’ve included a few photos so you can see what the gun looks like, and what the test results show on the gun.  We are by no means inspection experts; however we were very impressed with this new technology and how it can scientifically look for defective drywall.  If you’re purchasing a property, especially one built 2004-2008, or an older home that has been recently remodeled, we recommend an inspection.

You can watch the gun in action.  We have video segments posted in our “Best Of” section on the “Future of Real Estate” which can be found at www.Topagent.com

Jack Frost of Drywall Science LLC contributed to this article and has a patent on this X-Ray gun.  While we are excited about this new technology, the Ellis Team, RE/MAX Realty Group, and the News Press in no way guarantees the accuracy or claims of this product.

Happy New Year

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Each January everyone seems to ask what the new year will bring to the SW Florida real estate market.  While nobody has a crystal ball, experience and detailed analysis lends clues to what the future may hold.  Each year we release our annual State of the Market Report, which consists of the most detailed and current market stats around combined with our 20+ years of experience in the local real estate market. 

We pull these stats in January after agents have a chance to enter all their year-end transactions.  We pull from a variety of MLS databases then merge the data together and eliminate duplication of data.  Some listings are input and marketed to Realtors in multiple Boards, and we want the most current but accurate data free of duplication.  This all takes time, and then the real analysis can begin. 

Single Family Home Inventory in Fort Myers-Cape Coral Florida
Single Family Home Inventory in Fort Myers-Cape Coral Florida

Fortunately we do provide a significant amount of data all year round to our readers and viewers of the weekly Future of Real Estate Video Show, so we can offer some preliminary data combined with experience and make some educated guesses as to what 2010 might bring. 

As you can see from the attached graph, listing inventory has been rising recently, and pending sales have started to fall again.  We think this may be due to the anticipated expiration of the home buyer tax credit at the end of last November, but that has recently been extended and expanded into 2010.  Not only can first time home buyers take advantage of this credit up to $8,000, now people who currently own a home and plan to but a new primary residence can also take advantage up to $6,500.  Contracts must be in place by April 30, 2010 and must close by July 3, 2010. 

Add to this that our Northern friends are now here, and they are searching for homes.  Word has gotten around up North that Florida is on sale, and prices have begun to rise in some sectors, especially the bargain buys.  The Snow Birds realize 2010 may be the last “Season” to get these bargain basement prices, so they’re bringing their checkbooks looking to purchase.  We wouldn’t be surprised to see pending sales rise in the next few months and inventory to fall again as Northerners help scoop up even more of our inventory.  Investors have been hard at work in 2009 competing with first time home buyers, and we believe Northerners will be buying 2nd homes that they may one day move into, or vacation to at the least. 

The US Treasury Department has just issued new short sale guidelines which may make it easier to get short sales through for primary homeowners who are in trouble.  This may help add sellable homes to the market, which could help increase sales and relieve some of the strain on foreclosures. 

Speaking of foreclosures, we believe much of the entry level speculation inventory is now gone, and we expect higher priced inventory to enter the market, which will make 2nd homes and move-up homes more attractive.  As this occurs, look for more sales in the higher than median price range, which currently stands around $95,000.  These new bargains at the higher price levels will help raise the median sale price. 

Speaking of sales prices, we’ve seen 5 straight months of median price gains, and we look for that to continue.  In fact, early on in 2010 we may start to see year over year price gains, something we haven’t seen in about 4 years.  In other words, February or March of 2010 may see higher prices than February or March of 2009.  We can’t state the actual month it will occur, however if you study the graphs and data you can see that day looks like it’s coming fairly soon. 

Tune in to our weekly video show “The Future of Real Estate” at www.Topagent.com and stay tuned for our upcoming State of the Market Report which we’ll be releasing soon which will detail which areas of the county are moving, changes in averages sales prices, single family homes and condo data, and so much more.  We’ll even break it down by zip code and graph it out so you can see how your area is doing, and what the future may hold.  Stay tuned.