Jeff Lichtenstein, a former downtown Chicago resident and occasional contributor writes about the Florida real estate market:
1. What’s Happening?
I’m seeing continued improvement in the real estate market. Still nothing to get over-excited about. Kind of like an F student getting a D+. It’s better but not a cause for celebration.
Home prices are going up. The average price per square foot was $156 in March versus $147 in February.
Sales were up in March (1,071) compared to February (1,002). However, they were down compared to last year at this time (1,223).
4. Buyers: Who’s buying? First-timers, mover-uppers, downsizers, foreign buyers, or other?
Inventory is moving fast in the $200,000 to $400,000 category (8.7 months worth of inventory), and slowest in the $1,000,000 market (34.8 months of inventory). However, both categories are going down regardless.
5. Distressed Properties
Short sale inventory is stable but foreclosure inventory is rising. I’m also seeing the first beginnings of the end of the short sale. I lost a deal with a purchasing client on a deal because the court and bank would not stop a short sale and the property went to auction. Have 2 other properties where the auction process has started. Part of the reason banks have wanted to short sell is they have been waiting for 3 years on average in Florida to foreclose! Homeowners have been basically living rent-free for 3 or 4 years! The party is over as banks are now foreclosing faster. While it’s still advantageous for banks to work out a short sale and avoid the foreclosure costly process, we will see much less of this as that 3-year time table goes down significantly. One investor who purchases lots of short sales told me that he thought there was a 12-month window left for short sales. In 2006, I had no idea what a short sale was, so the rarity of the short sale might be what we are going back to.
My clients are not having that many issues getting loans. It’s just a lot more red tape with more verification (a good thing) and scrutinized appraisals. The short sales are the most difficult because you need to do a double appraisal; one that appraises low (for the 3rd party institution) and the other high for the new lending institution. More on those goofy dynamics below.
Comcast Must Be in the Short-Sale Business
New federal rules that could speed up the short-sale process to within 30 days if the loan is owned by Fannie Mae or Freddie Mac should be taking place by June. To that I say there is a better chance of my cable company getting their customer service act together. It’s just not going to happen. Cable missed 4 appointments with us last week. They have this automated system that confirms appointments. Twice the automated system never called. Once it did, but I picked it up in a middle of a message, and another time I missed the call by a minute. Only after a call to my HOA and the threat of losing 640 homes, did the account representative make it happen. Short-sales are like our cable company only far worse.
The loan company won’t verify the price until an offer is received, paperwork goes from one department to another and instead of using licensed appraisers, and the lien holder gets a broker’s opinion. While this saves them hundreds of dollars, the broker has to do huge volume and cover a vast territory. I had one house recently that the broker told me he does 60+ “broker opinions a day” and goes from Miami to Orlando. That’s crazy, as you can’t be an expert for the whole state. He also thought there were 3 baths where the house only had 2½ baths. Further to complicate things, the house has to appraise in order to get the price low enough so the lien holder knows they aren’t giving it away. On the flip side, you hope it appraises high when the buyer’s mortgage company appraises it for sale. Furthermore, with some institutions, if a buyer walks, they start the whole process all over again. The lien holder has to be incurring a ridiculous amount of costs holding the note and analyzing each short sale. What really should be done on short sales is that prices should be set before they go on the market like a foreclosure. Those prices should be good for 3 months. If they really analyzed it, they probably would be better off foreclosing on the house because the time and energy to handle the short sale has to be enormous. Fortunately, the red tape in the court system is speeding up and short sales may be passé in a year or two. Until then, maybe the lien holders should do like me and order Direct-TV.