U.S. New Home Sales Stuck at Record Low in February, But Median Price Jumps

posted on March 24th, 2010 filed under: Real Estate Market Data

Sales of new homes edged down to a seasonally adjusted annual rate of 308,000 in February, basically stuck at the record low of 309,000 originally reported for January.

Consolation?  The January figure was revised to a slightly less-horrible 315,000.  And February might have been depressed more than usual by winter storms.  That could lead to a rebound in March.  Maybe February will prove to be the bottom for this particular data series.

The unadjusted monthly number rose from 22,000 new home sales in January to 24,000 new home sales in February.  Again, this could be the bottom for new home sales.  Look at the seasonality: Sales always rise into the summer and fall into the winter.  But in a boom, there are higher highs and higher lows, and in a bust, there are lower highs and lower lows.  Notice how this winter’s low is not much below the previous winter’s low.  (As always, do not confuse sales and prices — sales can pick up even as prices continue falling.)

U.S. New Home Sales -- 1990 to Feb. 2010

The median price of new homes sold rose to $220,500 in February from $207,900 in January.  The January figure was nearly the lowest for the whole down-cycle (only March 2009, at $205,100, was lower), even though one might have expected the median to rise after the $8,000 tax credit’s originally scheduled expiration in November.

The long-term chart below suggests that we’ve worked off the bubble and are back to the trendline.  But beware.  These are national data.  Your local community may be in better or worse condition.  Here in Miami and Coral Gables, prices have fallen, but remain well above the long-term trendline.

U.S. Median House Price -- 1963 to Feb. 2010

Here it is in logarithmic form, which smooths out the long-term destruction of the dollar by inflation, courtesy of the Federal Reserve.  (Disregard the log-scale numbers on the vertical axis — they don’t represent dollars amounts.)

U.S. Median House Price -- 1963 to Feb. 2010 (Logarithmic)

All data are from the Census Bureau at the U.S. Department of Commerce.

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Sales Up Marginally, Median Price Sharply Lower for Miami Real Estate in February

posted on March 23rd, 2010 filed under: Real Estate Market Data

Slightly more existing homes in the Miami metro area were sold in February than January, according to the Florida Association of Realtors.  But the median price took a significant hit.

Sales of existing single-family properties rose to 445 in February from 436 in January.

The median price is where the action was, falling from $208,100 in January to $191,100 in February.  That’s the lowest since November’s reading of $184,800.

As explained in connection with last month’s data release, the originally scheduled November 30 expiration of the $8,000 tax credit probably caused the median price to pop higher in December and January.  Now the pop has turned to a drop.

Perhaps more low-end purchases are working their way through the system before the new, extended expiration of the credit (contracts by April 30, closings by June 30).  But it’s also possible that the government engineered a dead-cat bounce in the real estate market over the past year, and that prices will take another leg down once the artificial price supports are removed.

After all, real estate prices in Miami and Coral Gables remain markedly elevated relative to the fundamentals: incomes, rents and historical property values.

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You Can Walk Away, But You Can’t Hide: Lenders Selling Deficiency Judgments to Collection Agencies

posted on March 23rd, 2010 filed under: Financial Responsibility, Real Estate News

A recent post explained that walking away from your mortgage could leave you in hock in states, like Florida, where lenders have recourse against borrowers for the difference between the loan amount and property value.  Several news outlets have since published similar reports.

For example, an article in the Miami Herald reports that investors are buying the rights to collect second mortgages and other liens such as home equity lines of credit.  The practice is especially relevant in non-recourse states like California, where first-mortgage lenders can look only to the property to satisfy the debt, but junior lienholders apparently can pursue the debtor personally.

In places like Miami and Coral Gables, real estate became so ridiculously overvalued that a foreclosure or short sale does not even recover enough to satisfy the first mortgage.  Nothing is left for the second mortgage or HELOC lender, who gets zero cents on the dollar.

To mitigate the loss, the lender sells the loan (at a substantial haircut, no doubt) to a collection agency, which then hounds the debtor until the end of time.

[L]enders have been quietly selling second mortgages and home equity lines left unpaid after foreclosures and short sales.  The buyers: collection agencies, which in some states have years to make a claim.

If they win court judgments, these collectors could have years to pursue borrowers with repayment plans, and even garnish their wages . . . .

“The only relief a consumer will have is entering into a debt negotiating plan or filing for bankruptcy” . . . .

Debtors can attempt to head off these troubles by negotiating a solution at the time of a short sale.  But many don’t know better, and aren’t warned by real estate agents who often are “not really equipped . . . . They’re set up to make the sale.”

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Thinking of Buying Foreclosures in Miami or Coral Gables? WATCH OUT!!!

posted on March 22nd, 2010 filed under: Financial Responsibility, Properties in Focus, Real Estate News

Buyers attracted by seeming bargains among foreclosure auctions can instead lose their shirts.  An easy way to buy Miami or Coral Gables real estate on the cheap turns out to be an easy way to lose a whole lot of money.

As the Miami Herald reported a few weeks ago, the new online auction system for foreclosures in Miami-Dade County streamlines the process of buying foreclosed properties so much that amateurs are getting involved — and getting burned.

The problem is that foreclosures are sometimes brought by junior lienholders, meaning the sale does not discharge senior liens.  If you buy the property at foreclosure, you’re still subject to the senior lien.  This can be disastrous.

Here’s an urgent case study:  601 Sunset Drive in Coral Gables.  This property will be auctioned soon.  The lender has listed its maximum bid at just under $300,000.  If you bid more than that, and more than any other bidders, you will win the auction.  It’s a decent-size house on a big lot, so even in today’s ailing real estate market in Miami and Coral Gables, it seems like a screaming bargain.

601 Sunset Dr.

601 Sunset Dr.

Public records, however, suggest a huge pitfall (do your own homework on this and decide for yourself, of course).  Citibank is the foreclosing lender.  But Citibank is foreclosing on a home equity line of credit.  That’s not the first mortgage.  And there is a whopper of a first mortgage: $825,000 to JP Morgan Chase.

So let’s say you win the auction with your bid of $300,000.  That could turn out to be nothing more than a downpayment, because public records suggest the property is still subject to the $825,000 first mortgage.  If that’s the case, you have effectively paid $1.125 million, not even counting whatever fees Chase can pile on top of the mortgage balance, plus the property taxes that Chase has apparently been paying.

The same thing happens in condo foreclosures.  Let’s say there’s a condo worth $200,000 today that somebody bought for $400,000 at the top of the real estate market in Miami and Coral Gables.  And let’s say there’s a $350,000 mortgage outstanding.  The person defaults on the loan and stops paying maintenance fees to the condo association.  The lender doesn’t foreclose, because that would mean taking responsibility for taxes, maintenance fees, et cetera.  So the association forecloses, not because they think they’ll get any money (the $300k lender is senior and gets the whole $200k in a forced sale), but to force the lender to take title and responsibility in what’s known as a “reverse foreclosure.”  If you buy the association’s lien — say, $20k — you have bought a property worth $200,000 for $20k, but it’s subject to a $300k mortgage.  You’re in for $320,000, not $20,000.

Miami has an excellent online system for searching public records, but unless you understand it all — mortgages, liens, lawsuits, forms of ownership, homestead rights, and more — you might just be America’s Next Foreclosure.  WATCH OUT!!!

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Friday Fountain Photo

posted on March 19th, 2010 filed under: Fountains

Another charming, blink-and-you-missed-it feature of northern Coral Gables.  On Sevilla Avenue at San Domingo Street.

Coral Gables Real Estate Photos -- Sevilla Fountain 2

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Miami Ranks As Most Troubled U.S. Real Estate Market

posted on March 18th, 2010 filed under: Financial Responsibility, Real Estate Market Data, Real Estate News

Oh, Lawdy, Trouble So Hard.

Miami ranks as the most troubled real estate market in the United States, says Forbes.  The honor was bestowed on the Miami metropolitan area for having, by a wide margin, the highest percentage of mortgages delinquent 90 days or more.  The number for Miami is — hold onto your hats — 28.8%.

Try to wrap your mind around that.  Think about what it means for someone to be 90 days delinquent.  That’s not just late on a single monthly payment.  That’s nonpayment for three months in a row, strongly suggesting that the borrower has no ability or intent to pay again.

This is misery.  Personal financial ruin.  Borrowers have themselves to blame, but financial institutions and real estate brokerages are equally responsible.  It was irresponsible for anyone to buy, lend money on, or advise the purchase of property at prices equal to six times the buyer’s gross income, at ownership costs twice the rental costs, and in drastic deviation from historical price trends.

Miami Real Estate Photos -- Residential Neighborhood 2

The greed and incompetence are staggering.  Next time someone preens about being a “top producer,” think what their sales “producing” did to the personal financial condition of real people.  What does it mean for someone to buy a house for $1.1 million on an income of $200,000, only to find their home sweet home worth $700,000?  What does it mean to take a $400,000 loss when your income is $200,000?  How much, and for how long, would you have to save to make up for that kind of loss?  And for what?  So some bailed-out mortgage investor can keep taking six-figure summer vacations in the Hamptons?

From Forbes:

In greater Miami, including Fort Lauderdale and West Pam Beach, one-quarter [actually, 28.8%] of mortgages are 90 days past due or worse.  In Miami proper, one-fifth of mortgages are in foreclosure or converted to REO.  Worst in the country by far.

The next-worst metro is Las Vegas, at 21.7%.  Florida fares poorly as a whole, with only one metro area under 10% in the 90-day delinquency measure.

The Forbes study is based on data from First American CoreLogic.

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Miami and Coral Gables Celebrate St. Patrick’s Day

posted on March 17th, 2010 filed under: Miami and Coral Gables Living

It doesn’t take the luck of the Irish (a term not without irony) to find good times on St. Patrick’s Day, at least if you live in Miami or Coral Gables.  When there literally are lines at restaurants and bars at 10 p.m. on a Wednesday, you know you’re in a town where people like to enjoy life.  Slainte, Miami!

Party central may have been the JohnMartin’s block party in Coral Gables.  The great green gathering covered more like three blocks, taking in the food, drink and live music, including U2 tribute band UV.

Coral Gables Real Estate Photos -- John Martin St. Patrick's Day Block Party 2

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U.S. Housing Starts Slip in February from Upwardly Revised January — Still in Slow Recovery

posted on March 16th, 2010 filed under: Real Estate Market Data

Housing starts remain in a slowly rising pattern of recovery.  The Census Bureau estimated 575,000 starts at a seasonally adjusted annual rate, down 5.9% from the 611,000 now in the books for January, and roughly flat compared to February 2009.

January’s number was revised up from an initially reported 591,000.

The margin of error on these data is about +/-10%, but the trend is consistent with a slow, grinding recovery.

U.S. Housing Starts -- 1990 to Feb. 2010

The real-estate market in Miami and Coral Gables has generally followed the pattern of the national data over the past decade, only to greater extremes.

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Condo Flipping in Miami Real Estate Market — Just Like the Good Ol’ Days?

posted on March 16th, 2010 filed under: Financial Responsibility, Real Estate News

When the Miami and Coral Gables real estate markets were in mania mode, condo buyers would sell (assign) their purchase contracts for hefty profits.  Condo units might be flipped numerous times before a building was even constructed.

Miami Real Estate Photos -- Brickell Key 1

So what should you make of today’s Miami Herald article reporting that bulk buyers of condo units have been flipping deals within weeks, even minutes, for hefty profits?

First, don’t take it literally.  Nobody buys condos in bulk and sells to a new buyer within minutes, unless it’s all prearranged.  More likely, a first bulk buyer enters a purchase contract that is not assignable, and while waiting for the deal to close, finds the new buyer and lines up the two deals to close on the same day.

Second, if you’re an individual or a family looking to buy a place for yourself, none of this really matters to you.  The bulk market is not the same as the owner-occupied market.  It’s the difference between wholesale and retail.  If one wholesaler gets such a good deal that another wholesaler is willing to pay a premium, that doesn’t necessarily affect prices at the store.

Just because there’s activity in bulk condo transactions doesn’t change the fundamentals that should inform your decision about buying real estate in Miami or Coral Gables.  If you care about whether a purchase makes financial sense, the price you pay should bear a reasonable relationship to incomes, rents and historical values.

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With Fed Ending Mortgage Purchases, Fannie and Freddie Step In — What It Means for Real Estate in Miami and Coral Gables

posted on March 13th, 2010 filed under: Real Estate Market Data, Real Estate News

It might take a little longer for the free market to start peeking through the fog of government intervention.  As noted previously, the Federal Reserve has artificially suppressed mortgage rates by purchasing well over a trillion dollars of mortgage-backed securities (MBS).

Ordinarily, rates would rise if the biggest buyer walked away from the market.  Rising mortgage rates would put renewed pressure on property values here in Miami and Coral Gables, as elsewhere.  But the nearly total nationalization of the mortgage market will not be so quickly abandoned.  Fannie Mae and Freddie Mac recently announced plans to buy back $200 billion of nonperforming mortgage loans at full value.

That’s not the same as buying new mortgages, but will have much the same effect.  The investors who get bought out are in the mortgage market for a reason.  It’s their investing focus.  And they’ll plow a lot of that freed-up money right back into mortgages — maybe not every dime of the $200 billion, but most of it.

Is this another bailout?  Yes, indirectly.  Fannie and Freddie guaranteed that garbage in the first place, so they’re already on the hook for it.  But Fannie and Freddie themselves exist only by dint of taxpayer bailouts.  If you’ve got a claim against an insurance company that gets bailed out, then you’re bailed out too.  Think AIG.

Considering the timeline, an intent to perpetuate the socialization of housing is easily deduced:

09/23/09:  Fed announces it will buy $1.25 billion in MBS through March 2010

12/24/10:  Treasury lifts all limits on taxpayer bailout of Fannie & Freddie

02/10/10:  Fannie & Freddie announce plan to buy back $200 billion in bad loans

Isn’t that special?

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