June 2016 Newsletter
Topics for June
- GLOBAL TRENDS HIT HOME
- THE DYNAMICS OF HOME FLIPPING
- A FEW FINANCING TIPS
- RECENT MARKET STATISTICS
TAMPA BAY is in the TOP 10 U.S. CITIES SEARCHED BY INTERNATIONAL CONSUMERS
Realtor.com has released data from a recent analysis of global consumer searches: 1st place was Miami, 5th was Orlando, and TAMPA BAY is 7th!… exceeding even the most enthusiastic expectations of real estate professionals in the global arena.
One such group is the Pinellas International Council, which operates under the umbrella of the Pinellas Realtor Organization. The PIC mission is to promote our area to other global real estate organizations so that we generate worldwide recognition of our beautiful Gulf Coast of Florida, our unmatched location and access, our opportunities for living, vacation, retirement, investment, business growth, recreation, sports, beaches, our vibrant cultural community…. PIC promotes education and understanding to encourage investment in our home communities. These goals are being achieved, as confirmed by this recent Realtor.com survey, through educational programs, conventions, cultural exchange events, and professional interaction and cooperation with and among real estate professionals around the world. At any point in time PIC consists of approximately 12 volunteer and nominated directors and chair persons, PRO staff, and several hundred Realtor members and Affiliates who expand our own business opportunities and resources globally to benefit our consumers as well as our Realtor association, while exhibiting high professional standards and generating positive economic and cultural impact for the communities we serve.
Many accomplished Realtor members build on this focus by pursuing NAR’s (National Association of Realtors) CIPS Certification. Through this program a Realtor is awarded the Certified International Property Specialist certification, joining an inspiring network of professionals around the world who take extended courses, train and partner with associated global professionals, to provide an exclusive level of service, knowledge, resources and expertise to all our consumers, sellers and buyers …whether it’s our next door neighbor Harry, looking for a vacation home in Costa Rica, or Antoine over in France who wants a condo on St. Pete Beach. The recent count of CIPS designated real estate professionals totals about 2,804 worldwide, in 40 different countries including the USA. It is an elite group.
Home Flipping Trends
The Florida Realtor Association published an article in their Florida Realtors News on-line edition of 5/9/2016 containing the following statistics and sourcing about home flipping: RealtyTrac is a real estate information company, also an online marketplace for foreclosed and defaulted properties in the United States. It was founded in 1993 and is based in Irvine, California. First Quarter 2016 RealtyTrac reports Home Flipping at 6.6 % of single-family and condo sales nationwide, a 20% increase quarter-over-quarter and a 3% increase year-over-year…still 26% below the peak of home flipping activity, which was 9% of home sales in the first quarter of 2006…still impressive. A Home Flip, for this article, is a property that is sold in an arms-length transaction for a second time within one year of the most recent sale.
Home flipping can be positive for a housing market especially when it is responsible, but when it becomes too aggressive or careless financially, it can contribute to an unbalanced market or produce unrealistic pressure on the market. Controlling factors can include investors who use their own money, as a healthy degree of caution is built in. Also a controlling factor is the availability of third party financing for such transactions. Realty Trac reports 71% of home flippers currently pay cash while only 37% paid cash at the height of the flipping boom prefacing the recession..
RealtyTrac further reports that Florida metro areas have hit a new high, 1 in 10 homes are sales involving a flip. The Tampa Bay area exceeded the national average by 10.8%. Obviously there is profit to be had for the savvy real estate investor. I am working with a gentleman who currently owns about 250 properties which he is in some stage of flipping.
In short, responsible flipping activity can be a management-intensive and lucrative operation as well as a beneficial impetus to markets. Of course, like anything else, there can also be too much of a good thing.
Some market effects related to home flipping may prove unsettling…… Home shopping has turned out to be a frustrating operation for several Realtor friends and would-be home owners. Home flipping surely could contribute to this in some arenas, magnified by an already low inventory market. This includes all price ranges, but it seems most frequently to affect homes priced in lower to median price ranges and even up to around $300k or $350k, depending on the local market pricing parameters. It is a range where first time home buyers/owners and young families moving up might expect to purchase a home.
I understand some of my fellow agents are carrying a standard ‘as is ‘ purchase contract form for every home they arrange to show a buyer in some of our extreme low-inventory areas. They have learned if their buyer decides he wants to buy one of the properties they see that day, they should present a purchase offer then and there. If it is a particularly good or suitable property or reasonable buy, the property is likely to have another offer before the agent can return to her office to write one up.
Any buyer who needs a mortgage to finance his purchase faces competition from all-cash buyers. Cash is king for most home sellers, especially including REO bank owned situations, and the home flipper is most likely ready with his own cash funds available to make his offer appealing…. which leaves a lot of folks shut out of these “deals”, including first time home buyers and, young families. For them, home shopping becomes an ORdeal and sometimes a heart breaking one. That is why it is important buyers work with a professional, take the right steps in the right order, work closely with their agents to be ready to move quickly, and to obtain proper written proof of pre qualifying for their purchase through a mortgage originator or financial institution prior to the first shopping trip. That is why it is important that these buyers be able to find appropriate financing in the first place, which they can afford, so their offer to a seller to purchase his property is as strong as possible.
Cause and effect, opportunity or not, metro areas change. Only seasoned economists would try to predict how close we might come to some home flip pressure cooker effect. How will our communities and metro areas and demographics transform or evolve in years to come? What I can say for sure is the movement of real estate is a fascinating study and will always play a dominant role.
A few financing tips I have found useful in my business…..
VA Mortgage Guarantee Financing is available in our area for up to $750K for owner-occupied single family home purchase.
Conventional mortgages, both fixed and adjustable programs, may be re-negotiated once in their lifetime, generally for a fee somewhere around $350. For example, I have a conventional fixed rate mortgage for $400K at 4% annual fixed interest rate for 30 years, my principal and interest payment is $1908.66. Say I inherit some cash, or sell another property I own 3 years later and I am able to make a lump sum payment to principal in the amount of $200K. That leaves me with a $200K mortgage balance. I would be able that one time, to request my mortgage be re- amortized at the lowered principal amount of $200K. I pay my mortgage down to $200K principal balance and re amortize it over the remaining 27 years at 4% even if the market interest rates had increased since my original purchase….thus my new payment, over the remaining 27 years, would be $1010.42.
…Great Information….for example, for the buyer who wants to buy a retirement home, but for whatever reason he has not yet sold his home up north. He doesn’t want to be strapped with a big mortgage for life, and refinancing is expensive with additional risk that rates may be higher a year or so down the road.. This plan allows the buyer the flexibility to buy the retirement home now and substantially lower the mortgage payments once he retires or sells his other property without refinancing
Real Estate Statistics Summary
Now for a summary of recent Pinellas County Real Estate Statistics for April 2016, taken from information published monthly to Realtor members of our Pinellas Realtor Organization by CEO David Bennett.
Single Family Inventory is down 9.6% from April 2015 and Single Family property inventory is sitting at a 3.4 month supply for April 2016, the same as March 2016. Townhome/condo supply sits at a 4.3 months in April 2016 compared to 4.9 months in April 2015. Markets are moving across the board and buyers can continue to expect a very competitive Single Family market in Pinellas County for well priced listings. Comparisons are made on a year-over-year model so that seasonal fluctuations are not a factor of the analysis.
The number of closed sales for Single Family and Townhome/Condo combined for April 2016 was 2,202, up 4.8% from 2,102 in April 2015. Year-over-year, the Single Family closed sale segment was up 0.9% and the Townhome/Condo segment was up considerably more, 10.6%. County-wide Median Sale Price for Single Family was $200,000 this April, versus $180,000 last April, a substantial increase of 11.1%. Median Sale Price for the Townhome/Condo segment was up 9.1% from last April, at $138,000 for April 2016 versus $126,500 for April 2015.
New Listings for Single Family for April 2016 were 1,512, up 3.9% from last April, when they were 1,455. New Listings for Townhome/Condo for April 2016 were 952, up 3.9% from 916 in April 2015. Months Supply of Inventory for Single Family was way down again, 17.1% lower than last April. Months Supply of Inventory for Townhome/Condo was down 12.2% year-over-year. Active listings for April 2016 Single Family and Townhome/Condo combined were 7,035, down 7.0% from 7,562 in April 2015.
Summary:
- Closed Sales April 2016, 2202/ April 2015, 2102, +4.8%
- Paid in Cash, April 2016,974/April 2015, 989, -1.5%
- New Listings, April 2016, 2464/April 2015, 2371, +3.9%
- Inventory (Active), April 2016, 7035/ April 2015,7562, -7.0%
(Representing nearly 7,000 members, the PINELLAS REALTOR® ORGANIZATION is one of the Tampa Bay area’s largest professional trade associations. The organization advances and promotes the real estate profession through professional development programs, government affairs, and political advocacy and maintains a high standard of conduct by real estate professionals through professional standards training and administration.)