Florida Consumer Confidence Inches Up

GAINESVILLE, Fla. – Sept. 29, 2010 – The sealing of the BP oil well in the Gulf of Mexico put a stop to the hemorrhaging of Florida’s consumer confidence, which rose two points to 68 in September, its highest level since May according to a new University of Florida survey.

“With the Gulf oil spill largely behind us, consumer confidence has begun to recover to pre-spill levels,” said Chris McCarty, director of UF’s Survey Research Center in the Bureau of Economic and Business Research. “This is by no means a return to a state of optimism. Overall confidence is four points lower than it was at this time last year.”

Although this month’s consumer confidence is 10 points below the April reading of 78, all five of the index components posted gains. Rising four points were expectations of U.S. economic conditions over the next year, to 62, and expectations of U.S. economic conditions over the next five years, to 73. Rising one point were perceptions of personal finances now compared with a year ago, to 52, and expectations of personal finances a year from now, to 79. Perceptions of whether it is a good time to buy big-ticket items increased two points to 76.

“It seems increasingly less likely that we will fall into another recession,” McCarty said. “However, there are still a number of drags on the economy and we should expect confidence to oscillate between the upper 60s and lower 70s at least through the end of the year.”

Unemployment in Florida edged up again in August to 11.7 percent, up 0.2 percent from July, McCarty said. Despite that increase, it is still below the record 12.5 percent set in March, he said.

In other disappointing news, prices for existing single-family homes declined in August to a median $134,000, McCarty said. While this is still above the price at the beginning of the year, it is close to 2002 levels, he said.

Prices for food and energy have remained in check, although there are signs that gas and some food prices may go up in the coming months, he said.

Also of concern is that the stock market continues to exhibit volatility, but it appears to be resistant to a major downturn, he said.

On the positive side, job growth is expected, McCarty said. Companies have accumulated enormous amounts of cash and are waiting for some indication about where to invest it for growth, he said.

“Unfortunately, the job losses from this past recession have been so high that it will take many years to return to pre-recession levels,” he said. “Many jobs will not come back. Persistently high levels of unemployment will continue to be an anchor on consumer confidence, which we anticipate to remain near its current level over the next several months.”

The research center conducts the Florida Consumer Attitude Survey monthly. Respondents are 18 or older and live in households telephoned randomly. The preliminary index for September was 419 responses.

© 2010 Florida Realtors®

Tampa Bay Avoids Double-Digit Citizens Insurance Increases

Tampa Bay has dodged the latest homeowners insurance bullet.

Many counties will see double-digit rate hikes in their Citizens policies. But bay area policyholders with the most common type of Citizens homeowners coverage will see premiums fall 3.4 percent on average, as will dozens of other pockets around the state.

In sharp contrast, rates in Hendry and Dade counties will soar 18 percent on average for similar policies. Rates will jump nearly 15 percent in Sumter County and 13 percent in Okeechobee.

Florida Insurance Commissioner Kevin McCarty approved late Thursday the 10.3 percent average rate hike for Citizens’ homeowners statewide, a tad higher than the 9.7 percent average hike that Citizens sought. But, like most issues involving Florida’s turbulent property insurance market, the reality is more complicated.

Citizens was originally intended to be the state’s insurer of last resort, but it continues to add thousands of policies from private insurers who have cut back on hurricane exposure in Florida.

Currently, Citizens has 1.2 million policies statewide, including more than 800,000 homeowners policies. In Tampa Bay, the company has nearly 300,000 policies, the majority of them covering homeowners.

Here’s a closer look at the latest attempt to shore up the finances of Florida’s largest property insurer:

Who is affected by Thursday’s decision?

Primarily homeowners and mobile home owners covered by Citizens.

In addition to signing off on a rate increase for homeowners, McCarty approved a 9.2 percent average increase for mobile home owners in Citizens’ personal lines and high-risk accounts, and a 9.1 percent increase for mobile home physical damage.

What’s the bottom line for Citizens policyholders in the Tampa Bay area?

That depends on the type of policy and where you live.

For the most common type of homeowners policy, the average rate will go down 3.4 percent in Hillsborough, Pinellas, Hernando, Pasco and Citrus counties.

For mobile home owners, it’s more complicated. Average rates will:

• Decrease 4.6 percent in Tampa and 12.1 percent in the rest of Hillsborough.

• Decrease 5.9 percent to 13 percent in the three regions in Pinellas.

• Decrease 2.1 percent for coastal Pasco and 3.5 percent for inland Pasco.

• Decrease 0.9 percent for coastal Hernando, but increase 4.1 percent for inland Hernando.

• Decrease 2.9 percent for inland Citrus and 4.9 percent for coastal Citrus.

Why the big discrepancy in rate increases and decreases between counties?

A Citizens spokeswoman said staffers were meeting Friday to analyze McCarty’s order and were unable to answer this question with any specifics. However, the insurer has previously said that some discrepancies are tied to changes in the way it calculates rates.

For years, Citizens compared the top 20 insurance providers in every county and set its rates higher than those insurers to encourage homeowners to shop around in the private market. Last year it began gradually adjusting rates to better reflect what it should be charging based on its expenses and risk models.

Why are the average statewide increases higher than what Citizens requested?

Regulators found that Citizens deserved higher premiums in large part to offset an increase in sinkhole claims. The company paid about $97 million for sinkhole claims last year but collected only $19.7 million in premiums to cover it.

Is that sinkhole surge unique to Citizens?

No. In fact, the state is investigating an increase in claims statewide far from the “sinkhole alley” area in central Florida. Insurers blame fraudulent claims and cases spurred by public adjusters, who are paid to represent homeowners. Public adjusters say insurers are trying to reject valid claims.

Wasn’t there a 10 percent cap on Citizens’ average annual rate increases?

There still is. After a three-year freeze on Citizens’ rates, legislators allowed Citizens to gradually hike premiums up to an average 10 percent a year until they become what’s considered “actuarially sound.”

But the rate approval this week does not violate the cap the way state insurance regulators see it. Part of the premium increase will go toward increasing Citizens’ cash contribution to the Florida Hurricane Catastrophe Fund. The fund, which all property insurers pay into, is used to help insurance companies pay for catastrophic losses after a major hurricane. Payments to the Cat Fund are not factored into the 10 percent cap.

Are state leaders endorsing the decision?

Gov. Charlie Crist has backed McCarty’s order, though he said he only learned of it late Thursday from the media and as of Friday morning had not been briefed on any details.

“It’s disappointing, especially during this economy,” Crist said Friday. “It’s unfortunate that it would go higher … than what was even anticipated. It’s a problem for the consumer. It’s a problem for the people.”

Florida Senate Banking & Insurance Commissioner Garrett Richter, R-Naples, said the rate increase does not violate the intent of legislation that established the 10 percent cap. One of the goals, he said, was to rapidly increase reserves in the Cat Fund.

Are more Citizens rate requests pending?

Yes. McCarty’s office is still within a 45-day window for reviewing requests, including its commercial property lines.

Copyright 2010 St. Petersburg Times – staff writers Aaron Sharockman and Michael C. Bender contributed to this report.

MIT Professor: Housing Demand About to Take Off

William C. Wheaton, professor of economics at Massachusetts Institute of Technology, argues that the housing market is due for improvement, calling home construction, “a sleeping giant that is about to wake up.”

Wheaton believes because there has been so little construction that demand exceeds the level of building and it will soon absorb excess inventory.

“Housing construction will not only rise, but it will stay high for a while, which didn’t happen in previous recoveries,” Wheaton predicts.

Source: Fortune, Nin-Hai Tseng (09/17/2010)

NAR Hails Bill to Help Short Sales

Homeowners who are underwater with their mortgage may find that relief is on the way from a bill strongly supported by the National Association of Realtors (NAR) that would impose a deadline on lenders to respond to short-sale requests.  The legislation, H.R. 6133, “Prompt Decision for Qualification of Short Sale Act of 2010,” was offered yesterday in Congress by U.S. Reps. Robert Andrews (D-N.J.) and Tom Rooney (R-Fla.). The bill would require lenders to respond to consumer short sale requests within 45 days.  “The short sale, which requires lender approval, is an important instrument for homeowners who owe more than their home is worth,” said NAR President Vicki Cox Golder, owner of Vicki L. Cox & Associates in Tucson, Ariz. “While the lending community has worked to improve the size and training of their short sales staffs, they still have a long way to go on improving response times.”

The number of potential short sale properties is rising across the country. According to NAR data, in the second quarter of 2010, Nevada, California, Florida and Arizona are states where significant shares of all properties on the market are potential short sales: 32 percent, 28 percent, 27 percent and 24 percent, respectively.  “Unfortunately, homeowners who need to execute a short sale are severely hampered because lenders (loan servicers) are unable to decide whether to approve a short sale within a reasonable amount of time. Potential homebuyers are walking away from purchasing short sale property because the lender has taken many months and still not responded to their request for an approval of a proposed short sale price. Many consumers have mentioned that the delay in short sale price approval exceeds 90 days, and in many cases never arrives,” Golder said.  She commended Reps. Andrews and Rooney for their efforts on the bill and urged Congress to pass the bill qui  ckly.

Bank of America Horror Stories

Three months ago, if a buyer made an offer on our listing and was getting their loan from BOA 3 months ago, I would have thought nothing of it. Today, I would think that buyer is worthless. In my experience BOA can’t close buyer loans. They made lots of promises and then didn’t follow thru. However, let me give you some other agents stories before I tell you mine.

BOA Horror Story #1: “I wrote a new home purchase contract with B of A as the lender. The buyer was putting down $140,000 on a $185,000 purchase price. Yes – it was a very small amount of money he was getting a loan for  but B of A approved it and we were all set to close 4 ½ months later. The buyer flew out the week before to do the walk-through and get the money from his bank. The HUD-1 was emailed to me on Friday and I called the B of A loan officer to confirm our closing on the following Monday at 11:00 A.M. We were good to go – so I thought.

At 9:00 I got a call from the loan office saying B of A decided not to do the loan. I asked why it was denied 2 hours before closing (signing)? He said it was not denied, B of A had changed threir mind and decided not to do the loan.Lance Mohr

BOA Horror Story #2: I had a Buyer for a foreclosed home. His credentials were perfect for an FHA loan. The Buyer wanted to close asap. All the paperwork was sent to his loan company (BOA). It was suggested by the Sellers agent that BOA might work faster as it was their foreclosed property. I forwarded everything on time. It was difficult to get through to the BOA contracted loan officer by phone .. my emails were never answered.

The closing date drew nearer. I kept calling the contracted loan officer, but did not receive any replies from her..I finally called a manager at BOA who informed me the closing officer was very busy with the Tax Credit. They only had a certain amount of time to present the paperwork. I accepted the explanation but explained that my customer was anxious to close on his property as he and his family were living in a hotel. The Seller’s bank had stipulated a final date for Closing or the contract would be withrawn.

Another week went by and I continued to leave messages for the closing officer with no replies. I again called a BOA manager and was told that the contracted loan officer was on vacation and there was nothing that could be done until she returned…!!!

Her vacation return date was one day before the closing date. On the morning of closing date I was forwarded a copy of the Appraisal that had been performed 4 weeks previously WITH stipulation that the glass front door had to be repaired or replaced before closing!! I was not notified of this fact at any time other than the day of closing! The Sellers agent was unaware of the Appraisal report as he received it the same day as I did.

I was finally able to talk with the Loan Officer.. at this point I was ready to scream at her! She sugar coated her actions, however, the door still had to be repaired/replaced!! We were able to find a company to go out immediately to repair the door to satisfy the Appraiser. We got the Appraiser to reappraise the property just an hour before the set time for Closing.

To say I was upset/frustrated for the Buyer is an understatement. I worked miracles to Close the house .. . all because BOA’s “Contracted Loan Officer” was too busy and went on vacation. I will never!!! use BOA services again. ” Georgie Moore

Ben’s Horror Story: Another agent brought a buyer who was buying a short sale. The buyer was using BOA for their loan. I thought it wasn’t a problem. Today, we are 2 months past when we got the short sale approval. They have asked for two extensions and won’t give us a solid time to close. Although, “It should be any days now.”

She said she could close on the 26th of August if the buyer sent her final conditions by the 22nd. He sent it and she still can’t close. The processor and loan officer will not answer my e-mails and give me an answer. So we keep on asking for short sale extensions.

My bottom line: We won’t negotiate a short sale on behalf of a buyer using BOA financing. We’re not doing the work unless the buyer uses a lender that can actually close. I’ve got bills to pay and can’t handle this level of incompetence.

Sellers (and short sale negotiators at BOA) don’t accept incompetence from me. They demand that I do my job.

Ben & Chris Curry

I thought this was something people needed to know so I did a blog post on B of A. If you have any questions about Tampa short sales or Tampa home prices please give us a call.

To Rent or Buy? How to Weigh it Out

It may go against every instinct for a Realtor to tout the benefits of renting over buying, but from about 2005 until just recently, it’s made more financial sense in many markets to rent as housing prices skyrocketed.

Now, following the epic housing crash and with interest rates at record lows, economists and financial planners say it might be time to rip up that annual rental lease for a more long-term, at least eight-year, commitment to buy.

But the decision often has as much to do with personal circumstance as real estate’s financial ups and downs, and individuals have many issues to weigh when considering the benefits of buying over renting.

Of course, it’s also all predicated on whether a potential buyer can even get financing from banks still struggling with bad boom-time loans.

In Pearlman’s case, the rigors of keeping up an 84-year-old home have become a burden, and she and her husband eventually want to move west to Wellington where they hope to find a larger piece of land.

An unsure market, however, is also a driving force in making the couple renters again.

Pearlman said the argument against renting is always “you’re throwing money away” while earning no equity, but she figures there’s no harm in renting for a year to see where the market settles out.

“My husband wants to rent because he just doesn’t want to take a chance right now,” Pearlman said. “Look, you can get a nice house for $1,250 a month, no homeowners association payment, no property taxes, no lawn care, no responsibility.”

Doing the math

Andres Carbacho-Burgos, a Moody’s economist, said there’s little doubt that renting in South Florida was a better bet during the peak years of 2005 and 2006.

“What has happened since then is the housing prices have come down by a lot more than the costs to rent an apartment,” he said.

To illustrate that, Carbacho-Burgos looks to a price-rent ratio that considers the buy-versus-rent question in a more mathematical way. The ratio is calculated by taking the median cost to buy a home and dividing it by the annual cost to rent.

A price-rent ratio less than 20 is generally considered a sign that it is better to buy.

For example, if the annual rent on a three-bedroom, one bathroom home is $15,000, and a similar home is selling for $200,000, the rent ratio is 13, favoring buying as the better option.

According to Moody’s, the average price-rent ratio using apartment rents in 2006 in Palm Beach County peaked at 31 but was down to 18 in the first quarter of this year.

But that number isn’t perfect. Theoretically, the calculation should use home rental rates, which aren’t easily available in a uniform format for specific areas.

Also, the 18 ratio is based on using median home prices from the National Association of Realtors, which can be fickle and quick to change depending on the volatility of the market.

Carbacho-Burgos said if the S&P/Case-Shiller home price index is used, Palm Beach County’s price-rent ratio today is about 15. The S&P/Case-Shiller index calculates prices monthly using a three-month moving average. It also uses data on properties that have sold at least twice in order to capture the true appreciated value of each home.

“I can’t answer the question in absolute terms, but the ratio is much closer to the norm now than at the peak of the housing market bubble,” Carbacho-Burgos said.

A more complex evaluation of whether it’s better to rent or buy in today’s market can be completed using one of many online calculators. Most of these calculators consider mortgage rates, down payments, tax breaks and closing costs when figuring the ratio. Some go as far as calculating annual maintenance on a home, monthly rental insurance and your personal rate of savings.

At Lendingtree.com, the calculation favors buying a $200,000 home as opposed to renting at $1,100 a month under the following circumstances: the buyer puts 20 percent down on a 30-year loan with a fixed 4 percent interest rate, and plans to stay in the home for at least five years.

Thinking long term

While the total cost to own the home in the first year far exceeds the rental payments, after five years the net cost to own is about $51,000 compared with paying $66,900 to rent.

“You should look at a house as something you want to live in, not a get rich quick thing,” said Barry Rabinowitz, a certified financial planner and principal of BER Financial Group, LLC in Plantation.

Rabinowitz recommends buying a home now if a person plans to stay in it for five to eight years.

“The days of houses going up in value 25 to 30 percent is not realistic, but neither is the other extreme of them going down that much either,” he said.

In July, Palm Beach County’s median sale price for a single-family home was $226,000, an 8 percent decrease from July last year, but down 42 percent compared with the price in 2006 of $390,100.

Rabinowitz’s recommendation is also based on itemizing deductions on a tax return, which allows a homeowner to claim mortgage interest and property taxes.

The mortgage-interest tax deduction doesn’t eliminate the cost of borrowing money, but it does reduce it.

“When you rent a house, nothing is deductible,” Rabinowitz said.

How much can be deducted depends on the mortgage interest paid each year. It is also important to consider what your standard deduction is for the year depending on age, marital status and income bracket. For example, the standard deduction for married couples in the 25 percent tax bracket and filing a joint return is $11,400 for 2010. If your mortgage interest was $11,520, for example, you get a slightly higher deduction, but you have to pay $11,520 in interest to receive it. The standard deduction for single filers for 2010 is $5,700.

House vs. condo

Answers to the rent vs. buy question also vary dramatically depending on whether it is a condominium or single-family home.

Peter Zalewski, a principal with Miami research and brokerage firm Condo Vultures, said you can buy an average condominium today in Palm Beach County for about as much as it would cost to rent it.

Single-family homes in neighborhoods on the upswing, however, are going to be more expensive in the first several years.

“If a buyer is looking at a five- to eight-year hold and understands different neighborhoods, buy today,” Zalewski said. “The likelihood is that single-family homes will recover quicker than a condo.”

And contrary to what conventional wisdom might say, Zalewski and Pearlman agreed that owners are not so desperate that they are offering rock-bottom rates on rental properties.

Renters should expect rates to go up between 3 percent and 5 percent each year, something that doesn’t happen with a fixed interest rate mortgage.

“If a tenant squeezes a landlord when the market is down, when it recovers, that landlord is going to squeeze back,” Zalewski said.

Copyright © 2010 The Palm Beach Post, Fla., Kimberly Miller.

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