The Bosshardt Blog

How Will We Know when Gainesville Homes are Going to Start Increasing in Value Again?

It seems like everywhere I go I get asked the same questions "How's the market?" "Are things getting any better?" My answer is the same lately, "Yes, better for us brokers and agents in that activity is up modestly, but worse for all of us in that prices continue to fall." The real question that everyone should ask is "How will we know when the housing market will START to get better, and what should we look for." Thankfully there are some really smart people out there to help us answer this question.

Yesterday the Joint Center for Housing Studies (JCHS) released their annual report "State of the Nation's Housing 2010" detailing comprehensive and well researched reports about the state and the future of the national housing market as we know it today. The National Association of Realtors also released their local markets reports for Gainesville today for the first quarter of 2010. That data matched with JCHS's research can help us figure out where we are and where we are headed.

Some good news in the JCHS report is that the mortgage payment on a median priced home has fallen to a 20 year low. Other good news is that they see no immediate increase in rates, and only tighter lending restrictions stand in the way for home buyers. NAR's report supports this local somewhat. Showing that home affordability local has fallen below our historical average.

With our exorbitantly high local taxes this advantage may be muted as these numbers don't include property taxes. Just in case you missed it last week, the Gainesville Sun finally sounded the bell on this issue, Citing a report from the Florida Department of Revenue that concluded our property taxes are the highest in the state at $23.60 per $1000 of assessed value. The report also discounted the popular argument that our taxes must be that high due to so much of our property being off the tax roll. They cited Leon county with a similar problem, yet taxes there are only $15.60 per $1000. Alachua county is currently moving forward with implementing a new fire assessment tax, raising taxes even further.

Separately the Gainesville Times reported the City of Gainesville is considering an increase in their property tax millage rate. 

Back to the JCHS report, they say that unemployment is going to be the key obstacle for a housing market rebound. Laurel gourd with Harvard University writes:

 

Over the coming decade and once employment stages a convincing comeback, demographic forces should lift currently depressed levels of household growth and spur increased construction and sales. Bolstered by immigrants, the echo-boom generation is already larger than the baby boom generation, and the baby-bust generation (born 1966-1985) is nearly as large. If immigration matches the pace projected by the Census Bureau and headship rates by age and race hold steady, household growth should come close to 15 million from 2010 to 2020. Even if it falls to half the projected pace, household growth should equal the 12.5 million growth from 1995-2005.

 

Locally, The National Association of Realtors released data that shows unemployment on the rise. Oddly enough, their definition of Gainesville includes Alachua County and Gilchrist County. That probably explains why they list our unemployment a whopping 8.5% from 6.2% one year ago. That's still better then the national average, but higher then the number I previously reported from the Department of Labor and Statistics.

The JCHS Study also addresses Rental Housing in detail. In essence, rents have decreased, vacancies are up, incentives are up, and defaults and late payments from apartment owners are on the rise. I talked to one local apartment owner the other day. He told me that his physical occupancy (percentage of rooms/units/beds occupied) is hovering just below 80%. His economic occupancy (percentage of rents received after incentives versus rent advertised) was below 60%. Those type of vacancy numbers can only continue to put pressure on residential home prices and rents, especially in the struggling condominium market.

The one curious and perhaps concerning exception to this is that the number of affordable rentals, defined as rentals with a monthly rental payment of $400 or less have declined. Primarily due to demolition. Locally there was one affordable property I know of that was demolitioned after it was burned in a fire.

There is some hope moving forward for the rental markets. The rental housing study concludes that the overall population of renters increased 10% from 2004-2009. They primarily cited foreclosures and immigration and they expect this trend to continue for the next decade. Still no help from the rental markets in the near term future to stabilize home prices, when they can't even stabilize rents.

Unfortunately for us foreclosures locally only seem to be worsening. The NAR report says actual foreclosures in Alt A, prime and sub-prime are on the rise in our area, as are foreclosures in process. Foreclosures are not only elevating supply they are now so prevalent that in some cases the only comparable sales an appraiser can use are foreclosure properties.

Local supply is still high and buyers who can get money are finding great bargains, and perhaps proving that this may well be one of the best buying opportunities to hit the gainesville housing market in decades.

Sellers are often frustrated. More so then ever before we are seeing sellers bring money to the closing in order to sell their houses. Multiple offers have been coming in on quality properties, but in the past these offers would bring full price or more. In three multiple offer situations last week, no one offered full list price.

There is no doubt that our housing market will recover. It's just a matter of when, and how transparent will the recovery be. We need some factual signs. The experts agree that when local housing supply starts to decrease, job growth returns, property tax relief, or a decrease in rental vacancies comes we will start to get some price support. Until then prices will likely continue to fall.

Rest assured as soon as any of these indicators start to show a glimmer of hope, I will be happy to tell you all about it. In the meantime sellers need to be ahead of the curve, that means expecting prices to fall further and making sure once a prospect gets in the door they do everything in their power to keep them. 

 

 

 

 

How is the Gainesville Housing Market? Prices continue to Fall...

Let's start with the rays of sunshine. Rates are low if you are buying your primary residence, and because of how bad things look they could get lower. Also senate bill 1196 was signed and looks to give some much added relief to homeowner and condo associations. Among other things it enables associations to go directly to renters when a unit owner is behind on their assessments. The other good news. Things always look darkest right before the storm clears.

And it was a pretty dark week for real estate markets across the country. We started with the New York times and the Wall Street Journal running stories about homeowners who were much happier after deciding to just to stop making payments and start getting their lives back together, while lenders fumble to file foreclosure actions that often can take up to two years. One story even cited Bank of America executives admitting that it is just better for owners to do it, then fight them for a loan modification. All I can say is that isnt good for the future of real estate prices.

On Tuesday I was fortunate enough to do our weekly caravan with one of our top sales agents Henry Rabell. We walked into an overprice home and I quipped "I don't like overpriced listings." Henry proceeded to educate me on the value of them. His theory as long as their our overpriced listings it helps the sellers who are serious about selling stay ahead of the curve without cutting prices so much. The translation, prices are declining fast.

Jeremy Scheer one of my short sale specialists was there and he confirmed that he feels the same. "I Just had a closing on a bank owned property and I asked the REO agent if they saw more foreclosures coming in Gainesville." Jeremy told me the agents response "More then ever."

Wednesday I dealt with three different lender issues. One on an FHA appraisal from an out of area appraiser. There were several mistakes: a comp with a 1 car garage as being listed as having a 2 car garage, another comp was a cash sale on a bank owned property with no adjustment for the financing nor terms. There were other mistakes as well but after an appeal no changes were made and once an FHA appraisal is done that appraisal counts no matter what lender tries to take a buyer through FHA. The appraisal sticks with the property. Sellers once again have good reason to be cautious with an FHA contract.

Another VA deal highlighted how sellers should be wary of those contracts as well. In this deal, a short sale, the VA buyer switched lenders mid contract and the new lender had close to $1300 in junk fees that the buyer was not allowed to pay. The original contract and lender had the fees capped at $500. The most bizarre turn of events was that the seller was willing to cover the difference but, because it was a short sale the sellers lender wouldn't allow it. Sellers once again have good reason to be cautious with a VA contract.

Lenders were calling out appraisals. I guess some of the regulatory agencies are now telling banks they won't honor appraisals older then 2007 on commercial properties. I think in this market ordering an appraisal is like ordering an MRI on every patient a doctor sees. Pretty much 95% of the time you are going to find something wrong. The biggest question it raised is who is going to pay for all these appraisals? Commercial appraisals aren't cheap. Its either the bank or the borrower. hmmmm.

Thursday was rough for me personally as I opened a letter from the county stating they were going to start charging "fire assessment" fees in lieu of taxing for fire services. The letter claimed that the county was attempting to broaden the tax base and not have a select few carry the entire burden as an assessment was not subject to exemptions such as homestead, agricultural and others. As I looked the fee was almost double the fee based on my mileage rate, and while I know the county would like the debate to be about how much to charge, to me its about the fact that we can't stand for any new taxes, until our government proves they can control expenses.

On Friday we got the bad news that while nationally there are new jobs, they basically are all temporary census worker jobs. Locally Gainesville fell to the 288th ranked metropolitan market for percent change in unemployment. In April of 2009 our unemployment rate was 5.5, in April 2010 it has jumped to 7.2%. That's not good for our market.

Set against the backdrop of all this, I had two buyers call and complain about their agents or their offers and how they lost a property in a multiple offer scenario they wanted. The problem is that they didn't believe their agent who advised them to make their best offer. The better offer always wins, not matter the market. I always used to tell my buyers to make the best offer you can for the property you want. Make an offer that you are comfortable losing the property with. Look at your second and third choices and walk yourselves through the possibility of living in one of those homes. Remember that you saw everything in this price range and you and at least one other person like it the best. That probably means the home is priced right, or too low. Especially with all the inventory the current market has to offer.

In any market the price a buyer and seller agree to becomes the new true market price.  We are in a declining market so prices are going to fall and there is no sense in trying to time the market perfectly. These aren't stocks though, they don't trade daily. Be ready to pay for the house you want to live in.

Lets close out the week by seeing what CNN has to say about the Cabot Koppers superfund cite in its two part series "Toxic Towns USA." For the record the EPA has notified me they do plan on adjusting their formal decison of record, but not until December. I looked in the MLS for a client of ours last week. I think the homes in the current site are selling for .50 on the dollar, of the already .50 on the dollar in this current market.