NAR: Pending home sales rise in June
WASHINGTON – July 28, 2011 – Pending home sales increased in June following a wide swing down in April and then up in May, according to the National Association of Realtors® (NAR). Month-to-month activity increased in the West and South but declined in the Midwest and Northeast. However, all regions show strong double-digit gains from a year earlier.The Pending Home Sales Index, a forward-looking indicator based on contract signings, rose 2.4 percent to 90.9 in June from 88.8 in May, and is 19.8 percent above the 75.9 reading in June 2010, which was the low point immediately following expiration of the homebuyer tax credit. The data reflects contracts but not closings.
Lawrence Yun, NAR chief economist, said there may be some increase in closed existing-home sales.“For the majority of transactions, the lag time between pending contacts to actual closings is one to two months. Therefore, the two consecutive months of rising activity should lead to overall improvement in closed sales in upcoming months,” he said. “Though a higher than normal cancellation rate can hold back final closing figures, it could well be that some past cancellations are nothing more than delayed buying decisions rather than outright cancellations.”Yun said tight credit and economic uncertainty have been constricting the market. “The best way to ensure a more solid recovery in housing is to simply return to normal, sound credit standards so more creditworthy homebuyers can get a mortgage,” he said.
“Washington also should not rock the boat with policy changes that would negatively impact affordable credit or otherwise increase the cost of buying or owning a home,” Yun added.
The PHSI in the Northeast slipped 0.4 percent to 68.9 in June but is 19.4 percent higher than June 2010. In the Midwest the index fell 3.7 percent to 79.7 in June but is 26.4 percent above a year ago. Pending home sales in the South increased 4.4 percent to an index of 99.2 and are 19.1 percent higher than June 2010. In the West the index rose 6.4 percent to 107.0 in June and is 16.4 percent above a year ago.
Existing-home sales this year are expected to total 5.0 million, slightly higher than 2010. Similarly, little change is forecast for aggregate home prices with several indicators, including NAR’s median prices, showing recent signs of stabilization.
© 2011 Florida Realtors®
Monday, August 1, 2011
Wednesday, July 20, 2011
Housing Starts Surge 9 Percent; Signal A Strong Fall Season
by Chris Brown on Wednesday, July 20, 2011 at 8:46am
Builders are busy once again.
According to the Census Bureau, Single-Family Housing Starts rose to 453,000 on a seasonally-adjusted, annualized basis in June – a 9 percent spike from the month prior and the highest reading in 3 seasons.
A “Housing Start” is defined as a home breaking ground on new construction.
June’s reading is largest one-month jump since June 2009. The reading surprised Wall Street despite that the Homebuilder Confidence survey may have foreshadowed the results.
Monday, the National Association of Homebuilders reported that builders are more confident about the future of the new home sales market, and forecast a large increase in sales over the next 6 months.
For buyers of new construction, the news is mixed. Rising confidence may mean that builders in Orlando are less willing to negotiate on upgrades and/or price, but rising construction levels add inventory to an already fragile market.
Adding to the nation’s home supply without a corresponding increase in buyer demand shifts negotiation leverage away from builders.
The Census Bureau also reported on Building Permits.
In June, permits for single-family homes rose by 1,000 units nationwide on a seasonally-adjusted, annualized basis. This, too, bodes well for housing because 89 percent of homes with permits start construction within 60 days.
Momentum should carry forward into fall.
If you’re buying new construction in Florida , ask your real estate agent about local home supply, and how the market is trending. With mortgage rates low and the fall buying season approaching, you may find some of your best deals in the next few weeks.
Builders are busy once again.
According to the Census Bureau, Single-Family Housing Starts rose to 453,000 on a seasonally-adjusted, annualized basis in June – a 9 percent spike from the month prior and the highest reading in 3 seasons.
A “Housing Start” is defined as a home breaking ground on new construction.
June’s reading is largest one-month jump since June 2009. The reading surprised Wall Street despite that the Homebuilder Confidence survey may have foreshadowed the results.
Monday, the National Association of Homebuilders reported that builders are more confident about the future of the new home sales market, and forecast a large increase in sales over the next 6 months.
For buyers of new construction, the news is mixed. Rising confidence may mean that builders in Orlando are less willing to negotiate on upgrades and/or price, but rising construction levels add inventory to an already fragile market.
Adding to the nation’s home supply without a corresponding increase in buyer demand shifts negotiation leverage away from builders.
The Census Bureau also reported on Building Permits.
In June, permits for single-family homes rose by 1,000 units nationwide on a seasonally-adjusted, annualized basis. This, too, bodes well for housing because 89 percent of homes with permits start construction within 60 days.
Momentum should carry forward into fall.
If you’re buying new construction in Florida , ask your real estate agent about local home supply, and how the market is trending. With mortgage rates low and the fall buying season approaching, you may find some of your best deals in the next few weeks.
Wednesday, July 13, 2011
Wealthy Americans upgrade to pricier Primary Homes
NEW YORK – July 13, 2011 – Amid still-depressed housing numbers that dominate headlines, a new survey by the independent New York City-based Luxury Institute and the Institute for Luxury Home Marketing finds that high net-worth U.S. homeowners are taking advantage of the downturn and trading up into higher-priced primary residences.
Lured by lower prices, one in four U.S. consumers with an annual income of $150,000 or more have bought a residential property since 2008 at a median purchase price of $509,000 – an increase of 3.2 percent from the 2005 to 2007 period.
Most new residences (83 percent) are single-family homes and two-thirds of those are in suburban settings. Seventeen percent plan to purchase additional property this year, while 23 percent of those younger than 50 plan to buy in 2011.
More than one-third (37 percent) of the wealthy value their homes at $1 million or higher, while 32 percent assess their primary residence to be worth $500,000 or less.
Seventy percent of wealthy homebuyers used a real estate agent to help with their property purchase, and two-thirds of that group says they would work with the same agent again.
“Luxury is the good news story in real estate,” says Laurie Moore-Moore, CEO of The Institute for Luxury Home Marketing. “The number of wealthy households has jumped back to pre-recession levels and affluent home buyers are actively purchasing.
The National Association of Realtors’ statistics show that national home sales at $1 million and above were up more than 18 percent year-over-year in 2010. Strong activity continues this year as well.”
For complete details from this WealthSurvey on wealthy homebuyer attitudes, plans and marketing preferences, visit LuxuryInstitute.com.
© 2011 Florida Realtors®
Lured by lower prices, one in four U.S. consumers with an annual income of $150,000 or more have bought a residential property since 2008 at a median purchase price of $509,000 – an increase of 3.2 percent from the 2005 to 2007 period.
Most new residences (83 percent) are single-family homes and two-thirds of those are in suburban settings. Seventeen percent plan to purchase additional property this year, while 23 percent of those younger than 50 plan to buy in 2011.
More than one-third (37 percent) of the wealthy value their homes at $1 million or higher, while 32 percent assess their primary residence to be worth $500,000 or less.
Seventy percent of wealthy homebuyers used a real estate agent to help with their property purchase, and two-thirds of that group says they would work with the same agent again.
“Luxury is the good news story in real estate,” says Laurie Moore-Moore, CEO of The Institute for Luxury Home Marketing. “The number of wealthy households has jumped back to pre-recession levels and affluent home buyers are actively purchasing.
The National Association of Realtors’ statistics show that national home sales at $1 million and above were up more than 18 percent year-over-year in 2010. Strong activity continues this year as well.”
For complete details from this WealthSurvey on wealthy homebuyer attitudes, plans and marketing preferences, visit LuxuryInstitute.com.
© 2011 Florida Realtors®
Monday, July 11, 2011
Florida Mortgage rates moved slightly higher.
Keeping you updated on the market! For the week of July 11, 2011
MARKET RECAP
The past week was slow on housing news, which is understandable given the Independence Day weekend. Mortgage rates moved slightly higher, and it's possible they could start trending higher through the month.
One reason is hiring, which is on the rebound. ADP's National Employment Report showed that private sector employment rose to 157,000 new jobs in June, nearly triple May's rate and well-ahead of the consensus estimate of 68,000 from Reuters. June’s employment figures suggest the economic recovery, which slipped in the spring, has found new traction. New traction, in turn, could pressure interest rates to move higher.
Real estate research firm DataQuick reported that sales of existing homes in Phoenix reached a six-year high of 9,837 in May. This regional piece of housing news is important for the economics lesson it imparts. We've noted many times in the recent past that lower prices stimulate sales and are the most efficient, most expedient means of clearing high inventory. The Phoenix market is proving that to be true.
DataQuick also reported that 40 percent of the Phoenix sales were for homes less than $100,000, which is a 40 percent increase from year-ago sales. The median price of a home in Phoenix stayed consistent at $120,000, which is actually a good sign: increased demand is causing more distressed inventory to hit the market that needs to be cleared. With both supply and demand increasing, prices are likely to hold steady going forward. Once the excess supply is absorbed, prices can then start moving higher.
Many of the homes sold in Phoenix were investment rental property. This makes sense; many people are still shut out from the mortgage market due to either bad credit or insufficient down payment. This is producing a renaissance in rental properties. The Wall Street Journal reports that the average nationwide rate for apartments and home rentals is up 6.7 percent year-over-year. Rent increases for studio apartments and five-bedroom homes were particularly vigorous, rising 14.3 percent and 12.1 percent, respectively. Rent.com expects even more rent hikes this year.
This upward price trend in rents suggests to us that buying an owner-occupied home will become a more viable option over the next couple of years. Here, again, is another economics lesson: as investors buy rental properties because of rising rents, they also stimulate interest in more potential homebuyers who are renting. This is one reason we are bullish on the long-term outlook for housing.
Economic Indicator
Release Date and Time
Consensus Estimate
Analysis
International Trade(May)
Tues. July 12,8:30 am, et
$44.3 Billion (Deficit)
Moderately Important. Falling petroleum prices are shrinking the deficit.
Mortgage Applications
Wed., July 13,7:00 am, et
None
Important. Higher purchase activity reflects a rise in home sales.
Producer Price Index(June)
Thurs., July 14,8:30 am, et
All Goods: 0.4% (Decrease)Core: 0.2% (Increase)
Important. Falling energy prices have slowed producer-price increases, but inflation remains a concern.
Retail Sales(June)
Thurs., July 14,8:30 am, et
0.4% (Decrease)
Moderately Important. Sales are easing on fewer big-ticket purchases and falling gasoline prices.
Consumer Price Index(June)
Fri., July 15,8:30 am, et
All Goods: 0.1% (Decrease)Core: 0.2% (Increase)
Important. Consumer-price inflation remains elevated, so an unexpected rise could send interest rates higher.
Industrial Production(June)
Fri., July 15,9:15 am, et
0.7% (Increase)
Moderately Important. Capacity utilization continues to increase, suggesting strong business-sector growth.
Time to Remove the Monkey Wrench from the Gears
Trouble financing a home purchase is the one variable that could derail our prediction of a housing recovery. Bloomberg News recently ran a compelling article that encapsulates our most frequent lament: we need more liberal and subjective underwriting standards to get more buyers into homes. Bloomberg writes, “While a record share of Americans want to buy homes, U.S. policies [on banking and lending], often working at cross-purposes, are making it more difficult.”
We've been saying for months now that the market has gone too far in the direction of excessively high standards. Security-filings data provided by Fannie Mae show that nine of 10 mortgages it bought in the first quarter of 2011 were for borrowers with credit scores higher than 700, a 32 percent increase in the percentage of these higher-score loans. Meanwhile, the average credit score for FHA loans was 701 in April, up from 669 three years earlier.
There is a disconnect at work. People, a lot of people in fact, still want a home. In May, a record 5.5 percent of Americans said they wanted to purchase a home, according to the Conference Board, a New York research firm. This is frustrating, especially when considering we have the expertise and experience to price risk, but many people don't want to apply for a loan because they believe it is a waste of time.
It's no a waste of time; we want to speak with anyone interested in a purchase or refinance loan. However, if there was a cause that we could all get behind, it is loosening up the lending purse strings and getting more people mortgages who are worth the risk and can afford it.
Courtesy Patti Wilson, Mutual Bank of Omaha.
MARKET RECAP
The past week was slow on housing news, which is understandable given the Independence Day weekend. Mortgage rates moved slightly higher, and it's possible they could start trending higher through the month.
One reason is hiring, which is on the rebound. ADP's National Employment Report showed that private sector employment rose to 157,000 new jobs in June, nearly triple May's rate and well-ahead of the consensus estimate of 68,000 from Reuters. June’s employment figures suggest the economic recovery, which slipped in the spring, has found new traction. New traction, in turn, could pressure interest rates to move higher.
Real estate research firm DataQuick reported that sales of existing homes in Phoenix reached a six-year high of 9,837 in May. This regional piece of housing news is important for the economics lesson it imparts. We've noted many times in the recent past that lower prices stimulate sales and are the most efficient, most expedient means of clearing high inventory. The Phoenix market is proving that to be true.
DataQuick also reported that 40 percent of the Phoenix sales were for homes less than $100,000, which is a 40 percent increase from year-ago sales. The median price of a home in Phoenix stayed consistent at $120,000, which is actually a good sign: increased demand is causing more distressed inventory to hit the market that needs to be cleared. With both supply and demand increasing, prices are likely to hold steady going forward. Once the excess supply is absorbed, prices can then start moving higher.
Many of the homes sold in Phoenix were investment rental property. This makes sense; many people are still shut out from the mortgage market due to either bad credit or insufficient down payment. This is producing a renaissance in rental properties. The Wall Street Journal reports that the average nationwide rate for apartments and home rentals is up 6.7 percent year-over-year. Rent increases for studio apartments and five-bedroom homes were particularly vigorous, rising 14.3 percent and 12.1 percent, respectively. Rent.com expects even more rent hikes this year.
This upward price trend in rents suggests to us that buying an owner-occupied home will become a more viable option over the next couple of years. Here, again, is another economics lesson: as investors buy rental properties because of rising rents, they also stimulate interest in more potential homebuyers who are renting. This is one reason we are bullish on the long-term outlook for housing.
Economic Indicator
Release Date and Time
Consensus Estimate
Analysis
International Trade(May)
Tues. July 12,8:30 am, et
$44.3 Billion (Deficit)
Moderately Important. Falling petroleum prices are shrinking the deficit.
Mortgage Applications
Wed., July 13,7:00 am, et
None
Important. Higher purchase activity reflects a rise in home sales.
Producer Price Index(June)
Thurs., July 14,8:30 am, et
All Goods: 0.4% (Decrease)Core: 0.2% (Increase)
Important. Falling energy prices have slowed producer-price increases, but inflation remains a concern.
Retail Sales(June)
Thurs., July 14,8:30 am, et
0.4% (Decrease)
Moderately Important. Sales are easing on fewer big-ticket purchases and falling gasoline prices.
Consumer Price Index(June)
Fri., July 15,8:30 am, et
All Goods: 0.1% (Decrease)Core: 0.2% (Increase)
Important. Consumer-price inflation remains elevated, so an unexpected rise could send interest rates higher.
Industrial Production(June)
Fri., July 15,9:15 am, et
0.7% (Increase)
Moderately Important. Capacity utilization continues to increase, suggesting strong business-sector growth.
Time to Remove the Monkey Wrench from the Gears
Trouble financing a home purchase is the one variable that could derail our prediction of a housing recovery. Bloomberg News recently ran a compelling article that encapsulates our most frequent lament: we need more liberal and subjective underwriting standards to get more buyers into homes. Bloomberg writes, “While a record share of Americans want to buy homes, U.S. policies [on banking and lending], often working at cross-purposes, are making it more difficult.”
We've been saying for months now that the market has gone too far in the direction of excessively high standards. Security-filings data provided by Fannie Mae show that nine of 10 mortgages it bought in the first quarter of 2011 were for borrowers with credit scores higher than 700, a 32 percent increase in the percentage of these higher-score loans. Meanwhile, the average credit score for FHA loans was 701 in April, up from 669 three years earlier.
There is a disconnect at work. People, a lot of people in fact, still want a home. In May, a record 5.5 percent of Americans said they wanted to purchase a home, according to the Conference Board, a New York research firm. This is frustrating, especially when considering we have the expertise and experience to price risk, but many people don't want to apply for a loan because they believe it is a waste of time.
It's no a waste of time; we want to speak with anyone interested in a purchase or refinance loan. However, if there was a cause that we could all get behind, it is loosening up the lending purse strings and getting more people mortgages who are worth the risk and can afford it.
Courtesy Patti Wilson, Mutual Bank of Omaha.
Friday, July 1, 2011
Historic Sanibel Lighthouse Decked Out For Independence Day
Historic Sanibel Lighthouse located at Lighthouse Beach, 1 Periwinkle Way, has been decorated with traditional patriotic red, white and blue bunting in celebration of Independence Day. The decorations will remain through Tuesday, July 5. Sanibel Lighthouse is the most photographed icon in Lee County and is a historic as well as a navigational and marine landmark.
The Sanibel Lighthouse was the first lighthouse on Florida's Gulf Coast north of Key West and the Dry Tortugas and was completed in 1884. It is a popular sightseeing destination for tourists, locals, and island residents. The lighthouse was placed on the National Register of Historic Places in 1974 and also identified as a Historic Site and Structure within the 1976 Sanibel Plan.
For more information on Sanibel history click here.
Thursday, June 30, 2011
Cash Deals Dominate Some Luxury Markets
Cash Deals Dominate Some Luxury Markets
Cash is king in high-end real estate this year, serving to stabilize the market as tight credit conditions and depreciated home values continue to plague the embattled real estate sector.
At least 30 percent of all purchases were financed with cash between mid-April and mid-May, according to the May 2011 Realtors Confidence Index by the National Realtors Association, and the numbers are even more robust for the luxury property market.
In the Fort Lauderdale, Florida area, 57 percent of all single-family homes purchased and priced over $1 million were cash buys between Jan.1 and May 31 of this year, says Vickie Arcuri, an agent with EWM Realtors. In the million-dollar plus condo market, 42 out of the 47 units sold during the same time period were cash purchases.
The south Florida market is particularly hot for out-of-state and foreign investors, who often find it more difficult to secure financing.
“Tight credit and lending criteria are some of the reasons why cash is so popular and it significantly affects the upper-end of the market,” says Arcuri. Jumbo loans — those too big for underwriting by Fannie Mae and Freddie Mac — typically have higher interest rates than government-backed mortgages. The loan amount that falls into jumbo loan territory varies from one local real estate market to another. In the Fort Lauderdale area, a jumbo loan is anything above $620,000.
When you wave cash around, you can lower the purchase price and dictate the terms of the deal so much more effectively” said Ross Levine, a partner in the law firm of Schwartz, Levine and Kaplan. He recently represented a seller looking to offload a $4.5 million Manhattan property — a smooth deal made easy because of cash.
“The sellers said they would have never gotten the deal done if they had … (used) … a bank because the jumbo loan market makes it difficult to get a loan. Beginning on October 1, the government will dial back on the size of mortgages it guarantees in high-cost areas like San Francisco, New York and Washington.
Arizona is also benefiting from a cash spending spree — it’s a hot market for snowbirds, retirees, and those looking to purchase second homes. In 2005, only 11 percent of sales were cash, compared to 30 percent in 2009 and 43 percent in 2011, says Lynn Murtagh, branch manager of Coldwell Banker Residential in Scottsdale, Arizona.
In the north Scottsdale area, 45 percent of all sales were cash purchases for the month of May. In the high-end market — homes priced at $850,000 or more — 66 percent were purchased with cash, says Murtagh.
Even some of the top metropolitan markets around the country are seeing cash purchases on the rise. In Las Vegas, 49 percent of purchases were cash in the second quarter of this year, according to data from the popular real estate site Zillow. In Los Angeles, 33 percent of second-quarter buys were financed with cash compared to 17 percent in the same quarter of 2009. In San Fransisco, 24 percent were cash buys for the same time period versus 16 percent in the second quarter of 2009.
Cash buyers are propping up the market, increasing the number of properties sold, decreasing the level of inventory and flushing distressed properties through the system, says Jim Gillespie, CEO of Coldwell Banker Real Estate.
“If cash buyers evaporated tomorrow, real estate would be in a lot more difficult position. They are stabilizing the market even though they’re purchasing 10 to 15 percent below value,” he says.
For the seller, cash buys mean no appraisal or mortgage contingencies and faster closing dates, while the buyer enjoys the piece of mind knowing they don’t have a mortgage payment, can tap their home equity if needed, and can negotiate some extra perks in their favor.
Levine is currently representing a 23-year-old cash buyer looking to purchase a $2.5 million ground-level Manhattan property. Concerned about privacy in the all-glass building, she was able to negotiate renovations with the developer.
“She wanted to tint the windows but arguably that would permanently alter the structure and we needed the board’s consent. So I carved that language in the contract, which requires the board to approve the tinting before closing. There is no way if she had a bank with 80 percent financing that they would have ever entered into this kind of deal,” Levine says.
While a cash buy may be the sexier option at the moment, here are a few things to keep in mind for buyers and sellers.
Get educated on valueAn appraisal contingency — a condition that the purchase price of the property must be appraised at an agreed upon amount or the purchase can be canceled without penalty — is not required for a cash sale. But it may be a good idea to put an appraisal clause in your agreement to ensure you’re not overpaying. If you don’t want to go the appraisal route, be sure to solicit a market analysis from a real estate agent.
“Realtors have the tools to do an in-depth market analysis, giving the buyer a ball-park figure. They can show a buyer exactly what’s been sold in that area because we have access to a lot of data and information,” says Ingrid Carlos, branch manager of Coldwell Banker Residential in Hollywood, Florida.
Don’t make a low-ball offer. A common misconception among cash buyers is that you can deeply discount the purchase price. But with so many cash offers flooding the market, competition is steeper than you may think. Often times, the property will go to someone more well-informed on the local market.
“Typically in the luxury market, we don’t have a lot of distressed properties and distressed sellers. Owners of these properties are very secure financially and can hold onto the property for an extended period of time without accepting a low-ball offer because they’re desperate,” Arcuri says.
Don’t get swayed by the overall weakness of the real estate market. “Buyers will see the market has come down a certain percentage, and they will go in with an offer price that is discounted the same percentage on the listing price instead of realizing the news is trying to tell them that the market has come down that percentage over a number of years,” Carlos warns.
Make sure the buyer has the cash. If selling a luxury property, you want to be sure the potentially buyer can pony up seven figures when the bill comes due. A letter from the buyer’s financial institution stating the funds to finance the purchase price are available is a must. An account statement will also work, providing the funds will come from that account.
“Anyone can put an offer in writing, but if you don’t have the proof to back it up than it’s just writing on a paper and not a legitimate offer unless there are proof of funds,” Carlos says. “Sometimes buyers are reluctant to give that information and then they lose out on the potential transaction because a seller won’t even look at their offer.”
Sandy Schwartz, another partner in Levine’s firm, says if a cash buyer presents a seller with an offer it’s important to have a clause in the agreement prohibiting the buyer from seeking a mortgage at a later point in negotiations. “I represented a buyer once who lead me to believe it was an all-cash deal on a multi-million-dollar property. After he spoke to his financial adviser, and after we were already in the contract, he said he wanted to get a mortgage. There was no prohibition in the contract from obtaining the mortgage and the closing was 30-45 days later than what the seller had anticipated,” Schwartz says.
That may have inconvenienced the seller, but it worked out well for the buyer — he was left with all that cash, ready to wave at the next big deal down the road.
Courtesy Reuters Wealth June 29, 2011.
Cash is king in high-end real estate this year, serving to stabilize the market as tight credit conditions and depreciated home values continue to plague the embattled real estate sector.
At least 30 percent of all purchases were financed with cash between mid-April and mid-May, according to the May 2011 Realtors Confidence Index by the National Realtors Association, and the numbers are even more robust for the luxury property market.
In the Fort Lauderdale, Florida area, 57 percent of all single-family homes purchased and priced over $1 million were cash buys between Jan.1 and May 31 of this year, says Vickie Arcuri, an agent with EWM Realtors. In the million-dollar plus condo market, 42 out of the 47 units sold during the same time period were cash purchases.
The south Florida market is particularly hot for out-of-state and foreign investors, who often find it more difficult to secure financing.
“Tight credit and lending criteria are some of the reasons why cash is so popular and it significantly affects the upper-end of the market,” says Arcuri. Jumbo loans — those too big for underwriting by Fannie Mae and Freddie Mac — typically have higher interest rates than government-backed mortgages. The loan amount that falls into jumbo loan territory varies from one local real estate market to another. In the Fort Lauderdale area, a jumbo loan is anything above $620,000.
When you wave cash around, you can lower the purchase price and dictate the terms of the deal so much more effectively” said Ross Levine, a partner in the law firm of Schwartz, Levine and Kaplan. He recently represented a seller looking to offload a $4.5 million Manhattan property — a smooth deal made easy because of cash.
“The sellers said they would have never gotten the deal done if they had … (used) … a bank because the jumbo loan market makes it difficult to get a loan. Beginning on October 1, the government will dial back on the size of mortgages it guarantees in high-cost areas like San Francisco, New York and Washington.
Arizona is also benefiting from a cash spending spree — it’s a hot market for snowbirds, retirees, and those looking to purchase second homes. In 2005, only 11 percent of sales were cash, compared to 30 percent in 2009 and 43 percent in 2011, says Lynn Murtagh, branch manager of Coldwell Banker Residential in Scottsdale, Arizona.
In the north Scottsdale area, 45 percent of all sales were cash purchases for the month of May. In the high-end market — homes priced at $850,000 or more — 66 percent were purchased with cash, says Murtagh.
Even some of the top metropolitan markets around the country are seeing cash purchases on the rise. In Las Vegas, 49 percent of purchases were cash in the second quarter of this year, according to data from the popular real estate site Zillow. In Los Angeles, 33 percent of second-quarter buys were financed with cash compared to 17 percent in the same quarter of 2009. In San Fransisco, 24 percent were cash buys for the same time period versus 16 percent in the second quarter of 2009.
Cash buyers are propping up the market, increasing the number of properties sold, decreasing the level of inventory and flushing distressed properties through the system, says Jim Gillespie, CEO of Coldwell Banker Real Estate.
“If cash buyers evaporated tomorrow, real estate would be in a lot more difficult position. They are stabilizing the market even though they’re purchasing 10 to 15 percent below value,” he says.
For the seller, cash buys mean no appraisal or mortgage contingencies and faster closing dates, while the buyer enjoys the piece of mind knowing they don’t have a mortgage payment, can tap their home equity if needed, and can negotiate some extra perks in their favor.
Levine is currently representing a 23-year-old cash buyer looking to purchase a $2.5 million ground-level Manhattan property. Concerned about privacy in the all-glass building, she was able to negotiate renovations with the developer.
“She wanted to tint the windows but arguably that would permanently alter the structure and we needed the board’s consent. So I carved that language in the contract, which requires the board to approve the tinting before closing. There is no way if she had a bank with 80 percent financing that they would have ever entered into this kind of deal,” Levine says.
While a cash buy may be the sexier option at the moment, here are a few things to keep in mind for buyers and sellers.
Get educated on valueAn appraisal contingency — a condition that the purchase price of the property must be appraised at an agreed upon amount or the purchase can be canceled without penalty — is not required for a cash sale. But it may be a good idea to put an appraisal clause in your agreement to ensure you’re not overpaying. If you don’t want to go the appraisal route, be sure to solicit a market analysis from a real estate agent.
“Realtors have the tools to do an in-depth market analysis, giving the buyer a ball-park figure. They can show a buyer exactly what’s been sold in that area because we have access to a lot of data and information,” says Ingrid Carlos, branch manager of Coldwell Banker Residential in Hollywood, Florida.
Don’t make a low-ball offer. A common misconception among cash buyers is that you can deeply discount the purchase price. But with so many cash offers flooding the market, competition is steeper than you may think. Often times, the property will go to someone more well-informed on the local market.
“Typically in the luxury market, we don’t have a lot of distressed properties and distressed sellers. Owners of these properties are very secure financially and can hold onto the property for an extended period of time without accepting a low-ball offer because they’re desperate,” Arcuri says.
Don’t get swayed by the overall weakness of the real estate market. “Buyers will see the market has come down a certain percentage, and they will go in with an offer price that is discounted the same percentage on the listing price instead of realizing the news is trying to tell them that the market has come down that percentage over a number of years,” Carlos warns.
Make sure the buyer has the cash. If selling a luxury property, you want to be sure the potentially buyer can pony up seven figures when the bill comes due. A letter from the buyer’s financial institution stating the funds to finance the purchase price are available is a must. An account statement will also work, providing the funds will come from that account.
“Anyone can put an offer in writing, but if you don’t have the proof to back it up than it’s just writing on a paper and not a legitimate offer unless there are proof of funds,” Carlos says. “Sometimes buyers are reluctant to give that information and then they lose out on the potential transaction because a seller won’t even look at their offer.”
Sandy Schwartz, another partner in Levine’s firm, says if a cash buyer presents a seller with an offer it’s important to have a clause in the agreement prohibiting the buyer from seeking a mortgage at a later point in negotiations. “I represented a buyer once who lead me to believe it was an all-cash deal on a multi-million-dollar property. After he spoke to his financial adviser, and after we were already in the contract, he said he wanted to get a mortgage. There was no prohibition in the contract from obtaining the mortgage and the closing was 30-45 days later than what the seller had anticipated,” Schwartz says.
That may have inconvenienced the seller, but it worked out well for the buyer — he was left with all that cash, ready to wave at the next big deal down the road.
Courtesy Reuters Wealth June 29, 2011.
Friday, June 17, 2011
Top Picks for International Buyers
Top picks for international buyers
NEW YORK – June 17, 2011 – International buyers are taking advantage of real estate bargains in the United States. Last year, international buyers reportedly spent $41 billion on purchasing homes in the U.S.So which cities do they most have their eye on?Ten out of the 24 most popular American cities for international buyers are in Florida, according to Trulia. Last year, Europeans, Canadians and Brazilians reportedly spent about $13 billion on homes in Florida alone.Here are the most popular Florida cities for international buyers, according to Trulia, in order of demand:
1. Cape Coral, Fla.
2. Miami
3. Fort Lauderdale, Fla.
4. Naples, Fla.
5. Fort Myers, Fla.
6. Miami Beach, Fla.
7. Kissimmee, Fla.
8. Orlando, Fla.
9. Jacksonville, Fla.
10. Tampa, Fla.
© 2011 Florida Realtors®
NEW YORK – June 17, 2011 – International buyers are taking advantage of real estate bargains in the United States. Last year, international buyers reportedly spent $41 billion on purchasing homes in the U.S.So which cities do they most have their eye on?Ten out of the 24 most popular American cities for international buyers are in Florida, according to Trulia. Last year, Europeans, Canadians and Brazilians reportedly spent about $13 billion on homes in Florida alone.Here are the most popular Florida cities for international buyers, according to Trulia, in order of demand:
1. Cape Coral, Fla.
2. Miami
3. Fort Lauderdale, Fla.
4. Naples, Fla.
5. Fort Myers, Fla.
6. Miami Beach, Fla.
7. Kissimmee, Fla.
8. Orlando, Fla.
9. Jacksonville, Fla.
10. Tampa, Fla.
© 2011 Florida Realtors®
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