South Florida Real Estate Update- July 2, 2008

                                                                 By Rubin Wites: Realtor

 

Summer is upon us, the grass is green, Lake Okeechobee is starting to get back to normal  [since we have the tropical afternoon showers] and all is right with the world. That is close; we are getting closer and closer to that point in time when all is right with the South Florida Real Estate Market.  Prices have stopped their free fall and are beginning to level off, inventory is slowly going down and sales are starting to pick up.  All signs they we are close to the beginning of a recovery period that will stabilize our market.

 For The last several months I have been predicting that the afore mentioned scenario will take place between the 3^rd quarter and the beginning of the 4^th quarter of this year. As of this moment it appears I was correct, that is exactly what is happening.  I am including several recent articles that will help shed some light on the market and where it is going

On the path to a housing rebound The pain that homeowners and homebuilders are feeling now is a sign that things are going to get better. By Shawn Tully, editor at large Last Updated: June 25, 2008: 9:08 AM EDT NEW YORK (Fortune) -- The news that housing starts have fallen to their lowest level in 17 years sounds like one more reason to be depressed about the shrinking value of your home. In fact, it's an almost certain sign that the path to a housing recovery is finally in sight. If prices are going to stabilize, let alone rebound, the United States needs to produce far more first-time home buyers than new houses. That's the only way to tame the glut of "For Sale" signs dotting front yards from the Inland Empire of California to the Gold Coast of Florida. Builders constructed far more homes from 2002 until 2006 - the peak bubble years - than could possibly be absorbed by the normal growth in households. As a result, the market is now swamped with one million new and existing homes for sale that aren't occupied, and hence need to sell quickly. That's a multiple of the figure in most downturns, and it testifies to the duration and girth of the bubble. "For the recovery to begin, builders need to eliminate the standing inventory of finished, unoccupied new homes," says Mike Castleman, founder of Metrostudy, which assembles sales data on four million subdivisions across the U.S. The massive overhang of unsold inventory has remained stubbornly high. Sure, builders cut back, but sales dropped just as quickly. Now that excess supply is finally beginning to shrink. In April, the number of new homes for sale stood at 456,000 according to the U.S. Commerce Department, still a big number, but 93,000 below the mountainous figure a year ago. The key player in any recovery scenario is the first time buyer. The housing market operates with a pronounced laddering or ripple effect. When entry-level buyers flood the market, they not only stimulate production of new homes, they purchase existing homes. Those purchases, in turn, allow the sellers to move up to bigger houses. But when the first-timers are absent, the entire buying chain gets frozen. Today, newbie’s are coming back. Why? For the first time in years, entry-level homes are affordable. Builders have slashed prices, and what they're building tends to be far smaller than the McMansions of the boom, selling for far lower prices. KB Home's average selling price dropped to $248,000 in its February quarter, versus $267,000 a year earlier. In 2006, KB's basic model in Victorville, Cal., a former boomtown east of Los Angeles, took up as much as 3,800 square feet and sold for $328,000. Today, its stripped down offering goes for $220,000, at less than half the size. So the first time in a decade renters can carry the mortgage payments and taxes on a new house for what they're paying a landlord. Call it the New Affordability. Here's how the numbers play out: Single-family housing starts are now running at fewer than 500,000 a year. The normal demand for housing, based on immigration and household formation, is around one million units. We won't get back to that figure for a while because so many people rushed to buy homes during the boom. But with first timers returning, sales should rise to almost 700,000 units by the end of next year, according to Bernard Markstein, senior economist for the National Association of Home Builders. That means sales will soon exceed new production by as much as 250,000 units a year. That margin forms the foundation of the housing revival that comes in four steps. Step 1: First, the return of first-time buyers will shrink the overhang of new houses for sale. Step 2: Second, because so few new homes are being built, first-timers will start buying existing homes from owners who want to move up but have been trapped by the dearth of buyers. Their improved fortunes, though, come with a big caveat: The prices of new homes are now lower than comparably-sized existing homes. It's as if used cars are selling for more than new ones. That can't last. So move-up buyers are going to have to accept less than they had hoped to get for their current homes. They'll get a big break as they trade up, however. Unless they bought at the height of the boom, they'll still sell at a profit. They can then use that equity to buy bigger homes at bargain prices. During the bubble, homebuilders started pushing up home sizes to 3,500 square feet or more. It's those behemoths that are selling for the steepest discounts today. Step 3: Next, housing starts should start rising, probably next year. The increase, however, will be slow and gradual. For the next two years at least, homebuilders will compete ferociously with existing home sellers for customers. Step 4: Eventually, the glut of existing homes will disappear as well. The excess of new-home buyers over new homes being built makes that inevitable. But the oversupply is so enormous that the healing process could take as much as three more years. Only then will prices in former bubble markets start rising again. What could go wrong? One event has the potential to slow or even derail the recovery: A sharp rise in interest rates. Right now, the first-timers are gorging on 6% loans guaranteed by the FHA. But rates may not stay there. If they rise to 8% or higher because inflation rebounds, it would take a far bigger drop in prices to make new and existing homes affordable. The New Affordability is now in place. But if rates rise, we'll have to establish a New Affordability - at even lower prices.

 

South Florida Sun-Sentinel.com

Want to sell your South Florida home? Be realistic

By Paul Owers

South Florida Sun-Sentinel

June 16, 2008

Setting the right price for a home sounds simple, but too many sellers aren't doing it.

They insist that their properties are special and holding value, even though the median prices for existing homes have plummeted 26 percent and 24 percent, respectively, in Palm Beach and Broward counties since late 2005.

These stubborn sellers ask for too much money, ignoring the list prices of nearby homes, not to mention their real estate agents' advice. It's a short-sighted strategy, one that ultimately costs tens of thousands of dollars in a depressed housing market like South Florida, agents say.

"The worst thing to be in this market is one of those homes that's been listed for six, eight, 10 months with no consummated deals," said Beverly Rothstein, an agent in Broward and Palm Beach counties. "That's when the vultures come out, and you have to sell the house at a deep discount that you wouldn't have had to take if you had priced it right from the beginning."

Olga and Manuel Delacruz listed their three-bedroom Greenacres home in central Palm Beach County for $199,000 about four months ago. When it didn't sell, they dropped the price twice. Now they're asking $169,999, which is where they probably should have started, their agent, Douglas Rill, said.

The Delacruzes and other owners of lower-priced homes are likely competing with an increasing number of foreclosures. Lenders don't want to hold these properties, so they're slashing prices. Individual sellers must do the same if they have any hope of finding buyers.

"It's a little frustrating," said Olga Delacruz, 47, a security guard. "If we have to lower it one more time, we will."

Many sellers asking too much for their homes now are doing so because they paid inflated prices during the housing boom of 2000 to 2005. Agents cringe when they hear clients say they have to get a certain amount of money out of their properties.

"Your need doesn't change the market value of the house," said Rill of Century 21 America's Choice Realty in West Palm Beach. "Sellers will say, 'Can you at least try it at this price?' I'm happy to try, but it's not going to work."

Because of the glut of properties for sale, even beautiful homes won't attract interest unless buyers perceive value, said television commentator Gerri Willis.

"There's no bigger issue for sellers right now than pricing," said Willis, host of CNN's Open House and author of Home Rich: Increasing the Value of the Biggest Investment of Your Life.

In the book, Willis writes about price break points, which are psychological limits that buyers often set for themselves. She said a buyer may be willing to spend up to $499,000 on a home but will balk at $500,000, even though the $1,000 difference is barely noticeable on a 30-year mortgage.

Buyers prefer to spend at the top end of their price ranges, but they probably won't even visit properties if they're priced above the psychological break points, Willis said.

So a home valued at $310,000 would attract plenty of interest if listed at $299,000, she said. Asking for more than that would exclude buyers whose limit is $300,000.

And while that same home theoretically would draw people willing to spend up to $400,000, they're probably more interested in properties at the top end of the price range.

"The big question I always get from sellers is, 'At what point should I be willing to cut my price?'" Willis said. "But that's the wrong mindset. You've got to go into the market at the right price."

Terry Story can relate. The agent in Palm Beach and Broward counties wanted to list a Boca Raton home last summer for $575,000, but her client held firm at $625,000. Story knew that was too high, even though there weren't a lot of comparable sales in the area to go by.

Meanwhile, a similar house across the street was priced more competitively from the start and sold quickly for $482,500. Story's seller could do nothing but cut his price, finally finding a buyer to pay $460,000 after six frustrating months.

Instead of getting ahead of the price curve and establishing market value in the neighborhood, he was left to react to it. "He chased down the market," said Story of Coldwell Banker Residential Real Estate.

Other sellers are more realistic and realize that being able to move quickly is more important than trying to get the highest price.

Virginia Goss first tried to sell her Boca Raton house on her own, but had no luck. So she listed it with Story, who suggested she put it on the market in the low $300,000 range. Although that was much lower than she preferred, Goss listened and immediately sold the home, albeit at a loss.

"It's hard to swallow a loss, but we're moving on," Goss said. "There's value in that."

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If you are a seller then the following should be something you consider seriously, if you are a buyer, take note these homes will not last long on the market.

 

If the home gets no showings, Buyers don't perceive value!  The price must come down substantially.

The price is in the ballpark if the home gets a few showings but no second looks. Sellers should still lower the price.

The home is priced right if it's getting steady showings and repeat visitors.

 Expect an offer.

 

 

Lea Plotkin and Rubin Wites are not just Realtors we are business people who happen to be Realtors.

 Lea has a Masters Degree in fine Art, ran a new construction project, Training and IT director for Prudential Wites Realty, before it was sold to Prudential Florida WCI Realty in May of 2000. Rubin has a degree in finance, owned and operated one of the most successful Local Real Estate firms for 20 years before selling it. Together we have developed successful marketing programs that have enabled us to be amongst the top 1% of all Realtors Nationwide. 

 Today’s market is no different than any other and it requires aggressive marketing plans to enable both the Buyers and the Sellers that we work with to achieve their goals, that is what we excel at and if you would like more information on how we can help you as either a seller or buyer  Contact  Lea Plotkin at 954-802-8451 or Rubin Wites at 954-592-6734