South Florida Real Estate Blog by Michael Catino, Realtor

Hurricane Michael drops home sales by a third

A new report shows how much Hurricane Michael has affected home sales in the area of the Florida Panhandle where it made landfall last October.

The report by Florida Realtors shows that year-over-year sales of single-family homes declined by more than a third in the Panama City metro area during the last quarter of last year.

Sales of townhouses and condos were down almost 30 percent in the last quarter.

By comparison, statewide sales of single-family homes were up a tenth of a percent year-over-year, and sales of townhouses and condos were up almost 2 percent.

The report was released Tuesday.

Hurricane Michael made landfall on Oct. 10 as a Category 4 storm, devastating a large swath of the metro Panama City area.

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Fla.’s housing market: Sales, new listings, median price up at end of 2018

Florida's housing market wrapped up 2018 with more sales, higher median sale prices and more new listings compared to the year before, according to the latest housing data released by Florida Realtors®.

"Florida's economy is growing, the jobs outlook remains strong and more people are moving to the Sunshine State," says 2019 Florida Realtors President Eric Sain, . "And, while mortgage interest rates have fluctuated in recent months, they remain at historically low levels. All of these factors are positive signs for the state's housing market in 2019."

Year-end 2018

Statewide closed sales of existing single-family homes totaled 277,827 in 2018, up 2.2 percent compared to the 2017 figure, according to data from Florida Realtors research department in partnership with local Realtor boards/associations.

The statewide median sales price for single-family existing homes in 2018 was $254,505, up 7.2 percent from the previous year. New listings for existing single-family homes rose 6.5 percent in 2018 compared to 2017.

Looking at Florida's year-to-year comparison for sales of townhouse-condos, a total of 116,706 units sold statewide in 2018, up 4.9 percent from 2017. The closed sales data reflected fewer short sales and foreclosures statewide in 2018 compared to the previous year: Short sales for condo-townhouse properties declined 37.5 percent and foreclosures dropped 33.9 percent; short sales for single-family homes dropped 41.4 percent while foreclosures declined 39.5 percent.

The statewide median price for townhouse-condo properties in 2018 was $185,000, up 7.2 percent over the previous year. New listings for townhouse-condos for the year increased 5.9 percent compared to a year ago.

At the end of 2018 and also for 4Q 2018, inventory for single-family homes stood at a 4-months' supply, while inventory for townhouse-condo properties was at a 5.7-months' supply, according...

Flipping luxury homes growing in popularity – for now

 Investors are taking on bigger projects and finding an increasing appetite for flipped high-end homes.

In 2018, 2.6 percent of homes valued at over $1 million were flipped, compared to 2.2 percent in 2017, according to data from realtor.com, which analyzed markets where at least 20 flipped homes sold for more than $1 million from January to October 2018. They define "flip" as a home that sold twice for a profit within one year.

The markets seeing some of the largest number of luxury housing flips are in California, particularly the Los Angeles, Long Beach and Anaheim, where the percentage of luxury home flips increased from 3.4 percent in 2017 to 4 percent in 2018.

"It was one of the fastest-growing luxury markets last year overall, so it's a function of sales being higher and growing at a healthy pace, which can result in flips growing at a healthy pace," Javier Vivas, director of economic research at realtor.com, told Mansion Global. "The share of inventory above $1 million in Los Angeles is large, too, and above most other markets."

International buyers are targeting the area for flips as well, says Santiago Arana, a broker with The Agency in Los Angeles.

While luxury home flipping homes is rising across the country, activity is still lower than it was a decade ago, says Vivas.

Luxury home flipping in many markets could taper off though this year, too. Housing analysts point to changes in the U.S. tax code that could make investors more reluctant to take on bigger purchases this year.

"Buyers and sellers are adjusting their expectations," Vivas says. "We're already seeing a lot of that with price reductions and increases in the amount and types of price cuts happening above the $1 million mark."

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Tax-deduction cap could turn expected refunds into bills

The big tax question of the year: Will you get a super-size refund or suddenly discover that you're going to end up writing one monster check?

No one really knows for sure in light of sweeping changes that hit homeowners, two-paycheck couples and families who once had a string of itemized deductions but no longer can take some breaks under the Tax Cuts and Jobs Act of 2017.

Taxpayers are getting their first look at how the new tax overhaul hits their pocketbooks when they file their 2018 federal income-tax returns. The devil involving those deductions, such as those for property taxes and state income taxes, is in the details.

If you think you're getting the same refund as last year – or even bigger with the tax cuts – think again. It's not that simple. Some are owing more money.

A Novi, Michigan, homeowner told me that he was shocked when he was smacked with having to write a big check to pay his tax bill after he completed his 2018 tax return.

He owes more than $3,000 when typically he received roughly a $4,000 refund in the past.

The couple, in their 50s, both have jobs and receive W-2s to report their wages. They pay about $9,000 in state income taxes and another $10,000 or so for property taxes on their Novi condo. Their children are older, so they don't qualify for any child tax credit.

The homeowner asked to remain anonymous, citing a desire to keep his family's financial situation private.

The homeowner told me that he understood there was a $10,000 limit on how much one could deduct for property taxes on the federal return, after the major tax overhaul.

What he didn't know: The $10,000 cap includes much more than property taxes. The limit also affects how much the couple can deduct when it comes to what they paid for state income taxes.

Together, what would have been more than a $19,000 deduction was limited to $10,000.

"Your total deduction for state and local income, sales...

DeSantis proposes full funding for affordable housing

Fla.'s governor proposed his $91.3 billion budget on Friday and wants all doc stamp money rolled into the State and Local Government Housing Trust Funds to be used for affordable housing – a move strongly backed by Florida Realtors in an earlier meeting with the Governor's staff.

Florida Realtors considers full funding a top legislative priority. These trust funds are needed to address Florida's affordable housing crisis.

For the past several years, however, some of the housing trust fund money has been used for other purposes.

As advocates for affordable housing, Florida Realtors recently met with top officials in the governor's office to discuss the housing trust funds and the need to use it for state and local housing programs. Florida Realtors is a leading member of the Florida Housing Coalition, a nonpartisan collection of 30 diverse statewide organizations.

"Florida Realtors met with the governor's chief of staff and legislative affairs director to ask that his upcoming budget recommendations include full funding from the trust funds for affordable housing programs," says 2019 Florida Realtors President Eric Sain. "Our representatives left the meeting very encouraged by the feedback they received from the governor's staff, and we're grateful that full funding made it into Gov. DeSantis' final budget proposal."

The governor's annual proposed budget is released each year prior to the start of the Florida legislative session. While the Florida Legislature isn't required to follow the governor's recommendations, the budget serves as a framework lawmakers can use to develop and pass a budget that the governor will sign.

In addition to full funding for the affordable housing trust funds, DeSantis' budget focuses on improvements to the state's aging transportation infrastructure and additional funding for the Everglades and other water-quality issues.

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40 million Americans have no credit score

It's hard to buy a home with a low credit score and almost impossible for people who have used credit so seldom that a numerical credit score can't be generated.

VantageScore analyzed the population of consumers who are conventionally unscoreable – those that fail to meet the minimum scoring requirements of widely used conventional credit scoring models. Their number has grown from approximately 30-35 million in 2010 to approximately 40 million in 2018.

Overall, the proportion of the adult population that is conventionally unscoreable remains unchanged at close to 16 percent.

In Florida, 16.7 percent of the credit-age population has no credit score. Minnesota has the lowest percentage of non-scoreable residents at 11.4 percent; West Virginia has the most at 21.4 percent.

Through no fault of their own, these consumers wouldn't meet the basic requirements for automated underwriting for a mortgage or other loans. As a result, they could be turned down or face potentially unfair pricing and terms.

To perform the analysis, VantageScore used a random, anonymous sample of 15 million consumer credit files obtained from the three nationwide credit bureaus. It calculated the proportion of consumers who would satisfy conventional model scoring requirements or fall into one the four groups of conventionally unscoreable consumers:

  • new to market
  • infrequent credit user
  • rare credit user
  • no accounts

The proportions were then applied to the overall US adult population based on 2017 U.S. Census.

As the overall U.S. population has increased, so has the number of consumers who cannot be scored by conventional credit scoring models. According to the latest 2017 U.S. Census, the overall population grew to 326 million and the number of conventionally unscoreable consumers who can now be scored with the VantageScore 4.0 model increased to approximately 40 million.

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1 in 10 borrowers now opting for an adjustable rate

Fixed mortgage rates have been inching lower in recent weeks, but the percentage of borrowers tempted by the even-lower rates of adjustable-rate mortgages (ARMs) is rising.

ARMs posted their highest share of total originations in December since Ellie Mae, a maker of software used to process mortgage applications, began tracking them in 2011.

The share of ARMs reached 9.2 percent in December 2018, up from a 5.6 percent share a year earlier, according to the Ellie Mae's December Origination Insight Report, according to Mortgage News Daily. With a fixed-rate mortgage, the interest rate does not change over the term of the loan; with an ARM, the interest rate is usually locked in for a set period, such as five to seven years, and then changes based on market conditions.

Last week, five-year ARMs averaged 3.90 percent, Freddie Mac reports.

"With the strong demand for housing and rapid increase in property value appreciation, more consumers are turning to adjustable-rate mortgages in order to gain additional flexibility when competing for a home," says Jonathan Corr, president and CEO of Ellie Mae. "This is another key indication of how demand has outpaced supply in the housing market as consumers pursue their dream of homeownership."

Overall, mortgages for home purchases comprised 70 percent of mortgage originations in December, according to Ellie Mae's report. Closings moved faster, too. The time to close on a purchase loan fell to 47 days in December.

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Fla. has many programs to help first-time homebuyer

U.S. News & World Report issued an extensive overview of programs in Florida that can help first-time homebuyers secure their first house – and in some cases, they don't even need to be first-timers. A few programs consider anyone who has not owned a home within the past three years a first-timer.

There are three broad categories of aid for first-time buyers: home loan programs, some type of financial help to allow them to take out a mortgage, and buyer education programs that can teach them the basics of homeownership and help them understand the other aid packages available.

Many buyers and industry experts understand the national programs that can help first-timers – Federal Housing Administration (FHA) loans, Veteran Affairs (VA) loans and other programs – but the state also has the Florida Housing Finance Corporation (Florida Housing) that the Florida Legislature created to help provide affordable housing options statewide.

"Florida Housing's programs provide assistance to eligible homebuyers by offering low-cost, 30-year, fixed-rate mortgages together with downpayment and closing cost assistance," according to Taylore Maxey, press secretary for Florida Housing.

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Florida Realtors Real Estate Trends: No home price bubble

To Realtors, homeowners and others who ask, "Are we in another house price bubble?" – the answer is "No," according to Dr. Len Kiefer, Freddie Mac deputy chief economist, who spoke to a crowd of more than 400 Realtors at the 2019 Florida Real Estate Trends summit Thursday during Florida Realtors Mid-Winter Business Meetings.

Kiefer said he and other analysts have been researching home price growth trends and other economic factors to answer the "bubble" question.

"Home prices are up, but that by itself is no indication of a bubble; you need an element of speculation or credit financing involved as well," he said. "We looked at credit, capacity and collateral. In the mortgage space, credit has not expanded in anything like we saw a decade ago. As a result, the default potential rate is pretty low. And we clearly don't see the types of financing products that pushed the dynamics then."

While incomes are up, they're not matching the pace of rising home prices, he noted.

Still, mortgage debt payments as a percentage of disposable income has declined significantly, largely due to lower mortgage interest rates.

"In the downturn, people were taking on a lot of debt, which in turn pushed up prices," Kiefer said. "Now, looking at total mortgage debt compared to equity, we're not seeing that kind of speculation or problem."

He added, "So, when I'm asked about a bubble, I do say no – but the way I pause before I say no has been extending a bit as home prices continue to rise more than incomes. However, in our view (Freddie Mac economists), house prices will moderate as mortgage rates rise."

So, what's ahead for the U.S. economy and housing market in 2019?

"Employment and a little bit of income growth will be key to supporting homebuyer demand," Kiefer said. "Inflation is going to drive...

NAR calls new biz tax rule ‘big win’ for Realtors

Late last week, the U.S. Treasury Department and Internal Revenue Service issued final regulations regarding the new 20 percent deduction on qualified business income.

Americans are now preparing for the 2018 tax filing season, and while real estate professionals understood that the new deduction offered benefits, the specific extent of those benefits was unclear pending the government's final regulations.

Friday's ruling from Treasury and the IRS, however, "signaled a significant victory for the real estate industry and for many of the National Association of Realtors®' (NAR) 1.3 million members," according to NAR.

"Friday's ruling is a result of several months of advocacy and collaboration between NAR, our members and the administration," says NAR President John Smaby. "These final guidelines will allow real estate professionals to benefit from the Section 199A 20 percent pass-through deduction, a move that will empower Realtors to expand their operations and provide improved services to consumers and potential homebuyers across the country."

Smaby says NAR is "grateful for the openness and transparency encouraged by Treasury and the IRS, and we thank them for their hard work to ensure the real estate community was heard throughout this rulemaking process."

A central component of the new tax law is a reduction of the corporate tax rate – from 35 to 21 percent. However, since nine out of 10 American businesses are structured as pass-through entities rather than corporations, the Section 199A provision provides critical tax deductions for small businesses and self-employed independent contractors, which includes many real estate professionals.

Within the 247-page rule issued last Friday, three major provisions for real estate professionals stood out as critical victories for members, according to NAR:

1. Impacted real estate professionals
Most importantly, the regulation...