South Florida Real Estate Blog by Michael Catino, Realtor

Slowdown is striking the luxury market too

Luxury home prices saw their smallest increases in nearly two years, and those in the luxury market are blaming a culprit familiar to other sectors of the market for slowing sales and prices: higher mortgage rates.

This week, luxury homebuilder Toll Brothers reported a 13 percent drop year-to-year in the number of signed contracts for homes in its fiscal fourth quarter, along with a 9 percent cancellation rate. The average sales price of a Toll Brothers home in the fourth quarter was $906,000 compared to the national average home price of $294,000.

"In November, we saw the market soften further, which we attribute to the cumulative impact of rising interest rates and the effect on buyer sentiment of well-publicized reports of a housing slowdown," Toll Brothers' CEO Douglas Yearley Jr. said in a statement.

The luxury market has felt immune to the housing slowdown since its buyers tend to be less sensitive to changes in mortgage rates. But now the sector is starting to acknowledge that the slowdown is occurring across the housing market, Peter Boockvar, chief investment officer with Bleakley Advisory Group, told CNBC.

Luxury home prices increased 3.2 percent annually in the third quarter of this year, reaching an average of $1.7 million, according to the real estate brokerage Redfin. That marks the lowest increase since the end of 2016. (Redfin defines the luxury sector as the top 5 percent of values in a local market.)

Redfin's Chief Economist Darly Fairweather says a decline in high-growth stocks – called the FANG tech stocks – is curtailing sales. "This impacts the belief that the overall economy will grow," Fairweather told CNBC.

In markets where homes are the most expensive, sales are weakening significantly, notably in California, according to Yearley.

"California has seen the biggest decline," he says. "Significant price appreciation over the past few years, fewer foreign buyers in certain communities,...

Can residential leases run longer than one year?

At least a few times each day, members call the Legal Hotline to ask if a landlord and tenant can enter a residential lease that lasts longer than one year. The short answer is that a landlord and tenant are welcome to sign a lease for a term longer than a year.

However, they will need to do a little work without your assistance to make it happen.

Until 1992, there were no lease forms approved for use by Realtors. But that changed when the Florida Bar issued the advisory opinion The Florida Bar Re: Advisory Opinion Nonlawyer Preparation of Residential Lease Up to One Year in Duration, 602 So. 2d 914 (Fla 1992). Please note that the approval was limited to residential leases, so we're currently unable to provide any commercial lease forms for our members.

There are currently two lease forms available: Residential Lease for Apartment or Unit in Multi-Family Rental Housing other than a Duplex, and a Residential Lease for Single Family Home and Duplex. Both leases include the following clause regarding renewals or extensions: "The Lease can be renewed or extended only by a written agreement signed by both Landlord and Tenant, but in no event may the total Lease Term exceed one year. A new lease is required for each year."

If you pay extra close attention, you may notice that the language in the multifamily lease clause is slightly different than the language in the single family lease, but this is just a weird quirk specific to these forms since the message is the same. The lease shouldn't exceed a year, and a new lease should be prepared each year.

What if a landlord and tenant don't like this limitation and want a longer lease?

One option is to have a lawyer draw up a lease with a term longer than a year. This could be a wise investment, since a lease greater than a year triggers the need for additional formalities due to the Florida Statute of Frauds.

Another option is for the landlord or tenant to conduct their own search...

Rent vs. buy? FAU sees it still moving closer to ‘rent’

U.S. metropolitan residential real estate markets are peaking and some cities are in another pricing bubble, according to the latest national index produced by Florida Atlantic University (FAU) and Florida International University (FIU) faculty.

The Beracha, Hardin & Johnson Buy vs. Rent (BH&J) Index estimates wealth creation by way of homeownership and equity appreciation versus renting and reinvesting in more traditional financial assets. Thus, by default, the index also measures the pressure on the demand for homeownership.

Scores approaching one indicate strong downward pressure on the demand for ownership, and two metropolitan areas – Dallas (.92) and Denver (.77) – are rapidly approaching an index score of one.

"Both Dallas and Denver are significantly overheated," says Ken Johnson, Ph.D., one of the index's creators and associate dean and professor in FAU's College of Business. "Residential real estate prices in Dallas are significantly above their long-term pricing trend, and I anticipate pricing corrections in the near future."

Strong economies in Dallas and Denver have buoyed property prices beyond their fundamental levels for a sustained period.

"Prices are still appreciating in both metros but at a decreasing rate, suggesting that the current upward pattern in property appreciation is nearing an end," says Eli Beracha, Ph.D., co-creator of the index and director of the Hollo School of Real Estate at FIU.

Of the 23 cities in the BH&J Index, 20 trended toward rent territory last quarter, implying these markets became slightly more renter friendly in terms of wealth creation. Interestingly, three metro areas – Honolulu, Miami and Seattle – which have been some of the hottest real estate markets in the country, have trended marginally back toward ownership territory.

"This does not mean that these markets are exhibiting clear buy signals, but rather they...

Is it okay for a buyer to move in before closing?

Buyers often anxiously await closing so they can enter their new home. In some cases, however, they ask if they can move a few things in early so they can hit the ground running. In other cases, the buyers may have a time gap between closing on an old home and moving into their new one.

As a result, it's not uncommon for a buyer to ask a seller if they can move a few things in early, either possessions or themselves.

Nice sellers often try to accommodate nice buyers, but there are dangers to allowing someone to move in early. According to Cara Ameer, a broker associate with Coldwell Banker Vanguard Realty in Ponte Vedra Beach, Florida, who writes for Inman News, there are six good reasons for a seller to say, "No, I'm sorry you can't," when a buyer asks for early access to a home.

1. Who broke it?
A buyer moves in early, and the sink plumbing springs a leak. Will the buyer now fix it – should the buyer fix it? What if the buyer somehow thought the sink could support a grown adult and sat on it? Who pays?

2. Liability
If the buyer and seller have not signed any kind of pre-occupancy or lease agreement, what happens if something worse than leaky plumbing occurs, such as a major injury? The seller may be liable. In addition, what happens if wooden floors get scratched as movers drag new furniture across a room? What if a hurricane destroys everything the buyers stored in the garage?

Even with proof that the buyer caused damage, it could become a new negotiating point the buyers use to request further concessions from the seller.

3. "I didn't notice this before …"
Most houses have a small chipped something or temperamental item. If buyers move in early, it's like a "never-ending walkthrough," Ameer writes. Buyers could discover minor problems and try to "renegotiate issues that were never raised as a result of inspections or repairs."

...

What happens to a house after one spouse dies?

Question: I am concerned about what will happen to my house if my husband passes away. Will I be allowed to keep the house and make mortgage payments, or sell it if I want to? – Nancy

Answer: In most cases, you would be allowed to either keep the house, making mortgage payments, or sell it. Many factors affect this, though – most importantly, how the home is titled.

Most married couples own their homes in a special type of ownership reserved just for spouses known as "tenants by the entirety." To explain the significance of this type of joint ownership, however, I need to first explain the two other options that are available.

The default type is called "tenants in common," in which each co-owner owns his or her part of the property individually. Typically, these portions are equal but, if specified on the deed, they can be different, such as 80 percent to one owner and 20 percent to another. With this type, there can be many owners, and when each owner dies, his or her portion goes to any heirs.

Another type of ownership is called "joint tenants with right of survivorship." This is like "tenants in common" in many ways, except that when each owner passes away, the portion goes to the other owners instead of heirs.

This brings us to "tenants by the entirety," which is similar in many ways to "joint tenants with right of survivorship," except that it is limited to a married couple. It has been said that the marriage becomes the owner of the property with this form, automatically making the surviving spouse the owner of the property. There are other advantages to owning property this way, such as money judgments against one spouse not forming a lien against the property – unlike with other forms of ownership where judgments against one owner could attach.

The easiest way to tell whether you own your home this way is by looking at your deed. If both of your names are listed along with...

Fed shifts gears, may not push interest rates much higher

Federal Reserve Chairman Jerome Powell ignited a market rally yesterday by saying interest rates are "just below" broad estimates of a level considered neutral – a setting designed to neither speed nor slow economic growth.

Investors welcomed his remarks because they appeared to retreat from a comment he made in early October describing the Fed's benchmark rate as a "long way" from a neutral level. For some listeners, that statement implied that Powell planned to keep raising rates for a while.

However, his remarks Wednesday appeared to suggest to this audience that he might stop sooner or move more slowly.

Powell did not provide any more guidance on the likely path for rates, and he noted they remain low by historical standards. In addition, he offered nothing to dispel market expectations of another rate increase at the Fed's policy meeting on Dec. 18-19.

For homebuyers, the Fed's interest rate increases directly affect the rate charge on adjustable rate mortgages. The impact on fixed-rate mortgages is less reliable, but they also tend to go up generally as short-term rates increase.

A Fed slowdown in rate increases could bring some new stability to the mortgage market going forward.

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FHFA increases max loan rates for 2019

In response to rising home prices, the Federal Housing Finance Agency (FHFA) will raise the national conforming loan limit for 2019 by 6.9 percent – from $453,100 this year to $484,350 next year.

In addition, the high-cost limit – an amount used in areas with notably high home prices, such as San Francisco – will rise from $679,650 to $726,525.

In Florida, Monroe and Miami-Dade counties may be able to access higher-limit conventional loans. For an overview of maximum loans by U.S. county, visit FHFA's website. Overall, loan limits will be higher in all but 47 counties or county equivalents across the country beginning Jan. 1, 2019.

In addition, Federal Housing Administration (FHA) loans generally adopt the same loan limits set by FHFA, though 2019 changes have not yet been announced.

The conforming loan limit determines the maximum size of a mortgage that government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac can buy or "guarantee." Non-conforming (higher than this maximum) or "jumbo loans" typically have tighter underwriting standards and sometimes carry higher mortgage interest rates than conforming loans.

"The National Association of Realtors® is pleased to see the Federal Housing Finance Agency raise its national conforming loan limits for 2019," says NAR President John Smaby. Today's decision reflects rising or near-record-high home prices in many U.S. markets, and the move helps keep the American Dream within reach for countless families working with Fannie Mae and Freddie Mac. Without this assurance that loan limits keep up with home price growth, borrowers across the country risk being pushed out of the market altogether as mortgage rates and rising home prices continue to hold back potential homebuyers."

At the end of each year, FHFA updates the national and...

I inherited a house – what do I do now?

"Inheriting a property can come as a shock and may feel like an insurmountable obstacle," says Alex Lehr, a California real estate broker and author of "The Unexpected Sale: Guidance For The Executor/Administrator Of An Estate." "And usually the biggest asset in an estate – and the most difficult to resolve – is a house.

Decisions an executor might face when a house is part of an inheritance

Keep, rent or sell?
Competing interests among siblings can make the right decision difficult. "Caught in the middle, the executor has to ask the heirs to keep their emotions under control and put the rational facts on the table," Lehr says. "Selling is often the best decision if medical bills, tax issues or other reasons require cashing out. And it produces a specific amount that can be divided equally."

Can you manage a property investment?
If "keep the property in the family" is an option, an executor needs objectively consider the beneficiaries' dependability. "Would you choose the other beneficiaries to be your partners in any long-term investment?" Lehr asks. "Could they get divorced, go bankrupt or bring other entanglements?" And if you decide to rent the property, Lehr said there are issues to consider such as the local market for rentals and your ability to maintain the property.

Establishing property value
If one heir or beneficiary wants to buy the house, the estate must determine the market value and get a fair price to be fair to the other heirs and beneficiaries, and that starts with at least one appraisal. "Alternatively, the executor can put the property on the market with the expressed provision that one of the heirs has the right of first refusal to match the highest offer," says Lehr.

Repair and renovate?
In the time after a homeowner dies and the house sells, an executor must make sure the house is maintained in good condition,...

NAR: Existing U.S. sales increase for first time in 6 months

Existing-home sales increased in October after six straight months of decreases, according to the National Association of Realtors® (NAR), and three of the four major U.S. regions tracked saw gains in sales activity last month.

Total existing-home sales – completed transactions that include single-family homes, townhomes, condominiums and co-ops – increased 1.4 percent from September to a seasonally adjusted rate of 5.22 million in October. Sales are now down 5.1 percent year-to-year.

Lawrence Yun, NAR's chief economist, says increasing housing inventory has brought more buyers to the market.

"After six consecutive months of decline, buyers are finally stepping back into the housing market," Yun says. "Gains in the Northeast, South and West – a reversal from last month's steep decline or plateau in all regions – helped overall sales activity rise for the first time since March 2018."

The median existing-home price for all housing types in October was $255,400, up 3.8 percent from October 2017 ($246,000). October's price increase marks the 80th straight month of year-over-year gains.

Total housing inventory at the end of October decreased from 1.88 million in September to 1.85 million existing homes available for sale, but that represents an increase from 1.80 million a year ago. Unsold inventory is at a 4.3-month supply at the current sales pace, down from 4.4 last month and up from 3.9 months a year ago.

Properties typically stayed on the market for 33 days in October, an increase from 32 days in September but down from 34 days a year ago.

Overall, 46 percent of homes sold in October were on the market for less than a month.

"As more inventory enters the market and we head into the winter season, home price growth has begun to slow more meaningfully," says Yun. "This allows for much more manageable, less frenzied buying conditions."

Realtor.com's Market Hotness Index, measuring...

Finding and Fixing Leaks in Your Home

On the Hunt for Leaks

Usually, a homeowner will stumble across leaks on pure accident. They’re rarely loud, raging rivers, most are gentle trickles at best. In fact, you could have a leak for months and not even realize it! So how do you go about tracking one down?

  1. Look for signs of moisture damage. A leaking toilet, for example, will almost always leak at the wax ring that creates the seal between the stool to the drain pipe. When leaking happens here, it’s common that the water goes under the flooring and causes it to bubble up or soften.
  2. Smell around. This sounds ridiculous, but if you can’t see any damage, you may be able to smell the distinctive scent of mildew and moisture. Follow your nose to the source of the problem.
  3. Listen for dripping sounds. Even a tiny leak can sometimes be heard, especially if the leak in question is dripping into a closed area. For example, an air handler with a clogged or rusted condensation pan may drip into the space below, until a significant amount of standing water collects. The drip, drip, drip you hear when you walk by the utility closet could be a warning sign.

If your basic senses fail you, it’s time to start a systematic search. When you just know there’s a leak, but you can’t quite find it, make a list of all the things in your house that use water, including appliances like the dishwasher and the icemaker. Don’t forget all the drains, which can be really frustrating since a leaky drain literally comes and goes as it fills with water.

Fixing a Leak

Fixing your leak is going to depend heavily on where it’s located and what kind of materials are involved. For a basic homeowner-level repair, limit your efforts to plastic pipes and screw-on braided cables like the water lines to the toilet and sinks. Copper, galvanized steel and cast iron require special tools and specific expertise...