What's in the news real estate related?

Biz Journals - large Real Estate closings

It looks like a number of large complexes are moving at tremendous discount. The smart money is getting property that there is very little risk of not being able to get a cash flow out of it. Buying an apartment complex for 39k, that means that they would need assuming 30 year mortgage that's $250/month to break even, excluding maintenance costs.

Biz Journals - % of foreclosure sales in Orlando

This is going to sound like the obvious thing to state but foreclosure sales made up for a large percentage of overall sales in Orlando. On a year over year basis though this is actually better. But these numbers may just be reflecting reminiscence of the foreclosure moratorium that was in place a month or so ago. Either way a 25% discount on a home price is huge. Homes that are deeply discounted by the banks go in a few days of being on the market so fill out the sign in sheet below to get emails on homes right when they come on the market.

Thoughts on the employment situation compliments of Horowitz and company

Interesting take, basically stating that the government doesn't know what they are doing (well don't we all agree with that statement!?) when reporting the numbers. Adjusting too much for the seasonal affect for the employment numbers. He sites a number of sources and even more information in the links to charts, it's a lot to take in, but paints a much more detailed picture than the wonderful news who look at one number of the report.

Orlando 85/150 on recession recovery

It would have been nicer to be in the top 10 or so. But at least we're not last. Now I have been saying this for a while, that we are going to be in a recession for years to come, I think we won't see 2006 values again for 10+ years. This is based on statistics I pulled from the Japan's asset bubble burst in the 80's. It's the time to buy when there are less buyers around... less competition means better deals.

Orlando is number 2!

Well this isn't a good one to be on the top of the charts. Floridians rank number 2 for credit card defaults. This is only a mere 1% of Floridians however so although we top the charts in this category the amount of people this affecting is minimal. Another good thing out of this report was a decrease of 11% in total CC debt held by Floridians. From the article, "...8 million Americans stopped actively using their bank-issued, general-purpose credit cards over the last year.". Good stick it to the banks they can finally stop asking for tax payer money!

Another 5 guys burger

Admittedly this may have nothing to do with Real Estate but good burgers are good for the economy?

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A more detailed look at real estate market condition.

First question that needs to be answered, how do you value real estate? The reason I ask this is so we can find a price point that can be justified. There are a number of methods here are a few that I like:

· Price to Rent Ratio

· Price to Income Ratio (coming soon)

· Price to Gold Ratio (coming soon)

· Relative Price Adjusted for Inflation (coming soon)

· Historical Price (coming soon)

I love hindsight

Through my research I come across many papers written up relating to housing markets and bubbles and their behavior. This is one situation that I had to show you guys, this is from here http://www.ny.frb.org/research/epr/04v10n3/0412mcca.pdf

“Home prices have been rising strongly since the mid-1990s, prompting concerns that a bubble exists in this asset class and that home prices are vulnerable to a collapse that could harm the U.S. economy.

A close analysis of the U.S. housing market in recent years, however, finds little basis for such concerns. The marked upturn in home prices is largely attributable to strong market fundamentals: Home prices have essentially moved in line with increases in family income and declines in nominal mortgage interest rates.”

Written by the following at the end of 2004:

Jonathan McCarthy, a senior economist

Richard W. Peach, a vice president at the Federal Reserve Bank of New York

Although there are some jackass comments the analysis is interesting.

Be wary of the percentage charts, it always pisses me off when I see we had 2% increase as the headline everyone is talking about, if you go down 80%, then you go up 2%, who gives a shit about the 2%?

Funny little calculator that will value your house from when you bought it to now based on market appreciation/depreciation rates in your area.

http://www.fhfa.gov/Default.aspx?Page=86

How do we stack up nationally? Down close to 6% year over year as a state and 16% as a Metro area. Again as said above percentages don’t tell the whole story, but still good to note. These numbers will not show a jump in price until we’ve had a year over year price increase.

http://www.fhfa.gov/webfiles/16573/2Q2010hpi.pdf

Out of 300+ major markets we were ranked 298, this was only based on percentage year over year.

 

Price to Rent Ratio

http://www.calculatedriskblog.com/2010/03/housing-price-to-rent-ratio.html

Looking first at the overall market here is an interesting look at rent vs prices based on the owner-equivalent rent. This chart makes the 1.0 = 2000, which still might be a little inflated but I would expect prices to get to .9 some time in 2011 and we’ll drag along the bottom for years to come. In order to go down further one of two things must happen, prices come down further or rental rates go up.

The above is an analysis on the nation and as we all know Real Estate is local, so when looking locally and you instead look at the raw numbers, as Zillow has done below, you get a good picture on value for the area.

The ratio using the method explained in the link below (Zillow) puts the Orlando at 8.4, which gives us some of the best deals in the nation with relation to value. Also near the top Fort Myers and Miami. Surprisingly the top of the list is Detroit, apparently rental rates are still doing pretty well.

http://www.zillow.com/blog/research/2010/09/21/a-better-price-rent-ratio/

If you’re ready to get uber nerdy (some calculus required), the SP Case Shiller index releases a report relating to rents here:

http://www2.standardandpoors.com/spf/pdf/index/House_Price_Rent.pdf

All in all this is showing that buying a home now if you can (I’ll explain that comment further later) is a good idea, investor or to live in. No hurry if you don’t care about the house you get, the really good deals come on the market and go very quickly (within 15 days of listing). If you would like to get updates on an area, banked owned, certain sizes, almost any criteria, just email me at todrealestate@gmail.com

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Where are the trends?

We have a couple of trends that I like to point out, one of the trends was in my previous post relating to a price stability of some communities, others I will go through now.

First, we all know the state of the economy, still not good. However, what does the Orlando economy look like? UCF recently came out with Florida & Metro Forecast and Income growth is expected to go up 4.9% annually. This additional income, IF inflation stays in check, will actually make a significant bump to the consumers in our area. The Professional and Business Services is expected lead the industries in the area with a respectable 3.6% growth rate, then Education and Health Services, thanks to the medical city in Lake Nona area, is expected to grow at 2.8%. Some areas will decrease, one mentioned was Mining... we have mining in Florida?

In the real estate arena, we have a decent amount of federal money coming to "improve or demolish" foreclosed properties, in the amount of $34.5 million. There are a number of mentions of projects coming to the area which are the reasons we see the better economic look. What is more than a little disturbing is, who really is getting the fed money? Who owns most of these properties after foreclosure? The freakin' banks, super, they need more money from tax payers right?
Orlando Grows - UCF

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Exisiting Home Sales: The South Will Rise Again! : The Disciplined Investor

I'm back!

Interesting numbers starting to come out of the pending homes sales... see below.

Exisiting Home Sales: The South Will Rise Again! : The Disciplined Investor

This I take as a short term phenomena due to the moratorium foreclosures. However! Interestingly enough I have been witnessing in a community in St Cloud a potential end to the dismal Real Estate pricing. The community I speak of is Steven's Plantation, there are limited houses built in this area with close proximity to all that St Cloud has to offer. What originally happened as we all know is what happened in the rest of the U.S. prices came down, then they came down more, then they dropped off a ledge. The falling off a ledge were the bank owned home hitting the market, well that has been going on for some time now and it looks like in at least some circumstances that there is light at the end of the tunnel for prices. Realistically when a home that was built in 2007 is 2800 sqft and has 4 bedrooms can be on the market for $129k, which is less than it would cost to build that same house, The owner of that house is going to have a low probability of selling that house anytime soon which will provide stability to the prices that is needed for growth to enter back in.

Is this happening to all communities right now, of course not, this will happen first to the highly desirable areas. But the recent activity has got me looking for a house for my wife and I and I suggest you do the same.

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Orlando ranks 10th in foreclosures - Orlando Business Journal:

Orlando ranks 10th in foreclosures - Orlando Business Journal:

Again with the propaganda. If you just read the title of that article you would think that things are not getting any better. We had less foreclosure filings month over month by 18%, we had less! Now don't jump for joy just yet, as the title says we are still 10th in the nation in foreclosures, we were previously 8th.

Orlando one of the top destinations

The nation still likes us... yey!

Big deals still happening

Talk about decreasing inventory, they just took 248 homes off the market in one purchase, from a condominium project that failed to find buyers.

Sink going after former employer BOA

Alex Sink used to work for Bank of America and now is investigating Bank of America, former employer, for potential legal action.

Employment trend rises

As the saying goes, the trend is your friend until it's not. Anything positive to the dismal employment trends is good. This is an index that is local to Orlando and may just reveal the seasonal hirings that will be layed off over the next month or so.

Honda hiring in Clermont area

Anybody looking for a job, they are looking for a variety of positions, read the article for details, it also includes an email employment@headquarterhonda.com.

Young community turning old

I don't know what to say about this other than, well played. The young professional market is gone and it's smart to find another market.

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U.S. jobless rate drops to 9.7 percent - Orlando Business Journal:

U.S. jobless rate drops to 9.7 percent - Orlando Business Journal:

This is only a very small part of the jobs story. The revisions tell a much different story than what actually happened last year.
Unemployment Revisions
The revisions showed the government statistics off by 800k jobs last year... what?!!! How could anybody be that far off and not be fired? I don't know how this could not be somebody cooking the books. Some of the months were off by 100%, really. The recovery in the job market and the economy can't happen until we have everybody hit reality. As far as I see it there are only a few segments left to hit the reality bus... politicians, bankers, celebrities, news anchors and athletes.

4Q home construction slowed, sales jumped - Orlando Business Journal:

As long as we continue decreasing the inventory and stay stable on the amount of sales we will have a point that the builders will have to build because they have all of the demand. This will be the bottom everybody is waiting for and we won't know until it pasts us.

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Orlando No. 7 in 2009 foreclosures - Orlando Business Journal:

Orlando No. 7 in 2009 foreclosures - Orlando Business Journal:

Oh my goodness it's going to get a lot worse!!! AHHH! In the end this is where most if not all inventory is coming from right now. It doesn't matter, at least that much, where the inventory comes from. It does matter to the price because with short sales and foreclosures the banks are setting the price. The good part about that is that banks can wait longer to sell therefore demand a price. There's the bailout money at work, since the American tax payer are the deep pockets of the banks. The inventory (defined as homes listed for sale) has been steadily declining for a year now. Some talk about a shadow inventory and maybe there's some credence to that but there's no real data to back that up.


http://www.bizjournals.com/orlando/stories/2010/01/25/daily5.html

Wish my house was down 7%, that begs the question is down 7% the new up?

http://www.bizjournals.com/orlando/stories/2010/01/25/daily7.html

The amount of increase in the condos was surprising for me. But if you look back to other times when a burst of value occurred the center of the city is the first to show signs of life. My data for this was the Bank of Japan publication regarding the asset bubble burst in Japan in the 80's.

http://www.bizjournals.com/orlando/stories/2010/01/25/daily37.html

This type of article is fear mongering. There's no real data just speculation, some people say this is going to happen... other people say this... and here's some data that doesn't back up what I'm writing the article about.

As always if you need to contact me for Real Estate in the Greater Orlando Area:
4073743493
tewasko@watsonrealtycorp.com

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