Prices gains in all markets.
Foreclosure numbers declining steadily.
These are surely signs of a great comeback of real estate.
Or are they?
In the last five or six years I have hardly sold any property to a Florida individual resident. Not exactly. About three years ago I sold a small distressed condo to a local investor at a giveaway price.
The rest has all been out-of-town buyers, foreign buyers, vacation homes, bottom-feeding out-of-town investors.
I have been thinking a lot about it lately.
What has happened to what we used to call "normal people" ? Those young couples in search of a first home, the "empty-nesters" selling their larger houses to get into smaller apartments ?
I am not talking about the wealthy South American seeking a home in his new country of adoption.
I am referring to plain American buyers, my friends, the friends of my kids, those who, in a not so distant past, would have been calling me to ask for my expertise.
They are all but gone.
Perhaps I am getting old and my kind of clientele is naturally changing. I might be getting referrals from other strata of society. I am getting wealthier and world-wide-known. Could that be ?
Or could it be that perhaps the country has changed, or Florida has changed?
Florida is a place of retirement, a place of vacations. That explains why many of my prospects call me from France, or Argentina, Canada, or New Jersey, or Chicago.
But does it explain that these have become ALL my clients ?
I am suspecting that real estate problems have not quite ended and might even be worsening.
Affordability of homes is the keyword. Of real homes, not multimillion-dollar condos on the beach, or luxury private guarded neighborhood homes.
Can an average thirty or thirty-five year-old person dream of owning his own home at this time?
Yes he can, if he can solve all of the following questions:
Pay with a normal income a home mortgage, the homeowner and hurricane insurance, the property taxes, the maintenance expenses; and at the same time manage to keep the total of these payments below a 30% of his monthly pay-stubs ?
Put together an amount sizable enough for a down payment, and all expenses associated with a home purchase?
Manage to arrive to this stage with an almost immaculate credit report ?
Be confident about his present job security and the stability of his income (or the combined income of his couple) ?
If he has managed to solve all these points, he can get to the next step.
Which is:
Find a suitable property whose seller is willing to accept an offer that is not a "cash with no financing ontingency" deal.
Find a seller that is ready to be very, very patient, because now starts the following point which is:
Get the mortgage loan. As you might suspect, those same banks who were so generous in generating and granting these incredibly easy -and trashy- loans (that they would later resell to unsuspecting investors) are now the most strict, severe, inflexible lenders in the history of the world.
I have assisted to a couple of these loans and if it hadn't been awful and almost tragic, I would have called it hilarious. I swear that these guys wouldn't make a loan to their own bank! Endless requirements. Exaggerated insurance obligations, paper, documents, statements, constraints, more papers. Where did your money come from? We need proof that it's all yours, not your dad's, and so forth.
But wait! If it was an apartment in a condominium building, here comes the best. Is your building approved by Fannie Mae? Does your building have too many tenants? Does your building maintain reserves? Does your building have more than a certain percentage of investor owners?
Not in compliance of all this and some more? You're out of luck, my friend. And guess what? Most buildings won't pass the test.
What's funny is that most of these Fannie Mae requirements are addressing problems long gone now, which were precisely originated by the complete lack of ethics and rules in the famous "real estate balloon" years and which do not present a real problem nowadays. The scope of this blog does not allow me to explain why, but it is evident.
Of course, all this can be avoided or eased if you can remedy the problem with a 40 or 50% down payment, or even better: just buy it all cash. Which bring us back to my dear foreign buyers and investors.
Do I have the solution?
In a certain way, if we correct all the above, we'll get it right.
Which means:
Get normal people back to making a decent income. The ratios that mortgage lenders traditionally established are reasonable as long as they are adapted to reality. Perhaps we should build smaller homes, but it is evident that the national average income in real dollars has gone sharply down in the last thirty years or so.
Get them steady jobs. Bring back the good jobs to America. Good jobs will allow all of us to maintain better credit reports, and by the way send our kids to colleges, feed them better, keep them in better health, educate them better, and make this country's economy roll again.
Keep decency and ethics in the mortgage business, but letting those who got us in the big mess dictate the new rules can be a matter of discussion.
Ranting again! And just because I read the following article today:
Report from RealtyTrac
Most Housing Markets Still Worse off Than in ‘06:
Most housing markets are faring better than they did in the
depths of the recession, but the recovery still has a long way to go.
Just 8% of housing markets in 410 U.S. counties are better
off than they were in 2006—a year that predates the crisis, according to a new
report from RealtyTrac. The report analyzes housing market health in 410 U.S.
counties over the past eight years in two-year intervals. Market health is
measured according to four metrics: home price appreciation, affordability,
percentage of bank-owned real estate sales and unemployment rates.
Still, while a majority of housing markets have yet to
return to their pre-crisis standards, the report shows that the worst effects
of the crisis have largely passed. A full 96% of housing markets are better off
than they were in 2010. Eighty percent of housing markets are also in a better
state than they were in 2012, suggesting continuing improvement.
“The housing recovery has taken root in hundreds of counties
across the country, and almost all local
housing markets are better off than they were four years ago when foreclosure
activity peaked,” RealtyTrac vice president Daren Blomquist said in a press
release Friday.
Roughly 1 million homes went into foreclosure that year and “we
saw less than half that number of bank repossessions nationwide in 2013,”
Blomquist said.
"Even in hard-hit markets like Stockton, [Calif.], Las
Vegas and Lansing, Mich., where real estate owned sales represented more than
half of all sales in 2010, the percentage of [real estate owned] sales has been
cut at least in half," Blomquist said.
Home prices in three-fourths of the counties included in the
report continue to hover below their 2006 levels. But low inventory in cities
like Seattle, San Francisco, Denver and Oklahoma City has led to rapidly
appreciating home prices in those areas, according to the report.
"Those rapid home price gains are causing a concerning
drop in affordability rates in some cities, but homebuilders and homeowners
with regained equity should help provide more supply to balance out many of
those markets in 2014," Blomquist said.
Read in the National Mortgage News – March 23, 2014
Henry B. Nathan
is a Real Estate Agent at
United Realty Group Inc.
Please call me for your real estate assistance at:
(800) 416-2747 (954) 296-6741
Email me: hbnathan@gmail.com
