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Aug 16 Update

August 16th, 2007 1:11 PM by Ron Mastrodonato

Florida’s housing market for 2Q 2007: Sales activity remains soft

ORLANDO, Fla. – Aug. 15, 2007 – In second quarter 2007, Florida's housing sector in many markets continued to report higher inventory levels of homes for sale, median prices edging down and sales activity reflecting a buyer’s market.

Statewide, sales of single-family existing homes totaled 37,709 during the three-month period, a decrease of 30 percent compared to 53,723 homes sold during the same time a year earlier, according to the Florida Association of Realtors® (FAR).

The statewide existing-home median sales price was $239,200 in the second quarter; a year ago, it was $250,400 for a decrease of 4 percent. In 2002, the second-quarter statewide median sales price was $137,400, which reflects an increase of about 74.1 percent over the five-year period. The median is a typical market price where half the homes sold for more, half for less.

To gain insight into current trends in Florida’s real estate industry, the University of Florida’s Bergstrom Center for Real Estate Studies conducts a quarterly survey of industry executives, market research economists, real estate scholars and other experts. When assessing the state’s single-family markets, those polled in the second quarter 2007 survey viewed absorption activity as a sign the markets are continuing to move toward stability, said Dr. Wayne Archer, the center’s director.

While acknowledging the potential impact of the subprime mortgage “meltdown” on Florida’s housing sector, along with the issues of property taxes and high insurance rates, Archer said, “Those of us who have watched markets for a long time realize the picture can change rather dramatically in a short period of time if something allows people to sell their house more quickly, such as a change in the property tax situation or a sudden improvement in the economy.”

Continuing low mortgage rates remain another positive influence on the housing market. According to Freddie Mac, the national commitment rate for a 30-year conventional fixed-rate mortgage averaged 6.37 percent in second quarter 2007; one year earlier, it averaged 6.60 percent.

The latest industry outlook from the National Association of Realtors® (NAR) predicts that existing-home sales will continue to be stable over the next few months. Long-term fundamentals of the housing market remain favorable, said NAR Senior Economist Lawrence Yun, who expects a modest upturn for existing-home sales toward the end of the year.

“With the population growing, the demand for homes isn’t going away – it’s just being delayed,” Yun said. “More buyers, and cutbacks in new construction, will eventually draw down the inventory levels and support future price appreciation.”

Looking to Florida's existing condominium market, sales of existing condos also decreased during the quarter, with a total of 12,415 condos sold statewide compared to 16,566 in second quarter 2006 for a 25 percent decline, according to FAR. The statewide median sales price for condos remained relatively stable at $208,400 for the three-month period; a year ago, it was $211,200 for a 1 percent decline.

Among the state’s larger markets, the Sarasota-Bradenton metropolitan statistical area (MSA) reported 2,365 existing homes sold for the quarter, a 4 percent increase compared to the 2,281 homes sold a year earlier. The market’s existing-home median sales price was $294,100; a year earlier, it was $318,500 for a decrease of 8 percent. A total of 948 existing condos sold in the market over the three-month period, up 2 percent from second quarter 2006, while the existing-condo median price decreased 9 percent to $246,900.

The Tallahassee MSA, one of the smaller markets in the state, reported that 1,178 homes changed hands in the second quarter, down 20 percent compared to 1,471 homes sold a year earlier. Over the same period, the market’s existing-home median home price rose 4 percent to $181,000; a year earlier, it was $174,800. A total of 102 existing condos sold in the Tallahassee area during the second quarter, a decrease of 30 percent from the previous year, while the existing-condo median price rose 4 percent to $153,600.



Man-made storms to test houses

MIAMI – Aug. 15, 2007 – Just as crash-testing cars led to air bags and reinforced chassis, Florida scientists think blowing apart houses on camera will spur consumer demand for hurricane-proof windows, walls and roof shingles.

Work is underway on a state-funded, $17 million test lab at the International Hurricane Research Center on the campus of Florida International University in Miami. Inside the hangar-style building, a 25-foot-by-45-foot bank of industrial fans powered by race car engines – a “Wall of Wind” – eventually will slam full-size houses of up to two stories with 131-155 mph winds typical of a Category 4 hurricane – and could hit Category 5 winds of 160 mph. High-pressure water nozzles will simulate tropical rain. The lab will include an observation section behind bullet-proof glass.

‘Totally assault it’

The lab will be the first test site to use complete, intact structures in an indoor, controlled environment, according to Stephen Leatherman, director of the hurricane research center.

Testing thus far has been conducted outside on parts of buildings and smaller, mobile fans were used. Researchers will use a smaller bank of six fans inside the new test lab until the $2 million Wall of Wind arrives next summer, Leatherman said.

Besides helping manufacturers clinically test their products, center officials plan to publicize high-speed photos and video of the damage, just as the Insurance Institute for Highway Safety has done with its famed crashes of new cars.

“We’ll put a 2,000-square-foot house on a turntable and totally assault it,” Leatherman said. “When we first started talking about it, people thought we were mad scientists.”

The lab is scheduled to open in September.

For help planning the program, the center hired retired insurance institute president Brian O’Neill as a consultant. O’Neill said he stressed the importance of investing in broadcast-quality camera systems and publicizing the test results.

“When we started our frontal crash tests in 1995, we were able to show that ‘Car A’ was collapsing while ‘Car B’ was not,” O’Neill said. “And that got the attention of manufacturers and the public.”

The hurricane-lab tests could lead to rapid change in the housing market, as builders incorporate the products as selling points in new houses and homeowners select the best products to “retrofit” or “harden” existing homes, O’Neill and Leatherman said. By contrast, it can take two to three years to redesign a car model, O’Neill said.

“We spent a lot of money on shutters, and we did a lot of research before we bought them,” said homeowner Angelika Anderson of Cocoa Beach, Fla. “If there were videos and they showed how other materials performed, I would be interested in that.”

The prospect of lower, or at least more predictable, insurance losses from hurricanes was one reason the center received early funding from RenaissanceRe, a Bermuda-based company that sells backup catastrophe insurance to most brand-name carriers who sell homeowner’s policies, Leatherman said. The company has billions of dollars at stake.

3M, others interested

“It’s research that’s just screaming to be done,” said Craig Tillman, president of WeatherPredict Consulting, the U.S. affiliate of RenaissanceRe. “There’s not a lot of people standing around when a hurricane makes landfall. You see the aftermath, but you don’t see how the damage was propagated.”

The hurricane research center has no plans to issue ratings or product approvals, said Carolyn Robertson, the center’s assistant director. The initial focus, she said, will be teaching, research and publicity.

Anderson said the lab testing results should be acknowledged by all home insurers and result in lower premiums for people who buy the best-rated products. Anderson spent about $20,000 this year to storm-proof her home with hurricane shutters, only to see her State Farm insurance bill rise from $4,300 to more than $7,600.

Manufacturers such as 3M have agreed to help build test houses for the hurricane research center. And more than 50 companies are waiting to test products such as a spray adhesive that can cinch-down roof supports on older homes without modern metal “straps,” Robertson said. If the spray worked under realistic storm conditions, the company could market it to contractors and homeowners by citing the test results, she said.

Scientists and corporate clients will be able to test full-size homes and products, rather than scale models, in controlled conditions, Robertson said. They also will be able to scrutinize how different components of a house – windows, masonry, doors, roof trusses – work together in a storm.

“The real goal is to be able to retrofit houses or build new houses so they can withstand a Category 3 hurricane with no damage,” Leatherman said. Because stronger storms are rare, he said, “we can solve 80-85 percent of the problem.”

Copyright 2007 USA TODAY, a division of Gannett Co. Inc., Matt Reed reports for Florida Today in Melbourne, Fla.


Banking regulators propose new mortgage disclosure forms

WASHINGTON – Aug. 15, 2007 – Federal bank regulators on Tuesday published a new set of forms designed to give borrowers a better understanding of mortgages that can adjust to dramatically higher monthly payments.

With mortgage defaults rising among U.S. borrowers, consumer advocates say many lenders encouraged consumers to focus on the initial low-rate “teaser” period without fully informing them that their loan payments could jump up in the future.

The disclosure forms published by the Federal Reserve and the other four federal agencies that regulate banks, thrifts and credit unions are intended to give consumers clear information about the risks of adjustable-rate home loans.

One sample form gives borrowers an explanation of features common to adjustable rate mortgages, while another form compares payments under a traditional fixed-rate mortgage compared with an adjustable rate one.

Kirsten Keefe, founding director of Americans for Fairness in Lending, an umbrella group of consumer organizations, said the disclosures are an improvement over current ones but are no substitute for a new federal law that would ban specific unfair lending practices.

Many consumers, she said, are faced with a stack of confusing disclosures when they obtain a loan and rely on advice from real estate agents and mortgage brokers.

“The best disclosure will never replace regulations,” Keefe said, “What’s really needed are laws and regulations that get rid of abusive terms in adjustable rate mortgages.”

In addition to the Fed, the agencies that developed the new forms are the Federal Deposit Insurance Corp., the National Credit Union Administration and the Treasury Department’s Office of the Comptroller of the Currency and Office of Thrift Supervision. Comments on the proposal are due Oct. 15.

These banking regulators in July also completed guidelines that call on lenders to strictly evaluate borrowers’ ability to repay home loans.

Mortgage lenders such as Countrywide Financial Corp. and Washington Mutual Inc. package many of their home loans into securities and sells them to investors, but the market for those investments has dried up because of rising defaults and a slumping housing market.

Lenders are not required to use the new forms and are free to alter or design them as they see fit. However, banking institutions generally follow the regulators guidelines, which only apply to federally supervised institutions, not state-regulated ones.

If they do not use the baking regulators’ forms, lenders would have to ensure that their own disclosures and marketing materials provide “clear and balanced” information, federal regulators said in a notice published Tuesday in the Federal Register.

Earlier this year, the Federal Trade Commission concluded that many borrowers failed to understand loan terms after reading the current disclosure forms and recommended those forms should be replaced.

Copyright 2007 The Associated Press, Alan Zibel (AP Business Writer). All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Posted in:General
Posted by Ron Mastrodonato on August 16th, 2007 1:11 PM


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