Thanks to everyone who has contacted us with questions and thoughts for upcoming Real Estate trend reports.Let’s dive into to a very common question here in the TampaBay area:
“I have equity in my home and don’t know if I should sell now or wait for two or three years to hopefully sell for more then?”
The short answer: You will NOT be able to sell for more in 2-3 years. Holding your real estate waiting for the market to rebound is a long-term (7 to 10 years).
Let's look at why:
In 2009, Real Estate values in the Tampa area dropped by 12%, a much lower decline then in 2008, which saw a 22% drop in home values. As we look toward 2010 and 2011, we see short sales and bank-owned property (foreclosures) continuing to be major factors in the housing market. Let me explain to you why the short sales are so toxic to our home values.
House A was purchased in July of 2005 for $485,000 with a loan amount of $460,750.The seller can no longer afford the home and lists it as a “Short Sale.”
House A is listed on MLS for $310,000. An offer is presented to and accepted by the homeowner. The seller’s agent sends the offer to the Bank of House A. Bank A orders a Broker Price Opinion and an Appraisal on House A to determine market value.
Brokers Price Opinion: $295,000
Appraisal Opinion is $305,000.
In the opinion of the bank, the value of this home is $300,000.
Here is where the downward cycle starts: Since the offer that was made was $275,000 the Bank A WILL ACCEPT that offer as a sales price. Almost all banks will short sale homes at 90% of believed value. (Remember, the price the banks will accept is a function of the market value of the home, not necessarily the home’s list price)
While House A is going through the short sale process, a neighbor three doors down lists his home for sale as a short sale, it’s the same floor plan as House A and gets listed at $305,000.As soon as House A closes in August, House B gets an offer that is accepted by the homeowner and sent to the Bank of House B. Bank B orders a Brokers Price Opinion and an Appraisal to determine the value of House B.
Brokers Price Opinion: $295,000
The Appraisal Price Opinion: $275,000 (House A is now a comparable sale)
In the opinion of Bank B the value of House B is $285,000. The offer of $265,000 is accepted by Bank B, since it is within 90% of Bank B’s perceived value of the house.
It is this cycle that repeats itself time and time again that plays a major reason for home values dropping. This is why we will see home prices continue to drop into 2010 and 2011.There is still a huge percentage of homeowners who are upside down, and many more mortgage defaults are still looming.
For buyers, the downside of purchasing short sales is that they may not be approved at all.Thus we have many buyers today who have decided to or cannot consider short-sales, and are willing to pay more for a non-short sale property in good condition, priced competively.
Let’s look toward the future…
We expect home prices to drop 5% to 8% in 2010 and 2011. 2012 will start with a slow drop in value then level out in pricing, so expect home prices to drop 12- 18% over the next three years.
I know… I know…you’re saying, “John, how can you be so sure the drop will continue?”
47% of all active listings in New Tampa are either bank-owned or short sale listings. AND
78 % of all pending homes, (homes under contract) are bank-owned or short sales.These lower numbers are becoming the comparable sales and appraisers have no choice but to use them. The downward pressure on the housing market is intense.
The market can’t cleanse itself out mainly due to the time it takes to get a short sale approved (think 4 to 12 months for each transaction). New sellers are then becoming short sales due to these dropping values.
The good news is in 2013 we should see home prices going up! The bad news is we will have a 12%-18% drop to make up. (the total drop in value coming from 2010-2012). After that, the best we can hope for is2-4% annual increase in home values each year due to the fact that we will still have short sales in our market for years to come, hopefully not nearly as many as we have today!
CONCLUSION:
Do the math…if it’s going to take 4 to 7 years to make up for the falling prices that lay ahead and the increase of values won’t start for three years we will not see today’s pricing. (Feb 2010) for 7 to 10 years.
If you’re thinking of upsizing or downsizing in the next 7 years DO IT NOW.
If you see the wisdom of buying another home to move into and keeping your current home as investment property, DO IT NOW.
If you’re thinking about buying an investment property and staying in your current home, DO IT NOW.
PLEASE call us right away if you or anybody you know might be thinking of waiting to sell. We can help you save your equity. Or limit the amount you may need to bring to closing.
2010 is upon us and it promises to be another INTENSE year for Real Estate in the Tampa Bay area. There are a few preconceptions that today’s buyers have, that need to be discussed…
BELIEF #1: Finding a home to buy is going to be a fun easy process of selecting from a large inventory of homes.
REALITY: The inventory of non-short sale homes is VERY low. In some price ranges, the ones that come on the market priced right go under contract in 3 to 5 days. Buyers need to be able to react very quickly to new listings entering the market. As of year end, inventory was around the 13,000 home level—while this sounds like a lot, we’ve had several years of enormous inventory levels….we’ve had many months with over 20,000 active listings. Last time the inventory was this low was in March 2006.
BELIEF #2: Buyers think that they have two years to find a home because pricing will continue to drop for the next year or two.
REALITY: While prices will drop from 5-7% in 2010, interest rates will rise to at least 6% by the end of the year, and should be pushing 8% by the end of 2012. Waiting will cost thousands of dollars in the mid to long term.
BELIEF #3: All Realtors acting as Buyer’s Agents act in the same capacity.
REALITY: Nothing can be further from the truth. Most Realtors today act as Transaction Agents, meaning that they are agents of the transaction, having no fiduciary relationship to the buyer. Transaction agents do not operate in a capacity to talk value, pricing, or buying strategy/ negotiating with the Seller. On the other hand, a Realtor acting as a Single Agent has a fiduciary relationship with the buyer, has all the duties of a Transaction Agent with some important additions: Loyalty, Confidentiality, Obedience, and Full Disclosure.
A Single Agent has a fiduciary relationship with the Buyer, and has the right to talk about the value of home before an offer is written, having input on the buyer strategy, and can let the Buyer know if they are overpaying. Did you know this? Did you even know what your agency relationship is with your listing or buying agent? Florida Law presumes that we are all Transaction Agents unless we disclose otherwise. At Tampa Home Group, we provide this higher level of service to our clients, we choose to act as Single Agents, and we take the time to explain our relationship to you. As Buyer’s Agents, our commission is paid by the Sellers, so you pay us no commission.
Maria Hoffman
John & Maria Hoffman, Realtors
Keller Williams Realty
20701 Bruce B. Downs Blvd. Suite 200
Tampa, FL 33647
Direct line: 813-991-1406
Fax 1-866-897-0571
Time is running out. The Federal First-Time Home Buyer Tax Credit expires as far as we know December 1, 2009. If you know ANYONE who does not currently own a home, but you think SHOULD...employees, co-workers, friends, or their adult children, please have us talk with them right away.
Whether or not they buy, let's get them the help they need to so as not to miss out on this excellent opportunity.
It's that time of year again, and you have received, or will be receiving, information on your 2009 property taxes...
2009 PROPERTY TAXES
The Property Appraisers in each county mail out new property valuations, called TRIM (Truth in Millage) notices to homeowners in August.
WHAT SHOULD I LOOK FOR?
On your property record, you will see two figures, Just Market Value, and Assessed Value. Most Just Market Values on the TRIM notices have come down substantially this year. The Property Appraiser determines the value of your home on January 1 using sales from the previous year. In a declining market, we have seen our assessments lag behind slightly.
ASSESSMENT MAY GO UP DESPITE MARKET VALUE...
While the 2009 values we have seen have been quite low, even larger decreases than we might have expected, it is possible that your assessed value rose. Yes, this is possible. Back in January 1993, theSave Our Homes Act capped increases on assessed value on homesteaded property at 3% per year, OR the increase in the consumer price index, the lesser of the two. In the years when home values grew 5-10% or more, the increase on assessed value was capped at 3% . Now you may see the assessments play "catch up", recapturing the value by the allowed 3%.
If you have not received your TRIM notice yet, you can look up your 2009 values online:
If you feel your assessment is unfairly high or a mistake has been made, you have the statutory right to appeal it. Keep in mind that you only have a short time to do so, so don't wait. Here are some helpful links:
As always, we are here to answer your real estate questions. If you'd like to know more about the sales around your home to better assess market conditions, Click here for a custom report on actual sold prices around YOUR home! You'll receive a real-time report taken right out of the MLS. These are actual sold prices, much more accurate and timely than any other resource we've found. (That includes Zillow--if you didn't check it out, Zillow admits their info in Florida is terrible. This is Zillow's own data comparing their Zestimates to actual sold data, in many counties almost half the Zestimates are off by over 20%!)
Monthly sales at 1,714, a level we haven't seen in Tampa in almost 3 years! Buyers are taking advantage of low prices & rates.
Inventory has fallen to an 8.34 month supply (off a high in January 2008 of 25 months supply).
Our sources inside the banks tell us that the supply of bank-owned inventory has yet to hit its peak. We will continue to monitor the market and keep you informed.
This week (July 20-24) I will be attending a sales seminar along with 4,000 of the nation's top real estate agents. We will be working on the best strategies to keep our clients ahead of the market and get through these tough economic times. No matter what is going on in the market, we are continually educating ourselves to help you reach your long-term and short-term goals.
My wife, and business partner, Maria, will be running the office. I will be checking voicemail and email several times a day. We're always here to serve you, your families, and friends.
Don't forget we have new phone numbers at our new Keller Williams office in the Central Bank Building on Bruce B. Downs Blvd. (See below) While the old numbers will continue to be forwarded to us for a few more months, we want to make sure you are always able to reach us.
While 30 year mortgage rates are near historic lows , hovering around or under 5 percent for conforming loans (amounts under $417K) rates for jumbo loans (amounts over $417K) are now hovering in the low 6’s, down from the 7 or 8 percent range. Because a single loan of $600K represents more risk to a lender than 3 separate loans for $200K, rates have always been higher on jumbo loans. However, this week several banks have announced jumbo loans programs with rates under 6 percent. Contact us for more information.
