My New Blog

Looking back over the real estate market before hurricane Wilma hit in October of 2005, it seems hard to believe what is going on in the real estate market today. A rapid swing as drastic as what we are now experiencing in Southeast Florida seems shocking, but in retrospect the handwriting was on the wall. Homeowners and investors happily experienced a new found wealth with tremendous appreciation in home values between 2000 and 2005. Florida’s booming market also lured many people into a new found career as mortgage brokers who only had to go to school for a weekend to become licensed.

Two years ago, if a property was still on the market after 30 days I would wonder what was wrong with the house. Buyers were everywhere and I would often find myself begging to have their full price offer accepted! Those were the days, but the pendulum has swung fully in the other direction. Today, I am ecstatic when I see any house sold because there are so few sales.

There is an upside to this market correction….for Buyers

Housing is becoming affordable again and it is an excellent time to buy!

Mortgage rates are low, home prices are low and there is a lot to choose from.

If you are a cash buyer or you have good credit and would like to buy a home you are king! Some great programs are in place now for first time home buyers.

There are lots of short sales are being offered for good prices and can be a great deal for buyers. The sale price is generally 20% below the homes current market values. However, all sales are “subject to bank approval” and the time to close on the property can range anywhere from 3 weeks to several months, depending on the bank’s ability to process the transaction. (The bank in this case is the lender who holds the seller’s loan) Many short sales do work out, but both the seller and the buyer (not to mention the real estate agents) are all at the mercy of the bank.

The flipside of this coin is that Sellers are taking a beating.

Homes are not worth what they were yesterday and sellers need to be aware of their current real estate market conditions. Homes that are correctly priced can and will sell. The key is in the price. Prices must be lower than the competition because buyers are smart and there is a lot to choose from. Unfortunately, much of the competition is in the form of short sales. This week alone in Palm Beach County alone there were 225 new foreclosure filings. Until 6 months ago, I had never even heard of short sales and I have been in this business for 15 years! Foreclosures, short sales, lease with option to buy and seller financing have gone from rare to common.

The saddest piece of this market correction is the hardship for people who owe the bank more than their house is now worth and cannot manage their inflated loan payments. Homeowners who find they are teetering on or in foreclosure may find a short sale their best plan. If a homeowner can prove hardship to the bank, the bank may allow the homeowner to sell their home for less than the value of their loan. The bank then forgives the balance of the loan to the homeowner. This is a simplified explanation of short sales, but is worth exploring for some because it far outweighs the option of foreclosure. A foreclosure stays on your credit for 10 years and it’s a judgment that can haunt you all the while. With a short sale, you can clean up your credit and become credit worthy again within 2 years.

I could speculate along with everyone else on how long the current market conditions will last… but I won’t. I don’t have a crystal ball. I’ve heard some excellent analysts say “after the election” and “beginning 2008”. The only thing I am sure of is that the market will change. It always does. During the market boom I was amazed by the low prices some homeowners had paid years prior. Years from now, people will brag about how little they paid when they purchased property during the market correction of 07!

Okay… So the Market has changed. The “bubble” has burst.

Two years later, there is no more wondering.

Recession? It sure looks like it! But it is definitely not the end of the world.

We need to put things in perspective. Most of Southeast Florida rallied to an unbelievable 200% appreciation of home values over the boom years. So if we drop 20% or 40% over a few years, we are still ahead of the game.

The real problem and the consequences of the real estate boom we all enjoyed are the homeowners and investors who were still banking on continued rapid appreciation. This was a gamble and many people lost. This “gamble” came on the heels of the “dot-com” collapse. Many who lost in the “dot-coms” found salvation in their homes or by investing in real estate. Now we are back to traditional real estate and this is a very good thing.

Since Fannie Mae began offering 100% financing to first time home buyers in depreciating areas, 2 months ago, my office has been able to place quite a few families who could have never afforded a home otherwise into lovely single family homes. These were all young couples and these homes are a slice of the “American Dream” for them. This is traditional real estate and this is a very good thing.

During the boom years, every other person you met either held a real estate license or a mortgage broker’s license. It seemed everyone wanted in on the action, but not everyone was committed to the long term. Serious Realtors and Bankers work diligently at developing a strong professional business. Those that remain after the dust settles will be a smaller group of more qualified professionals. We will experience traditional real estate and this is a very good thing.

Because of our rapid appreciation during the boom years, we are having a larger correction than most. For this reason we have been referred to as “Ground Zero” of real estate’s bursting bubble. This real estate market correction will end, probably sooner than later, and when it does, our area will be one of the first to rebound. AAAH, back to normal! Traditional Real Estate. This is a very very good thing!

Right now, prices are low, interest rates are low and it is a very good time to buy. Please remember to look for a sound long term real estate investment when you are buying a home.