"Housing Affordability Update - March, 2012"

Real Estate
 is moving again!

   I liked it better when the prime topic at all social gatherings was "how awesome real estate is!"  Everyone was such a wise investor!  Buy a house and secure your retirement!  $250,000 today would mean $500,000 in a year or two, right?  It was so... easy!

Now, we are ecstatic if we are one of the lucky ones who are not upside down (upside down = you owe more than it's worth).  It's bad all over, but it's brutal in Florida.  And here in Palm Coast, Flagler County, FL... well, we have a "special" situation.  You see, in 2003-2005, we were the "Fastest Growing County in the USA!"  Now we are the "County with the Highest Unemployment in Florida!"  And for those of you old enough to remember "The Honeymooners," you can almost hear Norton say to Ralph, "Well, what a revoltin' development this is!"  We didn't know it yet, but we were in the eye of the storm from late 2005, through the end of 2007.  And we've been in a Category 5 ever since!

But... but... but,
it used to be worth $350,000!

Ah, yet is that a flicker of light I see at the end of yon tunnel?  Yes, the mortgage banks have been keeping the distressed inventory low, by withholding shadow listings from the market, yet we are methodically clearing the bottom.  As they release the next surge of REO/foreclosure properties, I think we'll be ready for them.  Why?  Because people with money are paying cash, because it's not doing them any good in a 2% yield CD... and that trumps even a crazy low 5% mortgage every time.  The Fed insists on keeping these rates "crazy low," yet in the back of my mind I see past recovery periods preceded by modest increases in the mortgage interest rate!

When we compare the numbers (*) in Palm Coast, FL, from the 4Q2010 to the 4Q2011, we see 30% more sales, with a 10% decrease in price.  And that matches perfectly with market trends that say, "Cash purchases can usually net you a 10% discount, when competing against a buyer with a financing contingency."  From the perspective of simple Supply and Demand analysis, this is a trend towards market equilibrium... and that's good news!

Other good news comes from those nasty old banks, themselves!  According to Krista Franks Brock, of DSNews.com, "Banks are now lending amounts up to 3.5 times borrower earnings. This is up from a low during the crisis of 3.2 times borrower earnings.  Banks are also loosening loan-to-value ratios (LTV), which Capital Economics denotes “the clearest sign yet of an improvement in mortgage credit conditions.”  In contrast to a low of 74 percent reached in mid-2010, banks are now lending at 82 percent LTV." 

Here's some great information from the Flagler County Association of Realtors MLS database:

• We currently have 1,050 single family, detached homes "For Sale" in our MLS.  This is way down from the worst of it, meaning things are moving!
• 70% are normal listings, 21% are short sale attempts, and 9% are bank owned.
• AND the better news is that we have 622 single, detached homes currently in "Pending or Contingent" status... waiting to actually close.
• And even better, is that 26% of them are normal sales, 58% are short sales, and 16% are bank owned sales.
• That means we are clearing out the bottom at a rate of 3 to 1!  This is a trend with enormously positive implications!

If we are good... and eat our liver and spinach.. we should be nearer to a "new normal" by 2014!
(*) These statistics are "approximate" and rounded off, for ease of discussion.  They include all areas served by our MLS, to include Palm Coast, Flagler Beach, Bunnell, all of Flagler County, and some small numbers of listings out of our immediate area.