Orlando Real Estate

The number of homes available for sale has risen by about 1,000 over the last three months. Back at the end of April there were about 15,700 homes available for sale and today there are about 16,700. I looked to see where the additional inventory is coming from, and they are all distressed properties. Back on May 3rd in by Orlando real estate blog I found 8,335 equity sales, 1,740 bank owned properties and 5,628 short sales available for sale. Checking today, there are 8,319 equity sales, 2,446 REO's and 5,956 short sales. The normal sales have remained very constant while bank owned have risen by almost 700 or just over 40% and short sales are up a little over 300 or just over 5.5%.

While I expect the short sales and bank owned to continue coming on the market, we are approaching the time of year when fewer equity sales will be listed and many will begin to come off the market. Of course, this is also the time of year sales begin to slow down. Factoring all this in, I expect to see a steady rise in inventory through the end of the year. Unless employment really begins to pick up, look for active inventory around 18,000 by years end. So far in July just over 1,800 sales have closed at a median sales price of $108,900. It looks like my estimate of 2,200 sales is probably right on track as many sales are likely to close today as the last Friday of the month.

David Welch Real Estate Optimist, Orlando Real Estate

I saw the title of an article today that said "What will a trillion dollars buy?" I did not read it, but I am sure it has something to do with the budget deficit or corporate profits or possibly the amount of money The Fed has pumped into mortgage backed securities. The other day, I started thinking about just these three things and it struck me that for less than a trillion dollars The Fed could have purchased all 3.99 million homes for sale right now. At an average price of around $200,000 four million homes would be $800 billion. Budget a couple hundred million dollars for upkeep and maintenance, and bam one trillion dollars.

Back awhile ago I wrote a blog titled "A Crazy Idea", and a year and a half later it is still relevant. So far about two trillion has been spent on bailouts, stimulus, and the purchase of mortgage backed securities. Today, interest rates are lower, and there are fewer homes for sale, but is the housing market any stronger than it was two years ago. Here in Orlando sales are much more brisk, but that has more to do with the freefall we saw in prices from 2008 to 2010. When I wrote that original blog piece our median sales price was around $148,000, and last month it was $116,000. What good is the liquidity in the financial markets if loans are not being made. What good is the stimulus if unemployment is still pushing double digits.

Yes, it's a crazy idea, and no I don't really expect anyone to take it completely seriously. However, if The Fed went into markets and absorbed the excess inventory in the middle third, think of the direct impact on local real estate markets and economies. The purchases release all kinds of pent up demand; builders would once again have to start building; prices would be stabilized; states and local governments would see their tax bases improve dramatically. This type of intervention directly impacts individuals and local economies instead of helping to support bank balance sheets.

David Welch Real Estate Optimist, Orlando Real Estate

I finally got around to seeing the actual models of the brand new city homes in Baldwin Park. Mattamy is new to the area, but not new to building, so if you don't know the name just wait - you will. These new city homes are gorgeous, and I have to say the floor plans are very well conceived. When I looked at them on paper, I was unsure how I would feel about the stairwell layouts. In person, I can say that they enhance the floorplans and make them stand apart. As I started to say Mattamy is new to the area, but they are actually Canada's number one builder. They are also winners of a few JD Power awards, so I think they know what they are doing. Current economics allowed them to come into our market at a much lower cost basis than some of their competitors, so they know what they are doing business wise as well.

My personal favorite is the 2,051 square foot model, but all of them have their strong points. As I tell people all the time, you need to find the home that fits the way you live. If townhome living is the lifestyle you are looking for, make sure you check out Mattamy homes in Baldwin Park. Tell Gary, you read about them on my blog. If you are not working with an agent, I would love to help you through the new home process. If you are considering a home in Baldwin Park, I live here and can probably answer a lot of your questions about purchasing and living in this terrific neighborhood.

David Welch Real Estate Optimist, Orlando Real Estate

New home sales numbers came out this morning and they were much improved over last month, but still very slow compared with past years. At the very core of the housing bubble was the tremendous over building that took place between 2004 and 2006. There were easily a million too many homes built nationally in that time period. Couple the over building with way too easy credit terms and, boom, here we are today cleaning up this mess. Here in Orlando we are cleaning things up from the bottom up. If you look at our numbers, our market is being dominiated by first time buyers and investors. So far this year just over 50% of all sales have been cash purchases. It is not a big stretch to assume most of these are investors bargain shopping.

Nationally, the median sales price is over $180,000, but here in Orlando it is running around $110,000. That is because investors and first time home buyers are the bulk of our marketplace right now. Both are snapping up bargain priced foreclosures and short sales at a brisk pace. The homes in the middle price ranges are not faring so well. Sellers have seen their equity eroded, and there are few buyers who can afford to move up. Add to the fray, the lawyers on television every six minutes telling people to call them about a "strategic default", and it looks like we could be cleaning up things for a while.

The good news is that unemployment appears to slowing turning around, and there are still a lot of great things going on in Orlando. I have heard a statistic that 95% of Americans will visit Orlando in their lifetime. If you have been to the new Wizarding World of Harry Potter at Universal, you would swear they are all here right now. The third largest university in the nation is right here; the University of Central Florida boasts more than 52,000 students, and is home to a new medical school. The new medical school is part of a world class medical city that is developing in the Southeast part of Orlando. Economists estimate the economic impact could be on a par with Epcot opening back in the 80's. Downtown has a new Amway arena opening soon, and the old arena is slated to become a major hub for digital media. As I have said many times before "jobs equals rooftops", and all of these initiatives should add jobs to the area.

I am looking for continued strong sales in the 2,000 per month range though September and December will probably fall a little shy of that number. I know these numbers are lower than what we have experienced in the first half of the year, but the Fall tends to be a slower sales period. If employment begins to finally improve, prices will likely come up a bit too. As long as employment growth remains slow, prices will likely remain low for some time. In other words, I am not looking for any big changes just yet.

David Welch Real Estate Optimist, Orlando Real Estate

So far in July, the main trends I am seeing are a climb in inventory of active and a rebuilding of pending sales. While the home buyer tax credit closing deadline has been extended for buyers with contracts dated on or before April 30, 2010, that extension did not come until after the original June 30th deadline. This caused a huge surge in closings last month to more than 3,000. I did not look for that to continue into July, but rather a return to the pattern we saw leading up to the June deadline of around 2,200 - 2,400 closed sales.

The active inventory is up several hundred from what we saw over the last few months with 16,675 active listings. Of those, 2,440 or 14.6% are bank owned and 35.6% are short sales with 5,932. Both of these types of distressed properties are up and now represent more than 50% of the total inventory. Pending sales are also beginning to climb again with 9,531. Of those 2,181 or 22.9% are REO and 5,975 or 62.7% are short sales. The number of pending short sales plummeted by about 700 homes at the end of June as more than 700 short sales closed last month. That marked the highest number of short sales I have seen close in any month.

Closed sales are right on track to close around 2,200 or so with 1,224 closed so far with a median sales price of $110,000. Of the closed sales posted 544 or 44.4% are bank owned and 22.7% or 278 are short sales. In every status of active, pending and closed sales the distressed properties have grown slightly as a percentage. This shift to slightly more distressed properties has also pulled the median price down from the $115,000 range we have seen over the last few months. Also, cash sales moved back up with 52.7% or 645 of the sales this month closing as all cash transactions.

David Welch Real Estate Optimist, Orlando Real Estate

I was looking at homes in the $1 million to $1.8 million price range for customers of mine. There were half a dozen homes that appeared to meet their criteria, so I called to ask a few more questions about them. Three of the six had just accepted contracts, and this made me start thinking that the Orlando luxury real estate market is starting to improve. Recently, a listing of mine in Baldwin Park priced at $699,900 had multiple offers on it in one day back on the market. I have also spoken with other agents that typically sell more expensive properties that are seeing more activity. I went back to 2006 which is when our prices peaked even after activity had begun to wane. Below is the resultof what I found.

Six Months Ended	Number of Sales over $1mm	Median Sales Price
June 30, 2010	119	$1,300,000
Dec 31, 2009	102	$1,300,000
June 30, 2009	75	$1,315,000
Dec 31, 2008	110	$1,367,500
June 30, 2008	172	$1,231,000
Dec 31, 2007	191	$1,300,000
June 30, 2007	242	$1,385,000
Dec 31, 2006	225	$1,300,000
June 30, 2006	247	$1,325,000

The sales of luxury homes appear to lag the overall market by about six months in terms of activity, but seem to be somewhat more insulated from price fluctuations. The Orlando real estate market suffered its biggest slow down in sales activity through the end of 2008, while the luxury segment saw its biggest dip through the first half of 2009. What is really interesting to me is the support for a median sales price of $1.3 million through the entire cycle.

David Welch Real Estate Optimist, Orlando Real Estate 

If you work on short sales, you know how frustrating it can be following up with the bank. Very often you receive conflicting or at least inconsistent information. Typically, the upate you receive is vague with respect to exactly where your particular transaction currently is in their process. The source of the frustration is that we, the real estate agent, are managing a process we do not control. It has at least been my experience that the people we are working with on the other end of the phone may not even know what their own process is. We certainly do not have any type of flowchart of the bank's internal processes, nor do we have direct lines of communication that provide feedback on where each transaction currently is in those processes.

I am writing this post to update you on a SunTrust short sale that was giving me fits a few weeks back. I had a devil of a time getting the short sale department to acknowledge receipt of the documents to open the short sale. Then I had a great deal of difficulty getting them to acknowledge they had authorization on file allowing me to work with them on behalf of my customers. The last time I wrote about this, I had just spoken with a customer service person on the 800 number that proceeded to tell me that everything I had already been told was incorrect. I pretty much asked her who I was supposed to believe. Either she was telling me the truth or every other person I spoke to was telling the truth and she was not. After politely and professionally letting her know that I had little faith in what she was telling me, I wrote about that experience in this blog. I do not know if it was my phone conversation or the blog post, but first thing the next day I heard from the set-up coordinator at SunTrust by phone and e-mail.

Ms Taylor is her name, and she has been truly wonderful to deal with. She has been very professional and personable with me on the telephone and by e-mail. We did run into a bit of a hiccup, but she was reasonable in her expectations and gave me the time I needed to provide her with updated information. I am very pleased to say that she has been timely in communicating with me and used excellent business judgment in helping me to keep this transaction moving forward. She just called me earlier today to let me know that she is moving the file on to the next step. She did ask for a better copy of a document, but she is not holding up the file. This particular transaction is really pretty straight forward to me, and should be an easy approval. Thank you Ms. Taylor for being a professional.

David Welch Real Estate Optimist, Orlando Real Estate

As I see it, there are basically three strategies for investing in real estate. There are many different variations, and tactics for employing these strategies, but they all boil down to these three. The first, is the bread and butter of real estate investment and in some ways has less risk and somewhat lower returns. The buy and hold for the income stream strategy is somewhat like purchasing bonds as an investment. You buy solid properties in good areas that will produce a somewhat predictable income stream. A lot of residential investment properties can work with this strategy, so you don't have to narrow your search as much. I generally recommend this tried and true approach to new real estate investors. You basically look for the same type of properties you may look for in a home. The key is to have a good expectation of what the rents will be for they type of property you are looking for. You should also have a good idea what type of return you expect from your investment.

The second strategy for investing in real estate focuses more on the potential for capital appreciation. I equate this to purchasing value stocks and investments. You have to be a lot more particular about the properties you consider for this strategy, because you are making your money by purchasing at the right price. This particular strategy, I believe involves a bit more risk although it tends to be a shorter term strategy than the buy and hold. In this particular strategy, the investor may feel like a particular property or area is undervalued. They may feel like values in a particular area may go up faster than others because of some changes in the area. The key with this strategy is to at least try to cover your holding costs with the rent, otherwise any potential appreciation could be eaten up.

The third strategy is probably closest to the leverage buyout or hostile takeover in the stock market. This is usually the shortest term, highest potential for returns and highest risk of the three. Flips and rehabs fall into this strategy. The keys to success here involve knowing what the property will be worth after the rehab, and understanding what your costs are going to be. If you know what the home will cost and what you can realistically re-sell it for, then the difference will be your profit. This is the most common misstep of would be investors. They know what the costs a going to be, then they add the profit they want to make on top of those costs to come up with a price. I have seen homes in $80,000 neighborhoods for sale for $100,000 with new carpet, paint and appliances being sold by investors that purchased the properties last month for $50,000 to $60,000. They are into these properties for $65,000 to $75,000 and trying to make a killing on them. Even if they get them under contract, and many do, the likelihood of them appraising is slim. Know what your costs are and what the likely sales price will be, then decide if the return is worth the risk.

David Welch Real Estate Optimist, Orlando Real Estate

June was crazy busy, with over 3,000 closed sales when all was said and done. By comparison, July is going to be quite a bit slower. I am looking for sales this month to come in closer to 2,200 as a result of the tax credit pushing some sales up a month or two. Of course now the closing time period has been extended through September. That extension came late, so a lot of people worked really hard to get deals closed last month. The inventory has gone up a bit with 16,541 active listings. Of those 2,414 are bank owned and 5,793 are short sales. Combined, distressed properties continue to account for nearly half of our homes available for sale.

Pending sales remain high, but are several hundred off our peak just over 10,000. There are 9,436 contracts pending as of today with 2,046 REOs making up 21.7% and 6,040 short sales accounting for 64% of all the homes under contract. The difference in the number of pending sales seems to have come straight from the short sales which have dropped from a peak of over 6,700. An early look at closed sales shows 377 posted so far with a median sales price still at $115,000. Of the closed transactions 145 are bank owned, 92 are short sales and 140 are equity sales.

David Welch Real Estate Optimist, Orlando Real Estate