Orlando Real Estate

I like numbers, because numbers are numbers. People may come to different conclusions about what the numbers tell them, but in the end the numbers are what they are. In May of 2008 there were 25,436 active listings on the market. Last month there were 20,194 and as of this morning the number is down to 19,132. That is a net reduction in inventory of 6,304 or almost 25% in the last year. The reduction in inventory appears to be picking up too with a decline of 1,062 coming in just the last month. With the posted sales so far of 1,581 for May we have a 12.1 month supply of inventory. We typically have another 200 to 400 sales posted after the end of the month, which should drive the months supply down below 11 months.

The posted sales of 1,581 is just 160 off April's final number, so it will probably end up slightly better than April. It is already 234 more than May of 2008's 1,347. We continue to see year over year improvements in sales which has been a trend since the last quarter of 2008. These are just the closed sales. Pending sales have shot up to 6,603 which is up from 5,818 in April and 3,225 in May of last year. The last time I checked nearly 3,000 of these are identified as short sales, so it is hard to say when of if they will close. Real estate is all about supply and demand, and to have this kind of turn around in sales required a substantial decrease in price. At this point though it appears that price drops are slowing considerably. Last May the median price was $211,400, and this May they look to be $130,000. That is a 38.5% drop in prices in the last year. However, April's median price was $132,900, so May had a very modest drop compared to April.

Individual neighborhoods and areas are starting to see different results. I was quoted in the Orlando Sentinel earlier this year as saying "Baldwin Park is not immune" to the factors effecting the Orlando real estate market. That is true, but the neighborhood has gotten very popular lately. The inventory of homes available for sale has dropped from around 165 earlier this year to 100 today. There are 63 pending sales and 64 closed so far this year too. At the current sales pace there is a 5.55 month supply of homes available for sale in Baldwin Park right now. Although, a lot of those are in the higher price ranges. Most of the sales are happening in the more affordably priced condos and townhomes.

Orlando Real Estate, David Welch Real Estate Optimist, @RealtyOptimist

Guess what I was doing today. I was shooting a few segments for the show House Hunters on HGTV. I can't say too much about it, except to say that is was a lot of fun working on this part today. It was great meeting the producer Josh and the cameraman Wayne and soundman John. Wayne and John both attended Full Sail here in Orlando. I thought that was pretty cool. I hope I did OK. We still have to shoot the scenes of the home search, but that may be a while. I don't expect the episode to air for several months. It will be fun trying to figure out which house they will choose.

Orlando Real Estate, David Welch Real Estate Optimist, @RealtyOptimist

Check out my site www.FirsTimeBuyer.info for information about a statewide bond program that offers up to $10,000 for qualified buyers. I also placed my demo video for the show House Hunters on the page with my opinion of what is going on in the Orlando real estate market. If you qualify for the bond program, you could get $10,000 from the state to help you get into your first home, and still get the $8,000 from the federal government as a a first time home buyer. That is a total of $18,000 of free money. It is actually possible to get into your first home with no money down and actually get paid $8,000. Prices are half of what they were at the peak, there are still a lot of homes for sale and interest rates are very low. Prices and interest rates won't stay low forever, and the number of homes for sale has already dropped significantly, and the $8,000 credit is set to go away November 30, 2009.

Orlando Real Estate, David Welch Real Estate Optimist, @RealtyOptimist

The number of sales pending in Orlando continues to climb. We are over the 7,000 mark right now, and adding to that total each month. In the past the pending sales were the best indicator of future closings. That is still true, but the relationship between the two is getting skewed by a number of factors. First, short sales are a large percentage of the the total number of pending sales. They account for close to half of all the contracts pending, but only a small number are closing each month. Second, bank owned properties are often difficult to close because of title issues and difficulty in obtaining estoppels from home owners associations and condominium associations. Finally, issues with closing purchase loans have lengthened the time to close by about 50% compared with our typical 30 day closing.

I try to keep up with the number of closed sales more closely, and as of this morning there were 1,104 closed sales posted with a median sales price of $130,000 which is right in line with the past two months. The total number of active listings is just over 18,300. The banks ability to approve short sales in a timely manner, clear title on their REO's and close loans is at the core of the build up of pending sales due to delays. If you look at the number of contracts written each month, I think you will see a far greater indicator of the demand for Orlando Real Estate. New contracts have risen each month since November: 11/08 1,644; 12/08 1,871; 1/09 2,282; 2/09 2,434; 3/09 2,956; 4/09 3,412; 5/09 3,455. The number of contracts written is running almost double the number of closed sales each month.

Orlando Real Estate, David Welch Real Estate Optimist, @RealtyOptimist

It seems more economists are getting on board with the idea that the recession is at least slowing down. Of course, the ones that think things are still going to get worse will always get more press. Let's face it bad news sells better than good news. The fact is that the recession is not going to last forever, and the economy will begin to improve. The liklihood that this turnaround will come this year, I believe is becoming greater with every new release of economic data. It is the intrepretation of the data that is always in question. In other words it is the old case of is the glass half full or half empty. If you are in sales, you should look at it as half full.

This is what is going to happen as the economy does turn around. People will be more confident in there jobs, and therefore more likely to spend some money. They will not only make more consumer goods purchases, but purchases of big ticket items like cars and such. Everyone that has been testing the waters in real estate will get more serious about making a purchase. Homes will start selling at a bettter rate. Here in Orlando we have already seen home sales improve significantly over last year. In May sales were more than a third higher than in May of 2008. At that pace the number of homes available for sale dropped by more than 1,000 down below 19,000. What this number does not measure is the new home inventory which is down significantly from the high a couple of years ago. New home inventory is down from more than 24,000 to around 4,000 homes. With a lag time to begin building, even more exisiting homes could be absorbed as well as builder inventory. As the inventory goes down, prices will stabilize and possibly beging going back in the other direction. This is more liklely to be seen with the new homes where builders have to make profit or it does not make sense for them to start a new house.

As spending goes up in all sectors of the economy, prices will go up too. The Fed's easy money policy will have to tighten up. This will push interest rates up to try to keep inflation from eating into the recovery. It is a balancing act for the Fed, but one that they have experience with from past recoveries. As interest rates go up the cost of ownership begins to go up too. Generally, what we have seen in the past is that people begin to buy faster when their costs are going up. There is no benefit to waiting, because it may cost you more to buy tomorrow. This actually has the effect of speeding up the sales of homes driving inventory further down and turning prices back around. This is going to happen to some degree. The questions are when and how fast. I already seeing the price decline slowing if not stopping altogether. Bank owned properties are more frequently drawing multiple offers and even selling for greater than the asking price. We have also seen the market pushing interest rates up in anticipation of inflation. Oil futures too have gone up significantly which is a sign that the market is anticipating greater economic growth and the potential for inflation.

The turnaround is coming, or maybe it is already here.

Orlando Real Estate, David Welch Real Estate Optimist, @RealtyOptimist

It is the 10th of the month, and that means the official numbers have been released by the Orlando Regional Realtor Association. May was rocking with 1,854 closed sales compared with 1,347 last May. That is a 37.6% increase year over year and it tied April's adjusted sales. There were 3,455 new contract written in May pushing the pending sales up to 6,603. So far this year there have been 7,834 sales closed, just think what those numbers would look like of all the pendings closed. That would be 14,437 closed sales or 84.2% more than what we already have had. The 3,455 new contract written last month are the most written in a month so far this year.

The active inventory is down with all this activity on the contract side, new listings are down from earlier in the year with only 3,754 new listings on the market. There were almost as many contracts written as new listing becoming available. Combine that with expired and withdrawn listings and the over inventory declined by 1,071 to 19,123 from 20,194. The home sales continue come in just over 100 days on the market overall. In addition to the over drop in active inventory, I am also seeing a decline in REO's and other distressed properties.

A big thank you to Graham Squier with Integra Mortgage. He has gone above and beyond in my opinion in getting loan approval for a buyer purchasing one of my listings. It should not have been this hard to get the loan, but the banks are making it tough going these days with an extremely conservative approach to lending.

Orlando Real Estate, David Welch Real Estate Optimist, @RealtyOptimist

If you are planning a real estate purchase here in Orlando make sure you plan for plenty of time for you lender to close the loan. Every lender I know is asking their Realtor partners to write contracts with 45 days to close. I have spoken with agents in other markets that are not experiencing this, so ask your agent what is going on in your market. Here in Orlando the norm has become 45 days. That does not mean that there are not deals closing quicker, anything is possible. I am just passing along what I am dealing with personally, and what other agents and lenders are sharing with me. It just takes longer to get the loans closed.

There are a couple of reasons for this slow down. First, the lenders have had layoffs too. There are just fewer people to process the loans. The other issue that is overwhelming the loan processing departments is re-financing activities. Virtually every loan officer I have ever spoken with says that purchase money loans take priority over re-finance loans, but at some point they have to close them too. The exceptionally low rates that we have had for several months now have stimulated a lot of re-financing activity. Sales are also way up from where they were last year. Combine the higher sales activity with the increased re-financing activity and fewer people to process the loans and you get a longer escrow. The second issue that is already effecting closings is the implentation of the new HVCC appraisal guidelines. This just went into effect May 1st, and it is already causing additional delays. There are communication problems as well as increased issues with appraisals.

Add these delays to the issues created by negotiating contracts for short sales and bank owned properties and the time to purchase could easily reach two to three months. This will become very important to those of you looking to take advantage of the first time home buyer tax credit.

Orlando Real Estate, David Welch Real Estate Optimist, @RealtyOptimist

I have been saying for a while that interest rates have been held artificially low by the Fed. They have been buying up mortgage backed securities to keep the secondary mortgage market liquid. By supporting the back end of the market, mortgage funds have remained more readily available and therefore less expensive. Less expensive money means lower interest rates. They have also lowered the Fed rate basically to zero%. Just a quick lesson, zero is the lowest you make an interest rate. While the Fed rate does not directly impact mortgage rates it does effect yield curves which result in effects on all interest rates.

While all of this is geared to stimulate the economy it also has spurred some increases in real estate purchases. Both of these things can help turn the recession around, but as that happens there is always a fear of inflation just around the corner. Well, that fear is becoming more of a reality as there are more signs that the end is near. The end of the recession that is. Jobs usually turn around several months after things start to improve, because employers don't want to move to quickly. They want to be sure that they really have the sales to support hiring new staff.

I have been speaking with lenders about what is going on right now. The general feeling is that the current spike in rates has more to do with refinancing activity rather than a trend in the rates. The thought is that the rates will probably come back down somewhat through the fall. Keep in mind the Fed is expected to stop the purchase of mortgage backed securities in December. By then the economy should be headed back in the right direction, so expect interest rates to begin a true upward trend by then.

Some of the lowest rates I have seen were 4.875% and today they are quoting 6.325%. To put that in perspective: the principle and interest for a $100,000 loan at 4.875% is $529.21 at 6.325% the payment is $620.60 a $91.40 difference.  That is a 15% reduction in purchasing power. In other words, at 6.325% to get a P&I around $529 the loan amount has to be about $85,000.

Orlando Real Estate, David Welch Real Estate Optimist, @RealtyOptimist

This has been a crazy day to end a crazy week. There is a lot of good news though for Orlando real estate. First the sales for May were outstanding at 1,866 with a median sales price of $130,000. Of those sales 1,091 were labeled as distressed including short sales and bank owned properties. That is about 58.5% of the sales which is consistent with what I have been seeing for almost nine months.  Of the distressed properties 802 were actually bank owned, so short sales are still way below REO's for closed sales. Pending sales is a different story. Of the 6,662 pending contracts 4,551 or 68.3% are distressed. Only 1,400 are REO's, so the short sales are more than 2 to one in the pending category compared to the bank owned properties.

The active inventory continues to drop with only 18,946 properties listed for sale by Orlando Realtors. There were 20,194 properties on the market at the end of April. So there has been a 1,248 or 6.2% drop in inventory in one month. Of the homes on the market 7,246 or 38.2% are considered distressed properties with only 1,122 being bank owned. The bank owned properties have been declining steadily since the beginning of the year. First, the moratorium was keeping new REO's from hitting the market. Now, it appears that there are a few things keeping the banks from foreclosing. The stimulus package is helping to encourage banks to work mortgages out with home owners. The other side of that is the banks working out more short sales. I think that one of the biggest issues effecting the number of REO's on the market is just the process. It appears only so many foreclosures can get done, and when they hit the market they are getting bought pretty quickly in many cases. In other words, I think they are not foreclosing as fast as they are selling. The main reason for this is pricing. The median price over all was $130,000, while the median price of all distressed properties was $102,000 and REO's was $82,000.

Orlando Real Estate, David Welch Real Estate Optimist, @RealtyOptimist

Inventory seems to go down every day. It looks like 30 to 40 fewer homes for sale almost every day. This morning's inventory is at 19,070. We will be below 19,000 by the weekend. The other thing I am finding with the bank owned inventory is that the condition of a lot of the properties is not as good. We have had a lot of bank owned homes that appeared in excellent condition, but now I am seeing more that are in disrepair. More sales were posted for last month. We now stand at 1,713, with a median sales price at $130,000.

Orlando Real Estate, David Welch Real Estate Optimist, @RealtyOptimist