Rising Flood Insurance Rates Sinking Sales in Florida

A big hike in flood insurance rates has forced home buyers to recede from the market in some areas, drastically hampering home sales, according to reports. 

"The market dried up — it died," says Shirley Davis, a home owner in St. Petersburg, Fla., who has been trying to sell her $175,000 ranch-style home. The now-nearly-$4,000 in annual premiums for flood insurance on her property has caused buyers to flee. "Now, [buyers] call and the first question is, 'Is it in a flood zone?'”

The Biggert-Waters Flood Insurance Reform Act rate hikes took effect Oct. 1, leaving many home owners in flood-zone neighborhoods facing a big raise in premiums. The law nixes subsidies on millions of older homes nationwide. Florida leads the nation in the number of subsidized policies. 

The rise in premiums is to help offset the National Flood Insurance Program’s $24 billion debt. 

But since Oct. 1, sales in flood-zone areas such as Shore Acres, the Pinellas beaches and inland St. Petersburg, all in Florida, have dropped to some of the slowest pace in years. 

"We're getting nailed big time," said RE/MAX managing broker Bonnie Davis. "The real estate market here had come back so strong. … Now, sales have almost come to a complete standstill."

Several homeowners’ insurance rates, when taken off the subsidy, could increase by about 20 percent a year. For a home buyer, however, the subsidies could be removed all at once and rates could go up anywhere from $2,000 to even $10,000, the Tampa Bay Times reports. 

"There's so much uncertainty floating around and misinformation, and it's affecting people's thought processes," says Brandon Rimes, a RE/MAX real estate professional in Florida. "When people start getting scared, they go into stalemate."

The insurance panic has led some real estate professionals to take other steps to get a home sold. For example, a few agents have reportedly turned to investors and international buyers, who often pay with cash and can “self-insure” to avoid high insurance rates. Some real estate professionals have also packaged flood homes to sell in bulk to investors.

“In some cases, agents have agreed to sell a coveted non-flood home only if the investor agrees to buy a home in a flood zone, too,” the Tampa Bay Times reports. 

Low-End Home Prices a Predictor of Overall Market Activity?

Home prices in different tiers can fluctuate greatly, but the real estate industry should look more closely at the low-end market for keys of where the overall market may be heading, according to CoreLogic's MarketPulse.

Sam Khater, CoreLogic's deputy chief economist, says that changes in low-end home prices lead changes in the high-end market by six months to a year. Prices at the low end are much more volatile than those at the high end, he notes.  

Low-end home prices hit bottom in March 2011, nearly a full year earlier than high-end properties and for prices overall.

“Not only can turning points be different, so can the momentum in low-end versus high-end price changes,” Khater says. Currently, low-end home prices are dropping, particularly in the Southwest. “The magnitude of the declines presages lower growth for prices overall."

Khater says that when prices bottomed out in early 2012 on the low end, they were still 14 percentage points above those on the high end. Currently, the difference is 22 percentage points, which is the largest gap in 20 years, he says. 

“This indicates that the low-end price correction is over and overall price growth will be markedly slower heading into 2014,” Khater predicts. 

NAR: Housing Market Is Stabilizing

Contracts to buy new homes leveled off in November, ticking up slightly by 0.2 percent, the National Association of REALTORS® reports. Pending home sales — which reflect contracts and not closings — were 1.6 percent below year-ago levels. 

“We may have reached a cyclical low because the positive fundamentals of job creation and household formation are likely to foster a fairly stable level of contract activity in 2014,” says Lawrence Yun, NAR’s chief economist. “Although the final months of 2013 are finishing on a soft note, the year as a whole will end with the best sales total in seven years.” 

Pending home sales in November posted the largest gains in the South and West, rising 2.3 percent and 1.8 percent month-over-month, respectively. The increases helped to offset declines in pending home sales in the Northeast (down by 2.7 percent in November) and the Midwest (down by 3.1 percent). 

Total existing-home sales are expected to end the year with nearly a 10 percent gain over 2012. However, Yun says that existing-home sales will likely remain at around 5.1 million in 2014. A rise to 5.3 million in existing-home sales is expected for 2015. 

Existing-home prices for 2013 are expected to be about 12 percent higher than year-ago levels, averaging $197,300. NAR predicts that home prices will grow modestly in 2014 at a pace of 5 to 5.5 percent, and values will increase another 4 percent in 2015. 

— By Melissa Dittmann Tracey

October Pending Home Sales Down Again, but Expected to Level Out

WASHINGTON (November 25, 2013) – Although conditions were mixed across the country, pending home sales continued to move lower in October, marking the fifth consecutive monthly decline, according to theNational Association of Realtors®.

The Pending Home Sales Index,* a forward-looking indicator based on contract signings, slipped 0.6 percent to 102.1 in October from an upwardly revised 102.7 in September, and is 1.6 percent below October 2012 when it was 103.8. The index is at the lowest level since December 2012 when it was 101.3; the data reflect contracts but not closings.

Lawrence Yun, NAR chief economist, said weaker activity was expected. “The government shutdown in the first half of last month sidelined some potential buyers. In a survey, 17 percent of Realtors® reported delays in October, mostly from waiting for IRS income verification for mortgage approval,” he said.

“We could rebound a bit from this level, but still face the headwinds of limited inventory and falling affordability conditions. Job creation and a slight dialing down from current stringent mortgage underwriting standards going into 2014 can help offset the headwind factors,” Yun said.

Modest gains in the Northeast and Midwest were offset by declines in the South and West. Yun notes there was a greater impact in the high-cost region of the West, where tight inventory also is holding back contract offers. He expects generally flat home sales going into 2014, but continued growth in home prices from limited inventory conditions.

The PHSI in the Northeast rose 2.8 percent to 85.8 in October, and is 8.1 percent above a year ago. In the Midwest the index increased 1.2 percent to 104.1 in October, and is 3.2 percent higher than October 2012. Pending home sales in the South slipped 0.8 percent to an index of 114.5 in October, and are 1.5 percent below a year ago. The index in the West fell 4.1 percent in October to 93.3, and is 12.1 percent lower than October 2012.

Yun said there are concerns heading into 2014. “New mortgage rules in January could delay the approval process, and another government shutdown would harm both housing and the economy,” he said.

Annual existing-home sales should be nearly 10 percent higher this year than in 2012, totaling just above 5.1 million, with a comparable volume expected in 2014. The national median existing-home price for 2013 is projected to be 11 percent above last year, and then cool to a 5.0 to 5.5 percent increase in 2014.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1 million members involved in all aspects of the residential and commercial real estate industries. For additional commentary and consumer information, visitwww.houselogic.com and http://retradio.com.

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*The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.

The index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity parallels the level of closed existing-home sales in the following two months.

An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined. By coincidence, the volume of existing-home sales in 2001 fell within the range of 5.0 to 5.5 million, which is considered normal for the current U.S. population.

NOTE:  Existing-home sales for November will be reported December 19 and the next Pending Home Sales Index will be on December 30; release times are 10:00 a.m. EST.

NAR Praises Positive Federal Housing Administration Actuarial Review

WASHINGTON (December 13, 2013) – The following is a statement by National Association of Realtors® President Steve Brown:

“NAR is a strong supporter of the Federal Housing Administration and its vital role in the mortgage marketplace.

“The 2013 Actuarial Review released today shows that FHA is on a positive trajectory to rebuild its capital reserve fund and meet the congressionally required 2 percent excess reserve amount by 2015. These promising gains are the result of strong leadership and a commitment to policies that balance risk with FHA’s mission of making mortgage insurance available to qualified homebuyers.

“In light of this report, NAR believes that Congress should not dramatically change the FHA or redefine its purpose. We will continue our work with FHA to help make the dream of homeownership a reality for millions more Americans.”

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1 million members involved in all aspects of the residential and commercial real estate industries.

Existing-Home Sales Decline in November, but Strong Price Gains Continue

WASHINGTON (December 19, 2013) – Existing-home sales fell in November, although median prices continue to show strong year-over-year growth, according to the National Association of Realtors®.

Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, dropped 4.3 percent to a seasonally adjusted annual rate of 4.90 million in November from 5.12 million in October, and are 1.2 percent below the 4.96 million-unit pace in November 2012.  This is the first time in 29 months that sales were below year-ago levels.

Lawrence Yun, NAR chief economist, said the market is being squeezed. “Home sales are hurt by higher mortgage interest rates, constrained inventory and continuing tight credit,” he said. “There is a pent-up demand for both rental and owner-occupied housing as household formation will inevitably burst out, but the bottleneck is in limited housing supply, due to the slow recovery in new home construction. As such, rents are rising at the fastest pace in five years, while annual home prices are rising at the highest rate in eight years.”

The national median existing-home price for all housing types was $196,300 in November, up 9.4 percent from November 2012. Distressed homes – foreclosures and short sales – accounted for 14 percent of November sales, unchanged from October; they were 22 percent in November 2012. A smaller share of distressed sales is contributing to price growth.

Nine percent of November sales were foreclosures, and 5 percent were short sales. Foreclosures sold for an average discount of 17 percent below market value in November, while short sales were discounted 13 percent.

Total housing inventory at the end of November declined 0.9 percent to 2.09 million existing homes available for sale, which represents a 5.1-month supply at the current sales pace, compared with 4.9 months in October. Unsold inventory is 5.0 percent above a year ago, when there was a 4.8-month supply.

The median time on market for all homes was 56 days in November, up from 54 days in October, but well below the 70 days on market in November 2012. Short sales were on the market for a median of 120 days, while foreclosures typically sold in 59 days, and non-distressed homes took 55 days. Thirty-five percent of homes sold in November were on the market for less than a month.

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage rose to 4.26 percent in November from 4.19 percent in October; the rate was 3.35 percent in November 2012.

NAR President Steve Brown, co-owner of Irongate, Inc., Realtors® in Dayton, Ohio, noted that new rules defining the Qualified Mortgage will be going into effect soon.  “New underwriting rules to protect borrowers, effective in January, will prohibit many loan features, set tighter limits on the amount of debt a borrower can have and still get a mortgage, and require that lenders accurately measure a borrower’s ability to repay,” he said.

“This means that qualified borrowers are getting a loan that they are very likely to be able to repay, but some borrowers may wind up paying much more for their mortgage, or not get a loan at all due to the tougher standards,” Brown said. “The new rules may tighten credit too much, but we’re hopeful regulators will make adjustments if this proves to be true.”

First-time buyers accounted for 28 percent of purchases in November, unchanged from October; they were 30 percent in November 2012.

All-cash sales comprised 32 percent of transactions in November, up from 31 percent in October and 30 percent in November 2012. Individual investors, who account for many cash sales, purchased 19 percent of homes in November, unchanged from October and from November 2012. Last month, seven out of 10 investors paid cash.

Single-family home sales fell 3.8 percent to a seasonally adjusted annual rate of 4.32 million in November from 4.49 million in October, and are 0.9 percent below the 4.36 million-unit level in November 2012. The median existing single-family home price was $196,200 in November, which is 9.4 percent above a year ago.

Existing condominium and co-op sales dropped 7.9 percent to an annual rate of 580,000 units in November from 630,000 units in October, and are 3.3 percent lower than the 600,000-unit pace a year ago. The median existing condo price was $197,400 in November, up 10.0 percent from November 2012.

Regionally, existing-home sales in the Northeast declined 3.0 percent to an annual rate of 650,000 in November, but are 6.6 percent above November 2012. The median price in the Northeast was $242,900, up 5.7 percent from a year ago.

Existing-home sales in the Midwest fell 4.1 percent in November to a pace of 1.17 million, but are unchanged from a year ago. The median price in the Midwest was $151,100, which is 6.7 percent higher than November 2012.

In the South, existing-home sales declined 2.4 percent to an annual level of 2.01 million in November, but are 1.0 percent above November 2012. The median price in the South was $168,700, up 7.7 percent from a year ago.

Existing-home sales in the West dropped 8.5 percent to a pace of 1.07 million in November, and are 10.1 percent below a year ago, in part from constrained inventory conditions. The median price in the West was $284,400, up 16.5 percent from November 2012.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1 million members involved in all aspects of the residential and commercial real estate industries. For additional commentary and consumer information, visitwww.houselogic.com and http://retradio.com. 

Pending Home Sales Edge Up in November

WASHINGTON (December 30, 2013) – Pending home sales stabilized in November with a slight gain, according to the National Association of Realtors®. Monthly increases in the South and West offset declines in the Northeast and Midwest.

The Pending Home Sales Index,* a forward-looking indicator based on contract signings, inched up 0.2 percent to 101.7 in November from a downwardly revised 101.5 in October, but is 1.6 percent below November 2012 when it was 103.3. The data reflect contracts but not closings.

Lawrence Yun, NAR chief economist, said the market is flattening. “We may have reached a cyclical low because the positive fundamentals of job creation and household formation are likely to foster a fairly stable level of contract activity in 2014,” he said. “Although the final months of 2013 are finishing on a soft note, the year as a whole will end with the best sales total in seven years.”

Yun said the market still favors buyers in most of the country, but higher mortgage interest rates in combination with strong price gains mean a more modest growth in values is expected in 2014.

The PHSI in the Northeast declined 2.7 percent to 82.6 in November, but is 1.9 percent above a year ago. In the Midwest the index fell 3.1 percent to 100.6 in November, but is 0.4 percent higher than November 2012. Pending home sales in the South rose 2.3 percent to an index of 116.1 in November, and are 0.1 percent above a year ago. The index in the West increased 1.8 percent in November to 95.0, but is 8.7 percent below November 2012, in part from inventory constraints.

Total existing-home sales this year are expected to reach 5.1 million, a gain of almost 10 percent over 2012, but should stay at that level in 2014, and then rise to 5.3 million in 2015. The national median existing-home price for all of this year will be close to $197,300, up nearly 12 percent from 2012, but is projected to rise at a more moderate pace of 5 to 5.5 percent in 2014, and grow another 4 percent in 2015.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1 million members involved in all aspects of the residential and commercial real estate industries. For additional commentary and consumer information, visitwww.houselogic.com and http://retradio.com.

# # #

*The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.

The index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity parallels the level of closed existing-home sales in the following two months.

An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined. By coincidence, the volume of existing-home sales in 2001 fell within the range of 5.0 to 5.5 million, which is considered normal for the current U.S. population.

NOTE:  Existing-home sales for December will be reported January 23 and the next Pending Home Sales Index will be January 30; release times are 10:00 a.m. EST.