It might seem strange that a person that relies on people buying homes would even discuss this subject, let alone advocate an unexpected opinion, but here I go.  While in most cases, it is more beneficial for customers to own their own homes, there are many instances where that is not the case.  In fact, the overall health of our economy and the housing market in particular depends on a healthy mix of the two options.

As a person who found himself transferred many times early in my career, I can attest to the main reason why people rent.   Lifestyle.   There are many us that are simply not at a point in our lives or careers that putting down roots is the most beneficial thing for us from an economic viewpoint.  The fact is that it may take many years, even in a good market, for you to be able to capitalize on home ownership.   Historically, a quick turnaround sale does not yield sufficient profits to cover sales and closing costs.  Many customers simply are not in a position where they can buy real estate for the right reason.   Another big reason why renters are so important is that they feed the investor market.   While the speculator market was a big part of  the real estate crash, long term returns for investment properties remain strong.   That success requires tenants to occupy those properties.

The other main reason why having rental properties available is that there will always be people who are not financially able or financially responsible enough to own property.  While that may be a sad fact, it is true that some people simply lack the maturity to handle the demands that come with ownership.  It is important that we maintain available options for low income borrowers but we should never return to a time where customers who are unable to afford property be allowed to do so simply because we want to increase the percentage of home ownership.

Here are some striking figures: between 2006 and 2009, one in every 411 homes received a foreclosure notice.   Housing prices fell over 32% during that same time.  In can be said that a customer that did not buy a home during that time actually made a better financial decision than those who did.

This is not to say that home ownership is not a wonderful thing- because it is.  And it is and will continue to be vital to the recovery of our economy.   We need to stop thinking of it as a right and rather as something of a reward for making correct and wise financial decisions.   The decision to purchase a home must come with an understanding of the responsibilities and requirements that go along with it.   We can’t continue to think of our homes as a way to make endless profit or as an ATM that is never empty.  As we continue to move back towards those ideas, the market will improve, prices will increase and foreclosures and delinquency will start to fall off.

As much as I would I like to think that solving our current problems is that easy, I know it is not so.   Our economy continues to sputter and many areas simply are not improving like we had hoped.  Unemployment continues to be a very big concern as jobs numbers are not where economists would like them to be.  This week, we will see the release of July existing and new home sales.   The numbers are expected to be down but how bad will reflect on the status of the housing recovery.  In some other news, USDA loan funding, while approved by Congress, is still stuck in a sort of limbo.  The guarantee portion of the program (which works like FHA or VA) is still in need of funding.  It is expected that much of the money approved will go towards the direct loan program which is not as popular with consumers or investors.

Rates remained steady last week.   The markets will react sharply this week to jobs and housing numbers.   Mortgage rates will probably remain steady but pressure on rates will continue.

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The big news this week is the newest program aimed at helping borrowers underwater on their home mortgages from defaulting.   This program was originally announced in March of this year using funds originally set aside in the Emergency Economic Stabilization Act of 2008 (commonly known as TARP).   As foreclosure actions continue and mortgage delinquencies do not seem to be slowing, the recovery of the industry as a whole is potential jeopardy.   Obviously, addressing the issue is very important and most actions thus far have not helped the vast majority of borrowers.   There is little indication that this program will be any different.  In my opinion, it will help very few borrowers.  That said, this program and others like are at least attempting to address the problem.

The eligibility conditions for the program are as follows:

• Home must be in a negative equity position.
• Homeowner must be current on the loan.
• Must be a primary residence.
• Current loan cannot be an FHA-insured loan.
• Current first holder must be willing to write off at least 10% of unpaid principal
• New loan will be 97.5% or less of current property value
• Current subordinate loans (i.e. 2nd mortgages) must re subordinated and the total loan to value must be less than 115%
• New loan must meet debt ratio requirements

On its’ face the program sounds great for borrowers who are at risk on their home due to owing significantly more than its’ current value.   There are three major problems.  First, current lenders ARE NOT required to participate.   That includes both current first and second mortgage holders.   The second problem- although the FHA will insure the new loans, current lenders and investors are not guaranteed to originate these loans.  Finally, pricing on the new loans, while influenced by the FHA insurance is also not guaranteed.   That means that any potential borrowers in the program face a number of hurdles.   Lenders may be hesitant to originate new loans on one side while facing significant losses on their current loans.   In short, I believe that this program will not be able to offer much for troubled borrowers.

In other news, the Federal Reserve issued their latest monetary policy statement.   As expected, their announcement indicated that the Fed would hold rates steady for the foreseeable future.  The statement also pledged help to keep the credit markets moving by buying additional mortgage backed securities.   The Fed had previously started slowing the rate at which it purchased the securities.  The announcement stated that they would buy around $1 trillion in securities by October of this year.

The market was relatively flat last week and there were few fluctuations.   Rates remained steady as the news in the Fed statement was expected by analysts.

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Orlando housing market continues to record sales gains

(August 10, 2010 – Orlando, FL) Members of the Orlando Regional REALTOR® Association reported completed sales on 2,387 homes in July, which is a 3.83 percent increase over the July 2009 mark of 2,299. To date, Orlando area home sales are up 39.54 percent over this time in 2009.

“Sales closed after the homebuyer tax credit are expected to be lower compared to the credit-induced spring surge,” explains ORRA Chairman of the Board Kathleen Gallagher McIver, RE/MAX Town & Country Realty, “yet total annual home sales are rising above 2009 and we’re looking for overall gains again this year.”

“Conditions have become more balanced in Orlando, which is good for both buyers and sellers. However, consumers find it even more challenging to navigate the transaction process, especially for distressed properties, which only underscores the value REALTORS® bring to buyers and sellers in this market.”

The number of new contracts filed in July 2010 (3,793) represents an increase of 2.62 percent more than were filed in July 2009 (3,696). The area’s pending sales statistic — also an indicator of future sales activity – is likewise remaining at a record high with 18.41 percent more homes (9,133) under contract and awaiting closing in July of this year than in July of last year (7,713).

The median price of all existing homes combined sold in July 2010 decreased 17.37 percent to $109,900 from the $133,000 recorded in July 2009. July 2010’s median price is a decrease of 4.43 percent compared to June 2010’s median of $115,000.

The median price for “normal” sales is $179,138 (up 4.15 percent from last month’s $172,000). The median price for bank-owned sales is $73,999 (down 4.52 percent from last month’s $77,500), and the median price for short sales is $115,000 (steady from last month’s $115,000).

“Distressed properties, which accounted for almost 70 percent of sales in July, continue to downwardly distort the median price because they generally sell at a discount relative to traditional homes in the same area,” explains Gallagher McIver.

Of the 2,387 sales in July, 740 “normal” sales accounted for 31.00 percent of all sales, while 1,133 bank-owned and 514 short sales made up 69.00 percent.

The Orlando affordability index increased to 243.74 percent in July. (An affordability index of 99 percent means that buyers earning the state-reported median income are 1 percent short of the income necessary to purchase a median-priced home. Conversely, an affordability index that is over 100 means that median-income earners make more than is necessary to qualify for a median-priced home.) Buyers who earn the reported median income of $53,162 can qualify to purchase one of 9,812 homes in Orange and Seminole counties currently listed in the local multiple listing service for $267,866 or less.

First-time homebuyer affordability in July increased to 173.32 percent. First-time buyers who earn the reported median income of $36,150 can qualify to purchase one of 6,837 homes in Orange and Seminole counties currently listed in the local multiple listing service for $161,910 or less.

Homes of all types spent an average of 85 days on the market before coming under contract in July 2010, and the average home sold for 94.89 percent of its listing price. In July 2009 those numbers were 101 and 94.04 percent, respectively. The area’s average interest rate decreased in July to 4.67 percent.

Inventory

There are currently 16,563 homes available for purchase through the MLS. Inventory increased by 259 homes from June 2010, which means that 259 more homes entered the market than left the market. The July 2010 inventory level is 3.88 percent lower than it was in July 2009 (17,231). The current pace of sales translates into 6.94 months of supply; July 2009 recorded 7.49 months of supply.

There are 12,708 single-family homes currently listed in the MLS, a number that is 185 (1.48 percent) more than in July of last year. Condos currently make up 2,457 offerings in the MLS, while duplexes/town homes/villas make up the remaining 1,398.

Condos and Town Homes/Duplexes/Villas

The sales of condos in the Orlando area increased by 35.64 percent in July when compared to July of 2009 and decreased by 16.21 percent compared to June of this year. To date, condo sales are up 78.15 percent (3,921 condos sold to date in 2010, compared to 2,201 by this time in 2009).

The most (285) condos in a single price category that changed hands in July were yet again in the $1 – $50,000 price range, which accounted for 52.01 percent of all condo sales.

Orlando homebuyers purchased 232 duplexes, town homes, and villas in July 2010, which is a 27.47 percent increase from July 2009 when 182 of these alternative housing types were purchased.

MSA Numbers

Sales of existing homes within the entire Orlando MSA (Lake, Orange, Osceola, and Seminole counties) in July were down by 5.94 percent when compared to July of 2009. Throughout the MSA, 2,770 homes were sold in July 2010 compared with 2,945 in July 2009.

To date, sales throughout the MSA are 31.72 percent above this time in 2009 with 20,978 homes exchanging hands compared to 15,926. Each individual county’s year-to-date sales comparisons are as follows:

• Lake: 16.41 percent above 2009 (2,589 homes sold to date in 2010 compared to 2,224 in 2009);
• Orange: 35.19 percent above 2009 (11,361 homes sold to date in 2010 compared to 8,404 in 2009);
• Osceola: 18.52 percent above 2009 (3,609 homes sold to date in 2010 compared to 3,045 in 2009); and
• Seminole: 51.75 percent above 2009 (3,419 sold to date in 2010 compared to 2,253 in 2009).

Copyright ©

2010 Orlando Regional Realtor^® Association

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