Headlines – Week of February 12, 2012
February 20, 2012
Time to Buy in Florida?
According to a recent article in Barron’s now may be the time to pull the trigger on a purchase in Florida.
Yes and No … depending upon the area, demographics, age of properties, levels of tourism, commerce and industry, as well as dozens of other issues that most buyer-owners and investors never bother to consider.
According to the author, don’t buy the hype. And beware of the “developers’ hype”, especially in over-condoed areas like Miami.
That being said, there is a positive reality. Don’t go out and buy the junk condos being peddled in Miami or one of the hundreds of single-family homes sitting empty in areas like Port St. Lucie and Cape Coral.
At the moment, Florida offers an unusual window of opportunity for individual buyers and investors.
While interest rates are low and prices are down by 50% or more the picture is clouded by the South Americans and Europeans, who fear currency collapses in their countries and are buying without regard for quality, maintenance costs or resale value. And Russians flush with cash are purchasing indiscriminately in South Florida.
Canadians, flush with the very strong Canadian dollar, are also buying, but they are far more discerning. For the most part, they are avoiding South Florida and looking for better value, more amenities and future appreciation north of there.
U.S. baby boomers on the edge of retirement and looking for serenity—not the hustle of Miami, Naples, Tampa and other overbuilt markets—also are buying.
Jupiter Island, toward the southern edge of Florida’s Treasure Coast, is among the areas worth considering, according to the author.
He also would consider looking at the barrier islands north of Palm Beach County, such as Hutchinson Island. He doesn’t buy the story that Miami’s popularity will jump because of casinos as there is no infrastructure to build casinos in Miami.
Traffic and crime are already a problem there; the city doesn’t need more. If Florida licenses additional casinos, they will generally be in run-down areas where land is cheap and roads can be built to handle the traffic.
Biotechnology is actually Florida’s brightest star, getting brighter by the nanosecond. There are three main centers: northern Palm Beach County, St. Lucie County and the Orlando area.
If you want the best of all worlds, look at the area between northern Palm Beach County and St. Lucie County. In the middle sits Martin County, with good schools, a relatively low-growth market, a no-high-rise policy and magnificent choices for owners and investors.
830,000 Completed Foreclosures in 2011
According to the December 2011 Foreclosure Report prepared by CoreLogic, completed foreclosures for all of 2011 totaled 830,000 compared with 1.1 million in 2010.
In December 2011 there was a month-over-month decrease in completed foreclosures to 55,000 from 57,000 in November 2011. The December 2011 completed foreclosures figure was also down from one year ago when it stood at 67,000. From the start of the financial crisis in September 2008, there have been approximately 3.2 million completed foreclosures.
Highlights as of December 2011
- The percent of homeowners nationally who were more than 90 days late on their mortgage payment, including homes in foreclosure and REO, was 7.3 percent for December 2011 compared to 7.8 percent for December 2010, and 7.2 percent in November 2011.
- The five states with the highest foreclosure inventory were: Florida (11.9 percent), New Jersey (6.4 percent), Illinois (5.4 percent), Nevada (5.3 percent) and New York (4.6 percent).
- The five states with the lowest foreclosure inventory were: Wyoming (0.7 percent), Alaska (0.8 percent), North Dakota (0.8 percent), Nebraska (1.0 percent) and Washington (1.3 percent).
- Of the top 100 markets, measured by Core Based Statistical Areas (CBSAs) population, 34 are showing an increase in the foreclosure inventory in December 2011 compared to a year ago, an improvement from November 2011 when 46* of the top CBSAs were showing an increase in the foreclosure inventory compared to a year ago.
Fannie Mae to Partnership with Investors to Sell Foreclosures
According to a recent announced by President Barack Obama, Fannie Mae plans to convert foreclosed homes into rentals through sales to investors hinges on offering concentrated packages of properties in areas such as Florida, Arizona and Southern California where a real estate recovery may happen soonest.
The mortgage agency, controlled by the U.S. government is inviting investors to apply to become joint-venture partners in the first bulk sale of some of its 122,616 foreclosed homes. It disclosed few details of a plan that is part of a series of programs unveiled this week aimed at lessening the impact of defaults on the housing market.
The portfolios of foreclosed properties will be geographically focused and consist of vacant or occupied homes, according to Fannie Mae’s website. Investors said they’re concerned that the first properties to be made available will come from the hardest hit areas of the U.S., which have limited appeal to investors because the prospect for population or employment growth restrain the outlook for a housing recovery.
GTIS Partners, a New York-based investment company, and GI Partners, a private-equity fund in Menlo Park, California, each announced plans in January to spend $1 billion on bulk-buying foreclosed homes as rentals.
GTIS wants to invest in Arizona, California and Florida cities with a high concentration of foreclosures and a strong likelihood of price appreciation. Financing from Fannie Mae will make the portfolios even more attractive.
Fannie Mae had 122,616 real estate owned homes, or REOs, as of Sept. 30. A minority of the properties will be offered in bulk to investors, while most will go to buyers who will live in them.
The REO strategy revolves around selling properties to owner occupants which the agency believes will help to stabilize neighborhoods and provides a better return to Fannie Mae and taxpayers.
California had the largest number of Fannie Mae REOs, with 6,987, followed by Michigan, Florida, Georgia and Illinois, as of Dec. 26, according to the FHFA.
It will be difficult for private-equity funds to generate high returns renting foreclosures because of the complexity and cost of managing single-family houses according to some experts.
Many doubt the ability to earn a profit if they have to create a whole organization to manage these homes since it requires a lot of personal attention.
Demand for rentals has risen as more homeowners lose their properties to foreclosure, prices fall and lenders tighten standards to qualify for a mortgage.
Posted by Scott R. Lodde