Home Buyer Tax Credit Deadline Looms – It’s Already Close for Short Sales

The Home Buyer Tax Credit that went into place at the end of last year will expire on April 30 in its present form. Homes and condos must be under contract by that date and close by June 30 to be eligible for the credit. See Home Buyers Tax Credit for more details. The tax credit can be up to $8,000.

The important point for buyers looking to take advantage of short sale opportunities is that time is running out. I’ve had many short sales that were not processed by lenders in the time left between now and the April 3oth deadline. For buyers of Daytona foreclosures and properties that are not in distress you will have a little more time, but with inspections and the length of the closing process, it’s wise not to delay too long.

Short Sale Buyers Strategy

Our recommendation for short sale buyers who want to take advantage of the tax credit in their purchase of Daytona Beach Homes is pretty simple – submit offers on multiple properties and schedule the closing well before June 30th.

This recommendation protects you both from losing the tax credit by not being under contract and insuring the closing against “surprises” from lenders and closing agents.

Submitting multiple offers will give you the best chance of taking advantage of the credit and getting a property you want. How many? Well, it’s a tough call, but you have a good chance with five to six. There’s no guarantee that any of them would be approved in time, but with five or six, you will probably be successful. Note that you must have a binding contract where both parties have signed before April 30th. Just making an offer is not enough. Make sure your real estate agent is an expert in short sales to protect yourself further (I’m certified and have closed dozens of short sales.)

Scheduling the closing a couple of weeks before the June 30th deadline will prevent requests for additional information from lenders and closing agents derailing the deal. I’ve had a lot of closings delayed, so please take this precaution to prevent losing the tax credit.

Will The Home Buyers Tax Credit Be Extended?

We don’t know whether the homes buyers tax credit will be extended for a second time. The Obama administration has been declaring that we are on the way to economic recovery. The Federal Reserve will stop buying Mortgage Backed Securities in March. Many are seeing that as a sign the administration is backing off big support for the real estate markets. If the same thinking applies to the tax credit, then it won’t be extended. However, the budget submitted by President Obama does contain additional tax credits for home buyers. Congress could remove it from the budget or it could be less; we don’t know.

There are tremendous opportunities available for buyers in the Daytona real estate market. For more information or to receive a list of properties that meet your criteria, please contact me at 386-566-7503. I’m a certified short sale specialist and have many short sale transactions successfully completed. Put me to work for you.

Quick Review of January 2010 Daytona Beach Real Estate Sales

The final numbers are in, and in January, Daytona Beach home sales were up against last January and down against last month. This is a mixed bag of up and down, but in-line with historical data. January and the first quarter have been the weakest month and quarter over the past two years. The summer and fall are the strongest months over the same period.

December was the highest sales months in over three years, so we need to keep that in mind when we compare January against those numbers. We’ve put together two charts to show the differences.

January 2010 vs. January 2009 Daytona Beach Home Sales

Daytona Beach Home Sales January 2010 vs. January 2009

Year over year, we saw a big 37.7% overall sales increase last month. The chart is broken down by the categories from the Daytona MLS. Single family houses dominate total sales with a total of 75% of all sales. Daytona Beach condo sales are the next strongest category with 22.2% of all sales. This is a good sign that January is stronger than last year, but when compared against last month the news doesn’t appear as good.

January 2010 vs. December 2009 Daytona Beach Home Sales

January 2010 vs. December 2009 Daytona Beach Home Sales

December was a big big month. With 417 properties sold, it was the highest sales month since the bubble burst. January show a 30% drop from December. We are not taking this lightly. Although we can look at historic numbers for an explanation, we’ve learned in this market not to attempt to predict anything too boldly. January has been the lowest sales month for the past two years, but last year the drop was only 4.9%. However, in 2008, the drop was 28.7%.

So there is some historical support for a drop of this size, but we need to keep in mind the pressures against home sales from the economy and distressed properties.

Where Do We Go From Here?

I boldy stated last month that I thought that with last year’s sales of close to 4,000 units, we were about where we would be without the bubble burst. I believe we are within 10% of that number. The January sales are in line with that view. Last year, the average monthly sales were 333. With January, the weakest month of the year, coming in at 292 properties sold, we are in line with meeting a average of 333 properties. Of course, there are no guarantees and we will need to watch as the year progresses. Make sure to visit here for regular updates.

National Real Estate News Can Be Dangerous for Local Buyers

When the national media publishes real estate news it may be contrary to local conditions and may actually harm you when making buying or selling decisions.

In December, national news outlets reported that overall sales of existing homes fell 17% across the United States. That seems pretty bad. You might have any number of different reactions to that news. It might very well influence your home buying or selling decisions.  However, during the same period, sales of Daytona Beach condos and homes were up 3% over the previous month, but a whopping 84.9% over the previous December. For 2009 results, see: Daytona Beach Real Estate Sales Up 38.1%.

In December, the S&P Case-Shiller Housing Price Index showed that prices rose in 14 of 20 markets. OK, how does that affect you? When national news sources report that housing prices are up, are they up in your neighborhood? Are they up for the area you want to buy?

There’s an adage in the newspaper business that all news is local news. That seems to be going away as many local papers are littered with stories from AP and Reuters wire services. But, for real estate the adage can be translated into all home and condo prices are local. Yes, prices are influenced by national economic and political conditions, but in the end, it’s the local market that determines prices.

The point of this article is to go to local sources when it’s in your best interest. For real estate, no matter where you are, a well informed local real estate agent may give you more relevant information during a 10 minute phone call than you could ever pick up from national news.

Finding a Knowledgeable Local Real Estate Agent

How do you know if you’ve found a local agent who knows the market? Well, a good place to start is to look at their website. Does the website contain local news reports and analysis? If it doesn’t, move on. In every area, an agent is likely to be blogging and issuing market reports. That’s a good place to start.

Sales of Daytona Beach Homes – Down Against Last Month – Up Over January Last Year

Daytona Beach homes and condos sold at a 33.2% slower pace than last month, but were up 29.9% over last January. What’s next? These numbers are preliminary, but will not change significantly over the next few days.  The fall in sales is not unexpected. Here’s why:

• January sales have been the lowest sales months for both 2008 and 2009
• The 1st quarter has been the lowest sales quarter historically in the area
• December sales of 416 properties through the Daytona Beach MLS were the highest in over three years

Our inquires and website traffic were down during the fourth quarter, even though our sales were strong. In January, our website traffic was up 61.1% over December, back to the numbers we see during the summer high selling season. We are showing a lot of properties and my listings are being shown.

Seeing this level of website traffic and inquiries shows a lot of interest in the Daytona Beach real estate market. Our web traffic is about 50% higher than it was for last January. We believe sales will improve in February and are looking for a strong first quarter. Beyond that, we need to see what happens with the economy and whether the home buyers tax credit is extended.

Here’s a quick breakdown of January sales by price range.

Daytona Beach Homes Sales by Price January 2010

The distribution of sales by price is consistent with what we have seen over the past two years. Homes and condos sold under $200,000 made up 75.5% of January sales and under $300,000 made up 88.1%. The under $200,000 market is consistently strong and over $300,000 sales have been weak. This will change, but not until there is more certainty of price stability.

We will publish a full breakdown of home and condos sales for January later this week; after all the numbers are in the system.

Ormond Beach Florida Sunset

Golds and pinks and blues fill this Ormond Beach Florida sunset photo showing the sky as a storm front moves into the area. Thunder storms are forecast for tomorrow and clouds started building up around noon.

There’s a lot of water in this area. I’ve heard it said that Florida is a reclaimed swamp. I’m sure there’s was a lot of dry land a couple of hundred years ago, but if you fly over the state, it’s not hard to imagine it as swamp.

This photo was taken just north of Tomoka State Park. Tomoka State Park is located north of Granada Blvd. at the end of Beach Street. Just yards from this spot, Beach Street turns into Old Dixie Highway heading toward Bulow State Park and the Halifax Plantation Sub-Division. The sun is setting over the Ormond Lakes Sub-Division which is only minutes from this spot.

Ormond Beach Florida Sunset

If you like to fish, there’s a very popular spot on the bridge that bridges the water here. There’s open water on both the east and west sides of the road. There’s usually a few people out there and there was one gentlemen night fishing as we left. There’s plenty of parking if you want to come and catch either the sunrise or sunset.

Daytona Beach Homes Months of Inventory Falls 52.4% in 18 Months

In the past 18 months, Daytona Beach Homes and Condos inventory, measured in months on the market, has dropped 52.4%.

We did a detailed analysis of homes inventory in July 2008. So, let’s compare July of 2008 when the market was close to its weakest point to now, after the highest sales month in over three years.

To check out the full analysis of July 2008 click here –> Daytona Beach Home Sales – Detailed Inventory Analysis July 2008. Let’s look at the overall difference first:

The first chart shows the difference in total inventory. We can see significant reductions in both condos and homes for sale. That’s a good sign considering it wasn’t too long ago, about 2-1/2 years when 7,000 residential properties were on the market. All the numbers we discuss here are for residential single-family homes and condos from the Daytona Beach MLS.

Housing Inventory Daytona Beach

The second chart shows total months of inventory. Again, we can see even more significant changes because of the increase in sales last year. Daytona Beach real estate sales were up 38.1% in 2009 over 2008 and these months of inventory numbers are calculated using December of 2009 sales when 414 homes and condos were sold.

Housing Months of Inventory Daytona Beach

So with the combination of higher sales and lower inventory, the total months of inventory for Daytona Beach residential real estate as listed in the MLS has dropped 52.4% of the last 18 months.

Current Daytona Beach Homes and Condos Inventory

This is significant. With a current inventory of 10.7 months, we are moving closer to a stable market. This number is still high compared to the boom period, but is getting closer a stable or neutral market. This is still a buyer’s market, but we need to look at the next chart to get a better understanding of inventory within different price ranges.

Daytona Beach Real Estate January 2010 Months of Inventory

If we consider about six months of inventory to be a neutral market; that is neither a buyer’s nor seller’s market, then homes under $100,000 have achieved that level. Condos under $100,000 and homes from $100,000 to $200,000 are close. Then we get to condos from $100,000 to $200,000 and home from $200,000 to $300,000 and we jump over the average.

74% of the total sales in Daytona Beach are under $200,000. That’s were the months of inventory are lowest. If you are a seller in this range, you are in a better position to sell than if you are attempting to sell a property over $200,000. Of course, your property needs to be priced right to sell regardless of price range.

If you’re a buyer, you will be seeing more competition in the lower price ranges. There are still tremendous bargains, but more properties are selling. More demand and less inventory indicates that price stabilization is occuring in the lower price ranges first.

Homes are selling in the higher price ranges, but not nearly in the same numbers. I’ve sold several condos recently above $200,000 and $300,000. I’m seeing a lot of interest in an Ormond Beach riverfront home on John Anderson Drive that priced just under $1,000,000. We had 10 showings and I have another one on Sunday.

What’s interesting about the drop in inventory and months of inventory is that this is happening in one of the communities hard hit by foreclosures. There are a lot of short sales, but despite the short sales and foreclosures, inventory is falling. This is one the most important factors in price stabilization and as mentioned above, we are already seeing this in the lower price ranges.

We’ll continue to monitor and report inventory numbers in the coming months.

2009 Daytona Beach Home and Condo Sales Report by Price Range

88.7% of sales of Daytona Beach Homes and Condos in 2009 were in the under $300,000 price range. See the graph below for the full visual impact.

Overall Daytona Beach real estate sales were up 38.1% in 2009 over 2008. Condos accounted for a good portion of the market growth, rising 69.6%. Let’s look at the graph below to see the distribution of sales by price.

2009 Daytona Beach Real Estate Sales by Price

The Lower Price Market Dominates Daytona Beach Real Estate Sales

First, we see that most of the sales are under the $200,000 price point – 74%. This is much the same that we saw in 2008, but with the increase in sales, more properties were sold in this price range. When we look at all properties sold  under $300,00o, the percentage rises to 88.7%.

At the other end of the scale, only 13 homes and condos were sold for more than $1,000,000 through the Daytona Beach MLS. Home and condos in the price range from $300,000 to $1,000,000 accounted for 11% of all sales.

There is no doubt that the sales engine for Daytona Beach area real estate sales is in the lower priced market. This is where the buyers are and if you are marketing a property in this price range and the property is priced at market, you have a much higher probability of success than in the higher price ranges.

We don’t see any major shifts in sales distribution for 2010. Lower priced homes will continue to dominate the market.

Here’s the breakdown by price and percentage.

2009 Daytona Beach Real Estate Sales by Price Chart

What’s Market Price?

Let’s face it, market price in Daytona Beach is being driven to a very high degree by short sales and foreclosures. Any home or condo, in any price range, is competing against similar distressed properties. Of my inquiries from buyers, most are either for individual homes or condos that are distressed or for lists of distressed properties.

This is the reality of the market and unless something changes dramatically, more distressed properties will be coming on the market at close to the current rate through 2011-2012. The most recent forecasts predict around 3,000,000 foreclosures this year. Balloon and ARMs (adjustable rate mortgages) will be coming due through next year in high numbers. See More Foreclosures on the Way for Daytona Beach Real Estate for more information.

For buyers, the current market is about patience and getting the best possible deal whether or not the property is distressed. For sellers, you are competing against distressed short sale and REO (real estate owned) foreclosure properties and need to weigh those facts when considering whether to market a property that is not distressed. Of course, pricing to sell means considering competing properties.

I am a certified short sale specialist who has sold many distressed properties. I am in this market everyday, full-time, working with banks for both sellers and buyers. Call me at 386-566-7503 either way to discuss your options.

Brilliant Florida January Sunset in Ormond By The Sea

Colors and light change in a brilliant dance as the sun sets on the western sky on a cool January evening. Ormond by the Sea Florida is just north of Ormond Beach up A1A. It is a quiet community with many nice homes and affordable condos. This photo was taken on the picnic mound at Bicentennial Park. Bicentennial Park is right across A1A from the ocean and is a good parking place to enjoy watching the ocean. There’s also beach access directly across from the park.

The night was sweatshirt weather as the ocean breeze cooled the air quickly with the setting sun. The late afternoon was cloudy so there was a good possibility of a nice colorful sunset. Patience was rewarded.

Ormond By The Sea Sunset January 2010

There are several picnic tables overlooking the ocean in Bicentennial Park. Think about coffee and breakfast as you watch the sun rise. The beach in the area is uncrowded and is very nice for walking or just sitting and watching the waves break.

Bicentennial Park is about 4 miles north on A1A from Granada Blvd (SR40). There’s a nice family style restaurant just a few steps up the road from the park called Betty’s A1A Cafe. We’ve been going there for years and always get a good meal with lots of food.

Check out Ormond By The Sea Real Estate for homes and condos and more about the community.

FHA Waives 90 Day Rule for Investors Who Renovate and Sell

Properties purchased for renovation or repair by investors for resale were not eligible for FHA loans until 90 days after the purchase. As of February 1, that’s changing. The FHA is waiving the 90 day period for one year, starting February 1st, to allow investors to renovate or repair REO (real estate owned) and foreclosed properties and quickly resell them using FHA financing.

With FHA financing making up about 30% of all mortgage written today, we believe it’s important to keep you informed of changes as they occur. FHA loans are very attractive to both buyers because of lower down payment, credit requirements and closing costs, and to lenders because of government guarantees.

The FHA has been very active lately with rule changes and we’ve had a lot to report. Just a few days ago we reported on FHA Loan Changes that will make loans more expensive, especially for those with a FICO score under 580. Now, we see the FHA making more properties eligible for FHA financing.

There are also separate FHA Condo Financing Rules that restrict sales in many condo buildings, and new FHA Short Sale Polcies.

The bottom line to this change is that if you are an investor who is buying property for resale, the FHA has made it easier for you to sell the property by allowing buyers to use FHA financing without a waiting period. There are of course restrictions:

1. Only Arms length transactions are eligible. There can be no interest between buyers, sellers and others.
2. If the selling price is 20 percent or greater that the seller’s purchase price, documentation will be required by lenders  to justify the price. A new appraisal will probably be required to support the higher price.
3. An independent property inspection will also need to be provided by lenders to buyers before closing.

Will FHA Loan Changes Help Daytona Beach?

Will this change to FHA loan requirements for investors help Daytona Beach homes for sale? It certainly can’t hurt and may help move some of the REO and forclosed properties that have been damaged and need extensive repairs to sell. Investors can get a quicker turn-around, saving them money and making it more attractive to purchase and renovate or repair.

Borrowers to Pay More for FHA Loans

With rule changes that will be coming in the summer, an FHA loan could cost you 10% more to close. That $20,000 on a $200,000 loan.

3.5% Down Payments and seller concessions of up to 6% will soon be a thing of the past for many. Mortgage insurance premiums will also increase by 1/2 point.

The FHA is writing about 30% of all current mortgages – Meaning BIG exposure. Now, the agency is acting to limit the risk of future exposure. That’s probably a good thing for most Americans, but if you are planning to use an FHA for you Daytona Beach Homes purchase, it may cost you more if you wait until summer.

FHA Loan Change Prosposals

The FHA is making proposals to change mortgage insurance premiums, FICO (credit score) and down payment combinations and seller concessions.  The changes will be posted in the Federal Register next month and after a comment period would become effective early summer.

Here is a quick summary of the changes:

• Increase upfront Mortgage Insurance Premium (MIP) to 2.25% – up 0.5%
• Decrease seller concessions from a maximum of 6% to a maximum of 3%
• Change FICO score/down payment combinations to as low as a 3.5% for a FICO Score above 580 and up to 10% for a FICO Score below 580.

So, with a FICO score below 580, the amount of out-of-pocket money to close an FHA loan would increase by about $20,000 on a $200,000 mortgage ($1,000 MIP, $6,000 increase in seller’s concession, $13,000 increase in down payment). This would be added to the current total cost, an increase of 10%. A FICO score above 580 could still add about $7,000 or 3.5%.

The FHA is taking these actions to reduce troubled mortgages in the future. They will also be making changes to reduce fraud. See FHA Loan Sharks Creating More Real Estate Foreclosures for more information on that problem.

These actions will allow them to add to their reserves against bad loans. Whether it’s a good thing depends on your point of view. As a taxpayer, this should reduce the cost of running the agency to you. As a home buyer, it will increase your overall costs to borrow.