How Are People Paying for Daytona Beach Homes?

Sales of Daytona Beach homes have been strong this year. People are buying homes and condos, but how are they paying for their properties. There’s an interesting new feature in our local MLS (multiple listing service) that shows how people paid for the property purchase.

In June, 52.4% of buyers paid cash. This doesn’t surprise me at all. I’m seeing about 80% of my buyers paying cash. Here’s the breakdown of how properties were paid for:

• Cash – 255 (52.4%)
• Conventional Mortgage – 136 (27.9%)
• VA/FHA 72 (14.8%)
• Other 24 (4.9%)

I went back to take a look at how financing has changes since the boom days. In June 2005 the numbers were completely different. 74.4% of homes and condos were purchased through conventional mortgages and 22.9% were cash buyers. In rough terms, 3 out of 4 people were using conventional financing in 2005 and 1 out of 4 are doing so today. Also interesting is that 1.3% of buyers in June 2005 used FHA or VA loans versus 14.8% last month.

Conclusions

More than half of buyers of Daytona Beach condos and homes are paying cash, about 1 out of 4 are using conventional financing and 15% are using VA or FHA loans. This tells me that if you want to finance at the good rates and you’re eligible that VA/FHA money is available (see Get Your FHA Loan Now) and people are getting loans. Make sure to check this avenue for the best options. If you have good credit and are willing to go through the new more stringent processes, mortgage money is available.

Sales of Daytona Beach Homes and Condos Up Again

And so it continues. Sales of Daytona Beach homes and condos were up 46.2% over last June and 12.9% over May.  Total sales for the first half of 2010 are up 33.4% over the first half of 2009. The uptrend continues, but…

There is a lot of speculation that sales have been driven by the Homebuyers Tax Credit. The date to close has been extended (see: Congress Approves Homebuyer Tax Credit Closing Extension for more). We won’t argue with that, however…

Daytona Beach area real estate is different than most other places in the country. To put it simply, most of our sales are driven from out of town money and buyers of second, rental and vacation homes. Those buyers are not eligible for the tax credit, so the affect of the credit is not as significant in Daytona Beach. See our article The Current Daytona Beach Homes Market in 142 Words for more details.

We will know the effects of the expiration of the homebuyers tax credit in July numbers. July and August are traditionally strong sales months in area, so if sales drop in the next couple of months, we might be able to say that the tax credit expiration was one of the causes.

The major trend continues…

The chart shows that 74% of all sales of homes and condos were under $200,000 and 88.1% were under $300,000. However, this is the first time in a long time that sales of properties over $300,000 were over 10%. At 11.9% of sales, this may be a signal that homes in higher price ranges may be becoming more attractive to buyers. One month does not make a trend, but this will bear watching.

If sales over $300,000 start to improve, that will add more strength to our market.

We are still receiving a lot of inquiries from this website, so activity does not seem to be declining at all. Most of our sales are from short sales and foreclosures. If you need more information, or just want to discuss the market and your options, please call me at 386-566-7503.

What is a Condotel?

In response to a questions people who are considering buying condos in Daytona Beach ask me a lot, let’s talk about condotels or condo hotels.

A few years ago, when just about anyone could get a loan for any type of real estate, condotel conversions became big business and took off like wildfire. Daytona Beach condotel conversions took place along the beach. In Daytona Beach and Ormond Beach, there are over 150 for sale right now.

A condo hotel, or condotel, is a hotel or motel converted into a condominium property. Pretty simple explanation, but it gets a bit more complicated. The complication comes from each condo hotel being different in the contracts and rules to be followed by owners and in the condition of sales for the property.

Most of the time, condotel units are simply converted hotel rooms. Sometimes they are upgraded, but quality and style vary greatly. If the converted hotel was a luxury property, the rooms are probably of higher quality and larger. If an old low-end hotel was converted, the rooms will be smaller and of lower quality and less stylish. Many of the units are without kitchens – they are just like living out of a hotel room.

Every building is different and is sold and managed in a different way. This can be frustrating for buyers trying to compare different units in different buildings. The rules, restrictions and fees can vary greatly. Restrictions on a maximum number of days you can stay, the share you receive of rental income, and whether the management company collects fees whether you rent the unit privately or they rent through their efforts.

Financing a condotel can be more difficult than a conventional condo. Few lenders, probably less than 3%, have programs for condotels. These loans will require higher down payments than other loans and will likely be at higher interest rates.

A condo hotel can still make sense for a lot of people if they go in with realistic expectations. Many of these conversions were very well done and the quality of the rooms and amenities is high. Some are in popular resort towns. The idea that you can rent the unit when not using it is attractive.

Being realistic though means understanding that it is unlikely that a condo hotel units will provide you enough rental income to make mortgage payments and cover taxes, fees and insurance. You may get a good portion of expenses offset, but positive cash flow is not likely.

If you are interested in a condotel, find a real estate agent who deals in condotel units. This may be difficult because many agents are reluctant to work in this market. My team does work with people on Condotels. Prices have fallen in recent years to the point that a few of these units are selling under $30,000 in Daytona Beach. There are over 100 condotels in the Daytona area for under $100,000. In addition, condotel transactions are more complicated and difficult than most “regular” real estate transactions.

When buying a condo hotel, you must take great care to understand what you are buying and the contract you are signing. It makes sense to have a lawyer review the documents and help you understand the restrictions, fees and other owner requirements for the building. You need to protect yourself when buying a condo hotel.

Some people who consider buying condotels are interested in Ormond Beach Homes for Sale and Ormond Beach Condos for Sale.

View All Condotels For Sale in Daytona Beach

]]> http://www.lynnbyrne.com/articlesblog/ormond-beach-condos/what-is-a-condotel/feed/ 5 http://www.lynnbyrne.com/articlesblog/daytona-beach-home-sales/daytona-beach-homes-sales-spike-up-34-9-in-march-2010/ http://www.lynnbyrne.com/articlesblog/daytona-beach-home-sales/daytona-beach-homes-sales-spike-up-34-9-in-march-2010/#comments Wed, 14 Apr 2010 01:22:06 +0000 Lynn http://www.lynnbyrne.com/articlesblog/?p=257

Daytona Beach Sales Up Big in March 2010

Sales of homes and condos in Daytona Beach continue their steep climb over both March last year and last month. 393 homes and condos were sold last month against 282 sold last March – an increase of 34.9%. Sales were up 23.6% over last month when 318 homes were sold. The number reported are from the Daytona Beach MLS.

Take a look at the chart and we can see that sales by price range remains consistent with the past two years.

Sales under $200,000 were 75.1% in March, down from 80.5% in February, but consistent with the ranges we have seen recently. This is where the market is strongest. Many of the foreclosed and short sale homes are in this price range and this is where buyers are most active. Sales in the $200,000 to $300,000 price range were stronger this month at 13.2%, up over last month when we saw 11.6%.

We are looking for an increase in the higher price range to show a market shift. That just has not been there in the past two years. When homes sold at over $300,000 begin to increase in numbers and as a percentage of sales that will indicate stabilization in those price ranges. Until then, inventory will remain high.

We have four listings over $499,000 and we’ve sold properties in the higher price ranges, but most of our sales and total market sales are in the lower price ranges.

If you have questions about the market, please give me a call at 386-566-7503. We can talk about specific properties or discuss the market in general.

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Daytona Beach Homes and Condos Inventory Analysis Report

Total months of inventory for Daytona Beach condos and homes stands at 14.3 months, but a slow rate of sales in the upper price ranges is pushing the number higher. Taking a look at the chart below, we can see that months of inventory in the lower price ranges is lower than in the higher price ranges.

Daytona Beach Home and Condo Total Months of Inventory

Inventory is higher in the lower price ranges, but sales are higher as well giving a months of inventory number of 10.7 months. In the highest price ranges, inventory rises to 28 months.

Daytona Beach Homes Inventory

Homes inventories are lower than condo inventories. Looking at the chart below, we can see again that the lower price ranges have the lowest months of inventory.

Daytona Beach Homes Only Inventory

The less than $200,000 homes price range show the lowest inventory numbers. The over $300,000 price range comes in as the highest. Now, let’s compare home inventories against condo inventories.

Daytona Beach Condos Inventory

Condo inventories are again lowest in the under $200,000 price range, but not as low as home inventories. In the higher price ranges, the inventories are double the lower price range. The over $300,000 price range show 26.1 months of inventory – high, but not as high as the home inventory in the price range.

Daytona Beach Condos Only Inventory

What Do Current Daytona Beach Real Estate Inventories Mean?

February has shown to be a low sales month over the past three years. We are not yet in the buying season, so we should be aware that months of inventory will fall as more sales are recorded during the higher sales months. Sales were up in February over last year. See Daytona Beach Real Estate Sales Up 27.7% in February 2010 for more information.

We are seeing much more strength in the lower price ranges. In February, 79.5% of all sales were under $200,000. There is also a distinction that we need to make. Not all homes are priced to sell. If a home is well priced, for its condition, in the lower price ranges, it is selling. If you are looking for the best price and value, you are likely to have competition.

There is a general view that prices are stabilizing, but have not stabilized. We need to segment the market into price ranges when considering such generalizations. Understand what’s happening in the price range where you are looking to sell or buy, not in the general market. Higher priced homes and condos do not have the same numbers of buyers competing and will take longer to become stable. Lower priced markets are probably very close to stable.

We report inventory numbers monthly, so check back often. Tremendous bargains are available in all price ranges. We are selling homes and condos in this market and helping clients find the best values. Please contact me with any Daytona Beach real estate questions at 386-566-7503.

Note: This report included Ormond Beach real estate, Port Orange Real Estate, and local communities including Daytona Beach Shores, South Daytona, Holly Hill and Ormond by the Sea.

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.

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 Big Recovery Year for Daytona Beach Real Estate Sales

Sales of Daytona Beach Condos and Homes were way up in 2009. More homes and condos were sold in the 12 months of 2009 than in the previous 16+ months in 2007 and 2008. 3993 properties were sold in 2009 against 2890 in 2008 or 1103 more in 2009.

The total numbers tell the story, but looking at the graph of 2008 versus 2009 home sales through the Daytona Beach MLS shows it more dramatically.

2008 - 2009 Daytona Beach Real Estate Sales

The Last Four Months of 2009 Huge For Daytona Beach Home Sales

We can see that the increase in sales was even more dramatic over the last four months of the year. Sales from September to December were up 74.1% in 2009 over 2008. December sales were up 79.6%

Why Are Daytona Beach Property Sales Up?

There is a lot of speculation to attempt to tell us why sales are up. My contention is that we are closer to normal sales levels based on historical sales before the big speculative run-up. In other words, we are pretty close to normal levels before the boom. When sales went bust, they swung very much too low and have now come back to normal.

There is little doubt that the home buyer tax credits are helping, but we don’t know the extent of the impact. We also know that Fannie Mae, Freddie Mac, FHA and other government agencies are backing 90% of mortgages currently written. So we see that the risk of  any mortgages being written is being assumed by the US government. See more on this at Daytona Beach Real Estate Market Boosted by US Treasury.

And then there is the bargain factor. People are taking advantage of what they see as low prices. Whether they are at the low point is impossible to say. We won’t know that until well after we hit bottom. What these buyers are saying, with their money, is I am willing to buy at this price. I’m getting a bargain.

Where Do Sales Go From Here?

I will go out on a limb as say that sales will be about level for 2010. I’m basing this forecast on several factors, but the overriding factor is that sales were up most dramatically at the end of the year. Meaning that the first eight months were not nearly dramatic in their increase. That will buffer variations in sales month to month. Simply, sales for the year averaged 333 properties per month, but the final four months of the year saw the following sales:

• September 371
• October 355
• November 404
• December 413

The average for the final four months was 386 or 53 properties higher than the average for the entire year. That gives a cushion for things like the tax credit not being renewed or delays in the economy recovering.

On the positive side; if the economy comes back strong and more mortgage money is made available, sales could be much higher. So, at this point, my best forecast is for level sales with a good upside potential.

I’m still concerned about inflation and a rise in inflation would have at least a short term impact on sales. I’m not an economist, so this forecast is unscientific. The best advice for people in the market is to closely monitor economic, price and sales news. Of course, you can do that here. We post articles nearly every day to keep you updated.

New Rules for FHA Condo Loans

The FHA has published some new rules for condo loans. These rules are more stringent and are designed to protect the agency from defaults and fraud.

The New Rules

1. 30% of the units must have already been sold
2. A big problem for Florida loans – no more than 15% of the units can be more than 30 days past due on the monthly condo association dues
3. A minimum of 50% of the condo units must be owner-occupied – this pretty much leaves condotels and condo conversion out
4. Residential square footage in the project must more than 75%. This means condos with lots of commercial space may not qualify
5. No single individual owner or investor can hold title to greater than 10% of the units in the project
6. The FHA will not insure more than 50% of the units in the project

You will have trouble with FHA condo loans if the developer is leasing units that haven’t sold. This falls under the 10% title holder rule from above. The developer is now considered to hold title as an investor since they are leasing the units.

Why Would You Want an FHA Loan for Condos

FHA loans are attractive for several reasons:

1. Low down payments – as low at 3.5%
2. Looser qualifying requirements – you don’t need perfect credit
3. Seller’s contributions – sellers can contribute to closing cost
4. Banks low them – they are guaranteed by the the US government

Daytona Beach Condos and the New Rules

I don’t think many Daytona Beach condos are going to qualify under the new rules. The problems with rule number 2 above, no more than 15% of the units can be more than 30 days past due on the monthly condo association dues is going to be a problem with many of the local condos. There are too many distressed units in those buildings. However, we can always check it out.

FHA loans are great for a home you plan to occupy and if you are interested in Daytona Beach homes and will be financing. you may want to check out FHA loans.