Positive Housing Sales in February Help Propel Dow

March 23 - Retirees either looking to sell their existing homes or see their retirement portfolios reclaim some of their losses got some good news today. Sales of existing homes in the U.S. increased 5.1% in February over January, helping give Wall Street its best day in months. Sales of single-family, townhomes, condominiums and co-ops were off 4.6% vs. the year earlier February. Prices continued to decline in February as the median selling price of a U.S. home fell to $165,400, off 15% from the year earlier period.

Many experts believe that the increase in sales is coming from first time buyers who are grabbing bargains in the current wave of foreclosures. Lawrence Yun, National Association of Realtors (NAR) chief economist, said first-time buyers accounted for half of all home sales last month, with activity concentrated in lower price ranges. “Because entry level buyers are shopping for bargains, distressed sales accounted for 40 to 45 percent of transactions in February,” he said. “Our analysis shows that distressed homes typically are selling for 20 percent less than the normal market price, and this naturally is drawing down the overall median price.”

The increases in sales were concentrated mostly in the northeast (+15.6%) and the west (6.1%), while other regions were essentially flat. Inventories of unsold homes, a major part of the current housing problem, have declined in recent months; they now represent a 9.7 month supply, considerably lower than the peak in April, 2008 of 11.3.

The good news in the housing market, combined with an apparent positive reception to the Obama Administration’s troubled asset repurchase program, helped set off Wall Street’s biggest rally in months. The Dow went up almost 500 points.

Visit to South Florida’s Real Estate Mess Finds Tranquil Exterior

Dateline: Fort Myers and Miami, Florida. Your Topretirements editor is spending a few days in South Florida. Realizing that the region is one of the 3 hardest hit real estate markets in the country (along with Phoenix and Las Vegas), we wondered: what would this meltdown look like in person? Since retirement in the warm climes of South Florida is the dream of many a baby boomer, here is our report on what we can see by looking out the window, jogging through the streets, talking with folks, and reading the newspapers.

The main answer is - South Florida looks pretty normal. Eerie, definitely, but in most ways the region looks like it always does. Traffic is as heavy and bottlenecked as ever. We were behind a gleaming Maserati in Fort Myers today; giant Cadillac Escalades hurtled by in Miami.There are billboards announcing new active adult and 55+ communities as always; but the difference is that low prices, sales, and special deals are today’s focus. Construction sites are still much more plentiful than you would see in the north, but now there is a difference. Some of the sites have no heavy equipment present, a sure sign that the project is on hold - either due to bankruptcy or a pause in construction. State officials report that 2008’s tourism numbers, long Florida’s economic raison d’etre, showed the first visitor decline in a long, long time. There are plenty of “For Sale” signs up, many of them on vacant lots, but that has always been the case in South Florida.

The “Fort Myers News-Press” published an interesting quote on March 1 from Dominic Pallini, a Realtor with Re/Max, who remains positive despite bad economic times. “Things will get better. Once we get through the inventory prices will start going up. Right now they’re selling houses for less than builders can build them. That can’t last.” (Terry Allen Williams/news-press.com)

The Press also reported last week that the median sales price of a Fort-Myers home has dropped below $100,000 for the first time since February 1999. In January the median price of an existing single-family home in Lee County fell to $94,900. That’s a 59 percent drop vs. year ago (statistics from the Florida Association of Realtors). Driven by foreclosures, sales are booming in Lee County: there were 758 sales in January vs. 338 the year before. Most of those sales are in Lehigh Acres (made famous by President Obama’s visit in February) and Cape Coral.

The newspapers are full of ads for sales of homes. It appears that plenty of multi-million dollar homes are on the market, and some are selling. The most obvious difference in this market is that along with many conventional ads, some “Miami Herald” real estate ads now scream “Priced to Sell”, “Bank Says Sell”, “No Money Down”, “Absolute Auction”, “Developer Close Out Prices”. Trump Luxury Miami Style, according to one ad, can now be obtained by “Rent With Option to Buy”. We thought one ad pretty well summed up what has happened in the area: “You’ll be amazed at the new listings to choose from in neighborhoods that you never dreamed would fit your budget.”

Meanwhile many active adult and 55+ communities in Fort Myers and South Florida are undergoing stress. The less stable developments are seeing foreclosures and delinquencies on Homeowner Association fees. Country clubs that cost $100,000 or more to join 3 years ago are now in trouble, trying to figure out how to avoid bankruptcy and keep their dues paying members.

Sadly, many people in South Florida are in a great deal of pain these days as their homes, cars, and dreams are taken away from them. But for visitors to the state and the majority of people who live in South Florida, life goes on as usual, albeit with plenty of worry in the air.

Tempted by a Short Sale or Foreclosure

If you could buy your dream home and save $200,000 or more, would you be tempted? For many retirees, the news reports of homes selling for half what they were 3 years ago are interesting. In fact, in many areas of the country the prospect of a bargain-priced distress sale has become so attractive that sales of new homes have just about stopped. In case you are thinking about plunging in yourself, we have prepared some background on the issues involved in this topic for our Topretirements.com visitors.

Short Sales:
- A short sale occurs when a home is sold for less than the remaining mortgage on the property.
- The tricky part is that lenders have to give permission for a short sale, which can be used to avoid a foreclosure. If the loan has been syndicated to many lenders – paralysis usually results
- Short sales tend to be good things for sellers, who preserve their credit ratings and their dignity (but sadly, losing all of their equity)
- They also tend to be good for banks, which avoid the expense of foreclosure and often get more for the property
- Short sales are often bad for buyers, who can get strung out for weeks or months by the banks or the multiple parties who own the mortgages
- Loan service companies can find themselves getting hurt by short sales, so they are often against them
- The Obama administration’s latest proposals are aimed at simplifying and rewarding short sales, an idea which is getting a lot of support from the financial and consumer protection sector
- In some parts of the country about 10% of the sales are short sales

Foreclosures:
- A foreclosure sale occurs when the borrower defaults on the mortgage and the lender takes over ownership
- Foreclosures often result in the best price for the buyer, for a multitude of reasons
- In some parts of the country over 50% of the sales are foreclosure sales
- A big reason for the low prices is that there are so many properties the bank’s can’t do a good job marketing all of them, they just want to get rid of them - fast!
- Chaotic markets and imperfect knowledge can work for (or against) you as a buyer. If you have superior knowledge about a particular home or neighborhood, you have a potential advantage

Tips from all over
- The sharks are feeding. Get a good real estate agent working for you if you don’t want to be eaten alive (“don’t try this at home”). An agent with experience in foreclosures and short sales is not only essential for your protection, but they have will access to properties you couldn’t find on your own
- You snooze, you lose. Foreclosures and short sales happen fast. If it’s your dream home, don’t dally
- Check out real estate firms and banks for lists of foreclosed properties in the communities you are considering. Or, keep your ear to the ground and take the initiative
- Don’t buy in a distressed neighborhood or one with a lot of other foreclosures
- Whatever you are buying, you are buying as-is. Any problems will be your problems now
- If buying a condo or there is a Homeowners Association, do your due diligence. Find out if there are many other bankruptcies or delinquencies in the development. How about their reserve funds; can they withstand an emergency without an assessment? Don’t fool around with a weak development.
- Harry Murray, vice president/manager of the J. Rockcliff Realtors office in Danville, CA told MercuryNews.com that “Investors account for more than 60 percent of the foreclosure buyers, (and) new sales are dead.

Bottom line:
Bargains exist out there, if you have the courage and the skill to find them. Act fast if you find your dream, but protect yourself.

Prediction:
After the dust settles the next investigation will Congress undertake is to find all the sweetheart deals that insiders made in this chaotic market. With the sheer volume of what is going on and all the uncertainty, insiders will always try to profit.

More References:
Foreclosure Market Offers Bargains for Savvy Investors

Foreclosures Hit Home on Cape Ann, Short Sales Aid….

What’s your opinion? Please use the “Leave a Comment” box below to share your ideas on short sales and foreclosure opportunities.

Despair in Lehigh Acres - Housing Meltdown’s Core

It’s not a contest anyone wants to win - whose housing crisis was the worst in 2008. The contenders: Phoenix, Las Vegas, South Florida - all with year over year price declines of 30% or more.

But perhaps nowhere is there more despair and more signs of a meltdown than in Lehigh Acres, a huge exurb east of Fort Myers, Florida. Houses are abandoned, foreclosed, and in ruins. Even fast food restaurants are laying people off as the unemployment rate hit almost 10% in November. Thousands of dreams are in ruins, thanks to real estate falling from Fort Myers’ 2005 bubble prices of a median $322,200 to $106,900 in December, 2008 (Source: Florida Association of Realtors). In other words, a house in the Fort Myers Metro is worth 33% of what it was just 3 years before - the fall in Lehigh Acres is even worse. President Obama is due to visit the Fort Myers area on Tuesday, but residents characterized the visit in the New York Times as a “herbal remedy: it probably won’t hurt but it won’t do much good either”.

Meanwhile in Lehigh Acres things have gone from bad to truly desperate. One of the biggest examples of reckless overbuilding in the country, more houses were built in Lehigh Acres in the last 4 years than were built there in the previous 50 years. The market has completely unraveled; criminal activity is increasing with looting of empty houses, marijuana cultivation, and drug dealers. Residents are trying to sell everything they have for cash. Food pantries are overwhelmed with the need, and indeed recipients are increasingly trying to return food pantry items to grocery stores for cash. Houses are selling for $45,000, about one third of what they cost to build. Officials and residents are hoping that foreclosure and short sales will help clear out excess inventory, but no one is predicting that will be completed within a year or two.

Florida’s economy is also in a tailspin, so no one is expecting any relief there. Florida, which has always counted on unlimited population growth, is now stagnant; unemployment is high; and revenues are plummeting.

Meanwhile in other areas of the country, even those metros that had been unaffected up to now are now seeing declines as of the end of 2008. Atlanta, Charlotte, Portland, Seattle, and Dallas experienced record price declines according to Case-Shiller data. As they say in the movies - “no one is safe” right now.

What do you think? Please weigh in with your comments on what happened, or any reaction. Just use the “Leave a Comment” box below.

Lets Hope 2009 Brings Happier Retirement News

As 2008 draws to a close and fond memories of the holidays begin to recede, here’s a wish for much better retirement and retirement community news next year.

This past year featured retirement news which went from bad to worse. Early in the year, housing prices completely hit the skids in south Florida, California, Arizona, and Nevada. Most other parts of the country saw double digit declines as well. Folks approaching retirement who held out for 2006-type prices found they could not sell their existing homes. So their dream to move to an active adult community, college town, CCRC, or retirement destination went un-fullfilled. More than a few experts, including this one, predicted that real estate prices might finally be getting close to bottom - only to see them sink lower. November’s housing prices fell at the fastest rate in 40 years, and the number of sales went down as well. Condo and cooperative apartment sales - the usual housing choice for retirees - were even worse than those of single family homes.The Jim Lehr News Hour had a feature on Christmas Day showing nice homes in Stockton California being auctioned off for $40,000. The good news there - prices don’t physically have much lower to go than that! And of course another item to celebrate - if you are buying and don’t have to sell to do so - prices are low!

Meanwhile all eyes are on our new President-to-be. Can he return our confidence to us, encourage those with resources to start spending again, and prime the pump with federally financed infrastructure projects? It’s been a long-time since such so much hope was pinned on a new President. Personally, we think he has what it takes. So we are hopeful that at this time next year we will all be feeling better about our stock portfolios, able to sell our existing homes, and looking forward to moving into our dream retirement home (which we purchased at an outstanding price in early 2009!)

Feel free to post your own opinion as a comment on this story.

Remodeling and Renting Increase as Retirement Living Options

Regardless of when the economy turns back around, the financial crisis has put just about everyone’s retirement lifestyle picture a little bit askew. If there is any silver lining, it just might be that it forces us to look at the retirement paradigm in a new way.

Remodeling
Common wisdom and AARP surveys show that at least 80% of people would like to retire right where they live now. The problem is, most of us moved into our homes with different lifestyle requirements than what we have now. Whereas we were once looking for more room for our families, a smaller footprint (with reduced energy consumption and property taxes) might be more appropriate today. Another consideration is that our future mobility will not be what it once was. So if we are to stay in our homes, remodeling them to fit our future might be a good idea.

The downturn in the housing market presents an opportunity for those with the means to remodel now. There are plenty of contractors looking for work, and materials prices have fallen considerably - it’s a good time to be remodeling. Interest rates are near historic lows for qualified borrowers. Plus, if you have the resources, it’s a patriotic gesture to make!

Remodeling a home for a dream retirement will differ from person to person, but building a first floor master suite would be at the top of most retired people’s lists. New kitchens and bathrooms are usually the top remodeling projects in every home, and they make sense for retirement homes as well. Making the home more accessible - removing steps and level changes, changing out door knobs for handles, widening door openings, etc. - are universal improvements that make sense for any home. Converting spare bedrooms to offices or hobby rooms, planting easier to maintain landscaping, changing to easier maintain exterior materials, installing energy efficient appliances and solar hot water systems - these are smart options to make your house more livable while reducing future work and expense. Remodelormove.com has an interesting remodeling vs. moving calculator you can use to help you determine which option makes sense for you (worth a look just for the questions it asks you).

Renting
In our opinion renting in an active adult community or retirement town has always been a good idea. For a relatively small investment you get the experience of living in a community without any risk. If you love it, you get insight into what and where you will buy. If it seems like there are greener pastures, it’s nothing to move on. As with remodeling, there has never been a better time to rent. So many homes are sitting on the market that rents are competitive and the choices are numerous. You can to places like forrentbyowner.com or vacation rentals by owner and find great selections just about anywhere. Or you can contact active adult communities directly.

Rent-to-Own
Another option, rent-to-own, was announced recently by the luxury home builder Toll Brothers. In their efforts to introduce new buyers to their communities Toll Brothers will now rent homes with an option to purchase in several markets. With no or limited complications, you get the advantage of living in a condo or town house before you decide to buy it. The program is available in New York City, Singer Island (FL), and Scottsdale AZ. You can always try to negotiate rent-to-own with other builders and see what happens. Many individuals who are stuck with an second or third home will also consider rent-to-own. The deal you strike is only limited to your creativity and negotiating skills.

Amazingly, Bits of Good News Spring Up in Housing

This is not to say that the bad news in housing, particularly for retirement communities, is over. But there have been some rays of good news popping up here and there. Thank goodness, we are tired of writing about the same old bad news!

First off, the Census Bureau reports that sales of new homes increased 2.7% in September, coming off the worst sales in 17 years. Inventory of unsold new homes declined 30,000 from their record levels of 404,000 units. Lower prices coming from distressed sales are the major reason for this improvement. The median price of a new home is now $218,400 - down from $240,000 in September, 2007.

One month doesn’t make a trend, but there is good news in other corners too. In Las Vegas NV and Prince William County, Virginia, sales are up. In California several markets improved - Sacramento sales increased 135% over September 2007. In parts of southern California September sales were up 65% or even higher. Again, the reason for the increase is mostly foreclosure sales - bargain hunters are snapping up properties at distressed prices. Experts believe this is a good thing, as these sales are clearing out excess inventory.

In the active adult community market there is still plenty of bad news to go around. Pulte Homes came out with a loss of $280 million in the quarter. Just about all the big players - Lennar, Pulte, Del Webb, Toll Brothers - are offering some form of incentives - lower prices, more free options, frequent flyer miles, new cars, mortgage payments and upgrades.

All eyes are now on October numbers, which will start to show what has happened in housing after the latest financial meltdown.

Same House - Way Different Prices

It is one of our favorite recommendations - if you want to get a good deal in retirement real estate, stay away from the coasts. The 2008 Coldwell Banker Home Price Comparison Index provides a pretty good illustration of the theory. The real estate brokerage firm makes an annual comparison of similar homes in 315 U.S. markets. It wasn’t a big surprise that La Jolla, CA - where the sample home cost over $1.8 million - was at the top of the list. Want to buy the same house cheaper - move to Sioux City, Iowa, where you can buy it for $133k.

Elsewhere in California it is easy to spend money too - the test house in Santa Monica and Santa Barbara would cost you $1.65MM and $1.6MM respectively. The second most expensive city in the country is Greenwich CT ($1,787,000). The test house in the HPCI Index has 2,200-sf, four-bedrooms, and 2 1/2 baths.

Elsewhere in real estate, this week’s news was unrelentingly bad. In almost every market, prices are off and sales are down. Prices in Las Vegas are off 30% from August 2007. The only ray of good news we have seen is lucky Aspen Colorado, where prices just keep going up.

Sellers Remorse Hits Miami Real Estate Market

If this headline about seller’s remorse strikes you as a little bit of a non-sequitur, you wouldn’t be alone. With the turmoil in South Florida’s active adult and real estate market, you would think we should be talking about “buyer’s remorse”. That’s the affliction that comes when people who bought a few years ago are under water with their mortgage - they owe more than what their home is worth.

Rafael Diaz could tell you all about it. Two years ago this Miami builder listed a brand new home near the University of Miami for $979,000. Today’s listing price - $599,000. What’s worse is that he turned down an offer of $770,000 just a year ago. What he told the New York Times says a lot of sellers remorse, “I should have taken it. … I guess I was a little cocky….”

The problems are understandable. Sellers are still thinking about prices in hot real estate markets. None was hotter than Miami, where home prices rose without interruption for 21 years. So they hang on to their asking price longer than today’s market will tolerate. The biggest problem in Florida, Nevada, California, and other former real estate hotbeds these days is that instead of yesterday’s bidding wars, short sales are setting prices. A short sale is when the asking price is less than the remaining mortgage, and the lending institution is willing to forgive the rest.

Unfortunately, even with massive discounts buyers are not biting. One realtor told the Times that “there are more qualified buyers on the sidelines than in the 35 years I’ve been doing this.” Buyers, who are afraid prices will drop further, are making the rental market hotter than it has been in years - in fact more deals are rentals in South Florida right now than are sales.

When home inventories get back to normal levels and the rate of foreclosures slows down prices will finally stabilize. But for now, the market remains fearful, except in the high end, where properties valued for more than $1 million are selling better than lower priced homes.

Is Now the Time to Buy into a Retirement Community

June 27 — Identifying the bottom of a real estate cycle is a trick that is just about impossible to master. We at Topretirements have been exploring this question for over a year now, wondering if it is finally the right time to buy into a retirement community or active adult community. Unfortunately, there is no definitive answer in sight. Today’s New York Times article, “Retirees Find the Time May Be Right to Buy“, examined this question, profiling the experiences several retirees had as they explored the retirement community real estate market.

The common thread in their adventures is the effect dropping real estate prices have in their view of the market. According to Case-Schiller data, prices in 20 of the top U.S. markets were off 15% in April vs. the year ago April. Prices in the first quarter of 2008 were off 14% vs. the same quarter of 2007. Fueled by foreclosures, prices in Miami, Phoenix, and Las Vegas dropped over 25% in April vs. year ago. Prices in these markets have now been diving steadily for over 2 years.

One reason for buyers to finally emerge from their bunkers is that, given the relentless price drops, there are now properties coming on the market at what look like reasonable prices. And when a serious buyer senses a bargain and a seller who is open to negotiation, sales start happening.

A good thing about the U.S. economy is that all markets in the U.S. do not behave the same. Some cities, notably Charlotte, did not see the big price run-ups as other areas, and as a result are not experiencing significant declines. Even in Florida, which has not been experiencing as much retiree immigration as it used to, there are real differences. Northern and middle Florida saw less excess, so these markets have been much more stable than much of South Florida. In Miami and Fort Myers there was too much building and too much speculation - in these areas inventories are too high and prices continue to fall. The disparity in markets is another factor that makes it hard to know if prices have reached a bottom in the markets you are interested in.

The main retiree interviewed in the Times story, Franke Watson, recently purchased a home in Prescott, AZ. The house was listed originally for sale at $430,000. When Mr. Watson saw it the price had been lowered to $349,000. He offered $300,000, and he and the owner eventually agreed upon $309,000 - a 28% discount from the original listing price.

The Sarasota Herald-Tribune had a recent article, “Have Home Prices Hit Bottom?“, with one of the more interesting ways of looking at home prices. Their analysis assumes that the average annual increase in home prices has traditionally been around 6-7% a year. Obviously in 2005 and 2006 the hottest real estate markets in the U.S. got seriously out of hand. In Sarasota, home prices increased 32% in 2005 alone! Since then prices are down in the hot areas. The article points out that if you assume a 6-7% annual price increase from 1999 on, the current prices are, after the correction, pretty close to where they should be.

The biggest problem facing many retirees right now is the inability to sell their current home. They do have an advantage over most other real estate buyers, though, and that is that they generally have plenty of equity. According to the Times article, many of those folks are taking the plunge, or at least thinking about taking a big step. Their rationale seems to be their estimate that their house will eventually sell, so why not take advantage of the current bargains to be had now.