New Census Data: Housing Stats

According to new Census data released last week:

- Nationally 53.0 percent of renters spent 30 percent or more of their household income on housing in 2010. That number was 51.9 percent in 2009 and 50.0 percent in 2008. National median household incomes dropped in 2010 and rents increased because demand for rentals increased. Rents are forecasted to rise 4.0 percent in 2012, according to Zillow.

- 60.40 percent of renters in Florida spent 30 percent or more of their household income on rent in 2010 and that was the highest percentage in the nation (California was second at 57.2 percent and Hawaii was third with 56.2 percent).

- 48.8 percent of Florida homeowners spent 30 percent or more of their household income on housing in 2010. Nationally that number was 38.0 percent, meaning that Floridians spend more of their income on housing than the national average.

4.09% Fixed Rate Mortgage

The rate for a 30-year fixed rate mortgage fell to 4.09 percent! This is the third straight week of record lows. Homeownership is often more affordable than renting when you look at the monthly mortgage of a home versus what it would command for rent.

Bifurcated Market?

There is some data suggesting the country's housing market appears to be splitting in two, albeit into two very unequal parts. While we are still awaiting the recovery for the majority of the market, according to Zillow the much smaller luxury market has seen improvements. The 1.5 percent of the market that consists of luxury homes like we have in Palm Beach County (think pools, spas, outdoor kitchen, screening rooms, massive master suites, waterfront) have seen a small turnaround. Since February prices of $1 million-plus properties have risen 0.7 percent since February 2010, while prices for $1 million-under homes have decreased 1.5 percent. Historically these two market segments have moved in tandem.

This split is due in part to cash-rich foreign buyers who think American real estate is currently undervalued. They don't need mortgages and thus are not hamstrung by the difficulty of getting a mortgage. In Florida in 2007 foreign buyers accounted for 10 percent of sales; in 2010 they made up 33 percent of sales. So while this news might not matter much for the majority of the country, it does matter for us. The concept of the market bottoming out needs to be asked on a more regional and then price-conscious level and right now it appears that the luxury market is going to have an earlier recovery.

To create an analogy for all of the fashionistas out there, consider the recent sale of Missoni goods at Target. Shoppers lined up to get a shot at owning a designer, luxury good for a more affordable price. The shelves were cleared within hours and the website crashed. We are still in a recession and normally no one would line up to buy Target clothes but the rules changed when it was a luxury brand.

Cast in a Different Light

This photo of the columns in the front hall at The Breakers deftly illustrates the importance of excellent lighting. Notice how the details in the ceiling are so much more vibrant because of the direct lighting. One of the easiest ways to make any home appear more grand is to invest in decorative outdoor and indoor lighting. By illuminating your landscaping, pathways, doorways (especially the front door), art and other decorative detailing, you are maximizing a home's potential.

Regarding your choice of lighting fixtures for your front door and front pathway, homeowners often choose fixtures that are too small. Homes are very big! Don't be afraid to use large lights.

Best Door in West Palm Beach

I spotted this door at one of the condominium buildings in West Palm Beach and it is the most whimsical front door I have ever seen! It has me wondering whether Snow White and the Seven Dwarfs winter down here...

Citizens' Property Insurance

Florida's Office of Insurance Regulation approved a statewide average 6.2 percent increase in property insurance premiums and a 32.9 percent increase for sinkhole premiums from the state-backed Citizens' Property Insurance. These increases will take effect on January 1, 2012 for homeowners and dwelling fire policies and February 1, 2012 for wind-only policies.

What are Riparian and Littoral Rights?

Riparian Rights- Property owners whose property abuts the banks of a river, stream or other watercourse have the right to use that water. The rights to the use of the water can only be transferred or sold when the land is transferred or sold. Riparian rights can include the right to swim, boat, fish, and erect a dock, a pier or a boat lift. These rights also include the right to the land created by reliction. So if water levels in a river permanently decreased and suddenly added five more feet to the length of your property, that new land would belong to you.

Littoral Rights- Apply to properties that abut an ocean, sea or lake and usually related to the use and enjoyment of the shore.

When purchasing a home in Florida that abuts water it is very important that you understand whether you have any riparian or littoral rights. Very often the essence of a home's value is in the riparian or littoral rights and the views that accompany them.

Loan Limits from U.S. Department of Housing and Urban Development

The U.S. Department of Housing and Urban Development has a website (https://entp.hud.gov/idapp/html/hicostlook.cfm) where you can find the loan limits for the loans the Federal Housing Administration (FHA) and Fannie Mae/Freddie Mac are willing to purchase. Nationwide the limit for Fannie Mae and Freddie Mac is $417,000 but some areas with more expensive housing were granted temporary loan limit increases. But on October 1, 2011 these increased limits will be lowered back to $417,000. In addition to the West Palm Beach/Boynton Beach/Boca Ration region, five other regions in Florida qualified for the limit increases, with Key West having been the largest at $729,750. (Note: Key West and Naples-Marco Island will not have their loan limits decreased to $417,000. Their new limits will be $529,000 and $448,500, respectively).

FHA limits vary by city in Florida and nowhere is the limit less than $271,050. Until October 1 the Palm Beach loan limit is $423,750. After October 1 the limit will be lowered to $345,000.

Often buyers have a tougher time getting their FHA loan approved for a condo than for a single-family home. Only condos that are on the approved list at the FHA can be purchased with FHA loans. That means that in terms of resale it can be easier to sell a condo that is on the approved list than one that is not.

Through June 2011 single-family home loans that Freddie Mac purchased had an average down payment of 29% and an average FICO credit score of 751. In 2007 the average downpayment was 23 percent with an average FICO score of 707, according to Freddie Mac. FICO scores go up to 850 and the national median is 711, says FICO.

FHA loans are popular with buyers with small down payments, though those borrowers must have high credit scores. From January-March 2011 the average credit score of a borrower was 704, whereas in 2007 it was 631.

Florida Had Highest List Price Increases in Nation in August

Florida had the largest increase nationwide in median list prices for homes from August 2010 to August 2011, according to MLS data aggregated by Realtor.com. Fort Myers-Cape Coral had a 33 percent increase to $213,000; Miami had a 24.5 percent increase to $249,000; Naples increased 20 percent to $359,900 and Punta Gorda rose 13 percent to $169,900. Palm Beach County's median list price increased just 2.9% to $199,973. Palm Beach County had a 25 percent decrease in the number of listings during that same time period.

These significant changes are most likely due to the stoppage and subsequent slowdown of the foreclosure process. The numbers that will be most indicative of where the market is at won't be available until we can do a year-over-year comparison after October 2011, when it will have been a year since the banks temporarily halted foreclosures.

Interested in Becoming a Landlord?

Now is a fantastic time for would-be investors to take the plunge into buying investment properties. Interest rates are at historic lows for both 30-year and 15-year terms and housing prices are hovering around 2002 levels (and if you buy a distressed property at a discount, you're looking at prices unseen since the 1990s). But the incentive isn't just in the low cost of acquiring a rental because while home prices have decreased, rental rates have increased. Here are some of the juicy facts:

- Four million former homeowners who went into foreclosure are now renters.
- Almost 35% of occupied homes were rentals in 2010, a staggering 33.8% increase from 2001.
- Demand for rentals has increased as banks have become more restrictive with their lending policies.
- Nationally rents increased 11.6 percent to $1,320 a month from 2009 to 2010, according to   Hotpads.com.

President Obama Looking to Make Refinancing Easier

In his speech last week, President Obama said that he wants to "take executive action to remove the barriers that exist in the current federal refinancing program (HARP, the Home Affordable Refinance Program) to help more Americans refinance their mortgages at historically low rates, save money and stay in their homes."

Although no formal action has been taken, this is an excellent idea. All homeowners should have the option to refinance, it does not make sense to restrict it to homeowners who are not underwater with their mortgages. It benefits the real estate market, neighborhoods and the recovery to have homeowners be able to afford to remain in their homes. It is better to have a homeowner who is underwater with their mortgage to be able to refinance it at these currently incredibly low rates instead of lose it to foreclosure. The cost of foreclosure to a bank must surely be greater than allowing homeowners to refinance.

In addition to negative home equity being an impediment to refinancing, a spotty income history is also a roadblock. Banks typically want to see an applicant with at least six months of tenure at their current job. Those who are recently retired or are self-employed might face more obstacles as well.

In order to receive the best rates for a 30-year fixed mortgage, credit scores of 740 or better are generally needed. However, banks are more flexible with credit score requirements if the homeowner is applying for a 15-year fixed mortgage; in that case a score in the mid-600s could be sufficient to receive the best rate.

30-Year Mortgage Falls to 4.12 Percent

According to Freddie Mac, last week the average interest rate for a 30-year fixed mortgage fell from 4.22 percent to 4.12 percent, the lowest rate in six decades. The average rate for a 15-year fixed mortgage declined to 3.33 percent from 3.39 percent, which is likely the lowest it has ever been. Five years ago the average 30-year fixed rate was around 6.5 percent.

With homes prices having declined and interest rates at historical lows, purchasing a home is now more affordable than ever for buyers with excellent credit and strong down payments. The low rates are not quite as low for buyers with lower credit scores or smaller down payments.