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Old 07-17-2012, 12:27 PM
398 posts, read 677,436 times
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Real Estate Sales Remained Strong in June-Any idea how long this will last? Is another bubble on the way?

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Old 07-19-2012, 12:10 PM
Location: Sarasota/ Bradenton - University Pkwy area
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Real estate markets truly are local in nature. You'll find diversity of statistics from city to city within our local market and even neighborhood to neighborhood or price point to price point. However, some generalizations can be made about the SW FL real estate market.

The real estate bubble and bust was caused mainly, according to many economic experts, by the lax loan standards of the big banks and the incredibly flexible types of loan programs those banks were doing back in the early to mid 2000s. Banks were not only doing 100% and 103% financing for people wishing to owner occupy, many were doing 100% financing for investors. No interest loans, ARMS that would reset to high rates in 3 or 5 years, balloon mortgages -- people were signing on the bottom line with no thought of what would happen when the much higher monthly payments kicked in. People were also refinancing their homes, treating them like ATM machines, getting back at closing huge amounts of cash. $100,000 or $200,000 cash back was not uncommon on homes that were previously mortgaged for $150,000 or less. Banks were giving mortgages to people who's incomes were not substantial enough to handle the debt burden they were taking on. Insanity.

Banks were also making huge loans to investors who were taking on projects such as condo conversions. A number of newer apartment buildings were converted to condominiums and the units all sold at 100% financing to some home buyers but mainly to a lot of investors.

Eventually the bubble burst, financing dried up and prices started dropping. Which lead to the huge volume of foreclosures over the past 7 years. People who had little or no money invested in the home that was now upside down started walking away from their obligations. Which caused prices to drop, which lead to more people being upside down, which lead to more people going into foreclosure. A vicious cycle. Currently distress sales (short sales & foreclosures) make up about 31% of the local real estate market. These distress sales are helping to hold down the sales prices of other, non distress properties even though the inventory of properties for sale is now at a 10 year low.

While banks are still cleaning up the foreclosures after the real estate bust, factors have changed that would, in my opinion, also help prevent another real estate bubble:

Lending practices have changed substantially in the past few years - gone are the 100% financing and exotic loan programs. Most conventional home loans require 10% - 20% down, FHA requires 3.5% down and credit standards have tightened considerably. Condo buyers will find that few condo complexes in our area meet the standards for financing, on those that do buyers can expect to put down 30% - 40%. Changed lending practices mean buyers must prove they have the means to repay the mortgage. Appraisals are much more conservative than past practices. All of the changes means more stability to the current market and these buyers will be less likely to go into foreclosure in the future.

Cash buyers are dominating the local real estate market. Recently released statistics show that 2/3 of the home sales in our area in the past 6 months were cash buyers - people buying a 1st or 2nd home as well as investors. Cash buyers are less likely to create a market bubble as they are bidding on properties with their personal money, not a bank's.

No one has a crystal ball that can predict future housing market trends with 100% accuracy, housing and the economy can be changed by a number of outside factors on a national and global basis. Look at the recent LIBOR scandal in Europe and the manipulation of lending rates created by it.

Overall statistics indicate the steady absorption of distress properties in our local market and gradually increasing sales prices, but not another real estate bubble.
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Old 07-19-2012, 12:15 PM
Location: Lakewood Ranch, FL
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Here's another story on the subject: Housing market in Manatee, Sarasota continues to show strength | Real Estate | Bradenton Herald
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