Pent-Up Demand or Mini Housing Bubble

Homes Sales Up Nationally – What’s Going On?

House and Money ImageHome sales and prices are up nationally. The increase is taking up back to 2005 pricing levels. I’ve seen some news where the issue of a new bubble in home sales and prices is being talked about, but I don’t think this is what’s happening.

The bubble that burst in 2006 was fueled by speculators with access to easy money. Lenders were giving stated income mortgages to people who were simply not going to be able to pay them back. These speculative buyers could only survive if prices continued to rise. They didn’t and the wave of mortgage delinquencies, foreclosures and falling prices began.

We know that the latest price and volume increases are not fueled by easy money. Mortgage money is tight. Many of the REO to Rent investors are using cash, not borrowed money. Further getting back to 2005 prices is about where we should be without the crazing price increases during the bubble.

I just read an article over at AG Beat that gives the latest housing numbers and projections. These numbers are from pent-up demand that we’ve been expecting might happen for some time. Many buyers were waiting to see price increases before they bought. Now they’re seeing price increases accelerating and they’re jumping in. It’s normal market behavior. Be careful of news reports and current numbers. Watch the market over quarters and years and you’ll get a better idea of what is really happening.

Prices are rising in Daytona Beach and surrounding areas. You can check all area listings without registration at search Daytona Beach homes.

All Real Estate Is Local

Remember – All Real Estate Is Local

Getting your real estate news through national news sources is dangerous to your financial health. I read a lot about real estate and too often I see so many examples of news reported that just doesn’t fit with our local situation.

I read today that mortgage applications are way down over the past four weeks. My initial reaction was a little panic about my business, but then I remembered that what’s happening nationally is out of sync with what’s happening in the Daytona Beach area.

My business is good. We had 17 phone and email inquiries over a 2-1/2 day period this week. These are people are buyers. We have a load of closings on the books over the next two to three months and we are writing a lot of contracts.

The Daytona Beach real estate market is out of sync with the national market. The things that make Daytona Beach, Ormond Beach and Port Orange attractive have not changed. The beach, ocean and weather that made the area to begin with are still here.

I urge you to take your real estate news in local doses. A good place to start is our just published Daytona Beach Area Home and Condo Sales Up in May 2010. We’ve also just updated our foreclosure pages to reflect current listings, you can see that at Daytona Beach Foreclosures Pages Updated.

As always, you can call me to discuss any home or condo, or just talk about the local market.

IndyMac Failure and Daytona Beach Real Estate

How Does IndyMac Failure Affect Daytona Beach Real Estate

The failure of IndyMac will have little affect on Daytona Beach Home and Condo owners. On Friday, July 11, 2008, IndyMac bank out of California was “taken over” by the Federal Government. This is the second largest bank failure in US history.

The bank informed Federal banking regulators that because of a recent run on the bank, in the form of deposit withdrawals, IndyMac no longer met capital requirements for banks. In other words, they don’t have enough cash or near cash .

What happens to depositors?

If depositors were under the $100,000 limit for FDIC insurance, they will get their money immediately. If they had over $100,000 at IndyMac, they are likely to lose 50% of the amount over $100,000. For IRA’s the amount insured is $250,000. The estimate is that all together, these people will lose 1/2 of one billion dollars, or $500,000,000.

The loss for taxpayers is estimated between $4 to 8 Billion. That’s a lot of money and I’ll bet that IndyMac is not the last to fail.

IndyMac was an active mortgage lender in the Daytona Beach area during the boom. Their business model was based on lending money to just about anyone, then betting that prices would keep rising to protect them. We all know that it didn’t quite work out that way.

If you hold a mortgage from IndyMac, keep making the payments. The mortgage will eventually be sold off, probably in the Fall of this year.

IndyMac recently cut about one-half of their staff, so I’ll bet that it’s a real mess there. I’m going to bet that with the Federal Government involved, the cost of this loss will be above the $4-8 billion estimate. When the FDIC gets into the books, it’s probably going to be worse than they thought.

The biggest lesson from the IndyMac failure, is to make sure that you do not have more money at any single bank above the FDIC insured levels. If you have more than $100,000 at any bank, it makes sense to spread it among enough banks to make sure all your money is insured.

How would you feel today, if you had $1,000,000 deposited at IndyMac. In the blink of an eye, you lost $450,000 (1/2 of the uninsured $900,000). Yes, you might get a bit back from the bank’s sale, but it will probably be pennies on the dollar.

The affect on Daytona Beach real estate is probably minimal, but it’s another lender out of the market and this whole mess can do nothing but make getting credit tougher.

Yes, we will get through all the effects of under-regulated banks. I hope we are all smarter for the next time.

Mortgage Rate Increases Headline Daytona Beach Real Estate News

Daytona Beach Real Estate News – Mortgage Rates Up 1/2%

Mortgages rates are up 1/2% over the past two weeks. This is not good news for people in the market for Daytona Beach Homes or condos. The 30 year fixed conventional mortgage rate was at 5.8% two weeks ago. The rate today is 6.3%.

What does an increase of 1/2% mean when making your home buying decision. If $200,000 is financed, here’s how it breaks down:

$200,000 financed at 5.8% = $1,183.71 monthly payment
$200,000 financed at 6.4% = $1,241.86 monthly payment

The difference in payment is $58.15/month.

Looked at another way:

$200,000 financed at 5.8% = $1,183.71monthly payment
$191,000 financed at 6.3% = $1,185.98 monthly payment

Basically, if you are financing 80%, you get $11,250 less home for the same payment. ($250,000 vs. $238,750 at 80% financing)

Will prices adjust further downward because of increased interest rates? We can’t be certain, but at some point, inflation will cause prices to rise. We’ve recently been hearing about housing housing affordability putting the breaks on falling home prices. We believe that’s possible and for the first two weeks of June, the median Daytona Beach condos and homes sale price is up $15,000 over May and the average sale price is up about $14,000. This number could change, but median prices had been dropping for a while now. We’ll see what happens going forward.

For a more information and analysis, see our weekly Daytona Beach Real Estate Market Report.