Sarasota market continues to stabilize after boom years

*The following press release was sent to local media on Sept. 25 at 11 a.m.*

Sales figures year-to-date for homes and condominiums in the Sarasota MLS are close to the market totals experienced in 2006 - declining only a modest 6 percent through the first eight months of 2007 compared to the same period in 2006.

In total, 4,460 closings were reported through the end of August 2007, compared to 4,747 closings through August 2006. These numbers are reminiscent of the market in 2000, when a total of 4,051 closings were reported, and 2001, when there were 4,732 closings through Aug. 31. However, home and condominium prices have increased dramatically during the past seven years.

Pending sales remained above 450 for the month of August, indicating the winter months will likely not see the kind of drop in sales experienced in the later months of 2006. Pending sales climbed by 164 percent from August 2006, when only 170 pendings were reported. This provides a strong indication that the market will not see the stall in sales that occurred during the end of 2006. The higher number of pending sales will likely mean sales activity will remain higher during the next 30 to 60 days.

Condominium prices were up year-to-date, with the median sale price through the end of August at $365,000, compared to only $310,000 for the same period in 2006. This marks a 17.7 percent increase. The median price was only $292,925 for the first eight months of 2005, often cited as a period within the boom years.

The median sale price of a home was $310,000 year-to-date through August 2007, compared to $350,000 for the first eight months of 2006, for an 11.4 percent decline.

The Sarasota-Bradenton MSA, only three other MSAs in the state experienced better August 2007 to August 2006 comparative numbers for single family home sales, and only three reported better numbers for comparative condo sales.

"I am still convinced that we have weathered this adjustment period in sales volume and prices very well, particularly compared to the rest of the state," said Joe Hembree, 2007 SAR President. "We continue to go through a period of adjustment in the Sarasota market, and there has been some depreciation in both the number of sales and the median price. But we are emerging from the downturn faster and stronger than other markets in the state and nation, and I see no reason to believe we will not continue to see growing strength."

With an eye toward the bigger picture, and discounting the historically abnormal years of 2003-2005, we have seen a return to the normal market experienced as recently as 2001 and 2002, Hembree noted.

Dr. Lawrence Yun, Senior Economist with the National Association of Realtors® indicated in an address at Lakewood Ranch Golf & Country Club on Sept. 14 that he believes there has been a negative spate of news concerning foreclosures, hurricanes, property taxes and insurance increases. This has left potential home buyers with the impression that the bottom of the real estate cycle has not been hit, which he believes is an untrue analysis. In fact, the quarterly figures compiled by FAR and NAR indicate that prices in the local market appear to have bottomed out in the fourth quarter of 2006, and have risen since that time.

"They have jobs, their income is rising, but they are saying, 'I'm going to step back,'" Yun said of the potential home buyers.

But Yun noted July's median price of houses sold in the Sarasota-Bradenton MSA was roughly $277,000, a bargain for the beaches, sunshine, golf, fishing and general location that the region offers. Yun said this means real estate agents need to tell the true story of Florida.

Regarding the hurricane scare, only six Category 3 or greater storms landed on Florida's mainland from 1950 to 2003, although eight touched down between 2004 and 2005. "The chances of that happening again are low," Yun said of the disastrous two-year period.

Yun predicted the Florida housing market will recover from the current malaise, get stronger in 2008 and will be booming again by 2010, once people again realize that Florida's assets are unique.

Home and condominium sales declined in August 2007 to a total of 430 sales, as local families began to settle into the school year and plan ahead for the holidays. However, this figure is still 21.1 percent higher than the low point in the recent local market, reached in December 2006, when only 355 sales closed.

Sales have escalated since then, and have remained stronger throughout 2007.

Sarasota Association of REALTORS®

Fed slashes rates to boost economy

from CNNMoney.com

The Federal Reserve lowers the target on a key short-term interest rate for the first time in four years to 4.75% from 5.25%

NEW YORK (CNNMoney.com) -- The Federal Reserve cut the target on a key short-term interest rate by a half of a percentage point Tuesday to 4.75%, further acknowledgment from the central bank that the mortgage meltdown plaguing Wall Street and Main Street could have a negative impact on the economy.

Stocks surged following the announcement, with the Dow gaining nearly 250 points, or 1.8 percent. The S&P 500 and Nasdaq both shot up more than 2 percent. Bonds fell, sending the yield on the benchmark 10-year U.S. Treasury up to 4.5 percent. (Bond prices and yields move in opposite directions.)

The cut to the federal funds rate, the first since June 2003, was widely anticipated by investors and followed a surprise cut to the Fed's discount rate on Aug. 17. The only question was whether the Fed would lower the federal funds rate by 25 basis points or 50 basis points. (There are 100 basis points in a full percentage point.)

Some investors had thought that Fed chair Ben Bernanke would take a more cautious approach and not cut rates by such a large margin, because a half-point cut could signal the Fed was acting out of desperation to save the economy.

But Alan Skrainka, chief market strategist with Edward Jones in St. Louis, disagreed with that interpretation. He said Wall Street was cheering the rate cut because it proves the Fed is willing to take any moves necessary to ensure the economy is not derailed by problems in the subprime mortgage market, loans made to consumers with less-than-perfect credit.

"We're having champagne and cookies," Skrainka said. "This is not a magical elixir that solves our subprime problems overnight, but it is a big step in the right direction to keep the economy growing. The Fed is sending a strong message that it won't get behind the curve," he added.

click here for complete article from cnnmoney.com

State turns down another insurance rate rise

By JOHN HIELSCHER
Herald Tribune

State regulators shot down another rate increase for a large homeowners insurer.The Florida Office of Insurance Regulation denied a 29.5 percent rate increase sought by insurers of The Hartford Financial Services Group.

The Hartford's six companies cover more than 91,000 Florida homes, including 5,880 in Sarasota, Manatee and Charlotte counties.

The Hartford asked for the rate increase in its "true-up" filing, a price adjustment all state insurers are making after buying their reinsurance that covers the 2007 hurricane season.

Under the insurance reform law, property insurers were expected to cut rates after purchasing the cheaper backup insurance from the state. Instead, dozens of companies first lowered prices but have since filed for sizable rate hikes in their true-up filings that would wipe out any savings for their customers.

The Hartford, for example, lowered rates by 17.7 percent under the new law.It then asked to raise rates by 29.5 percent, which would have meant a net 6.6 percent increase for policyholders.

Insurance Commissioner Kevin McCarty said Hartford's proposed rate increase did not reflect its savings after buying reinsurance from the Florida Hurricane Catastrophe Fund." I am committed to ensuring that insurance companies doing business in Florida are offering policyholders the best rates possible," he said. "

The rates proposed by The Hartford are not in line with this objective." The Hartford, Conn.-based insurer is reviewing OIR's decision and deciding its next step, said Debora Raymond, media relations manager." We believe that our proposed changes are actuarially justified," she said. "The filings we submitted pass on to consumers all of the savings from the temporary increase in catastrophe limits legislation."

The OIR has recently rejected other proposed rate hikes, including from Florida Farm Bureau, Cypress Property & Casualty, First Floridian Auto & Home and Travelers Indemnity Company of America.

Florida Farm is appealing the denial of its 30.3 percent rate hike. At least six companies have withdrawn rate increases after facing scrutiny from the regulators.

Real estate sectors in state strong

From the Sarasota Herald Tribune - 9/6/07
Survey says parts of market, like cap rates, remain stable despite housing turmoil
STAFF REPORT

Foreclosures, dropping sales prices and ballooning inventory. That is most of what you hear these days about the Sunshine State's housing market, but a recent survey of real estate experts coupled with data gathered by the University of Florida's Bergstrom Center for Real Estate Studies suggests that the underlying strength of Florida real estate remains.Cap rates, for example -- a measure of the expected rate of return on a property -- have "remained remarkably undisturbed by current real estate problems," the third quarter "Survey of Emerging Market Conditions" said.

If there is growing apprehension about the real estate market, capitalization rates should increase in response to lenders' rising fears about perceived risk, said Wayne R. Archer, the Bergstrom Center's director, in a statement. But Archer acknowledged that a lot has happened since the center did its third quarter work in July." There's a growing feeling of apprehension or caution, but the results from our survey remind us that the underlying markets for real estate in Florida are still in good shape," Archer said. " Owner residential is the only area of real estate markets where there are problems at this time."Apartments, retail, office, industrial and hospitality all remain stable and healthy," he added. click here for full article...

SURVEY CONCLUSIONS

Some key findings of the third quarter "Survey of Emerging Market Conditions" by the University of Florida's Bergstrom Center for Real Estate Studies:

• Cap rates, a fundamental indicator of perceived risk in value, have remained remarkably undisturbed by current real estate problems.
• Single-family development, while at a low level, continues to be regarded as stable by our expert respondents.
• Condominium markets continue to be regarded as in poor condition.
• Rental markets, including apartments, office, industrial and retail, continue to be regarded as basically stable and healthy.
• The overall outlook for real estate investment has declined somewhat, no doubt reflecting the sobered outlook for housing markets.
• The outlook for the survey respondents' own business continues to decline.
• Cap rates, a fundamental indicator of perceived risk in value, have remained remarkably undisturbed by current real estate problems.

Deborah's Podcast - The upper-end housing market

Premier Properties Realtor Deborah Beacham discusses trends in luxury real estate on the barrier islands with Herald Tribune real estate editor Harold Bubil.
Hear podcast here.

Introducing Toscana

3860 Casey Key
Enter into the grande interior courtyard and your eyes soar to Sarasota Bay, then upward to the 26-foot ceiling defined by an exquisite hand carved stone fireplace. The lines of sight draw your eyes through arches and doorways in a harmonious interplay of light and shadow. Step back into a different time and place when craftsmanship was the passionate pursuit of artisans working to create a unique style for the discerning Italian families who commissioned them.

See more of this magnificant estate here.

Florida’s housing market shows surprising resilience despite pessimism

GAINESVILLE, Fla. — Despite the bleak real estate outlook nationwide, Florida’s new home market appears for now to be stabilizing as a result of persistent demand for homes and lack of overbuilding, according to a University of Florida study released today.

“There’s a growing feeling of apprehension or caution, but the results from our survey remind us that the underlying markets for real estate in Florida are still in good shape,” said Wayne Archer, director of UF’s Bergstrom Center for Real Estate Studies. “Owner residential is the only area of real estate markets where there are problems at this time. Apartments, retail, office, industrial and hospitality all remain stable and healthy.”

The findings are from the center’s quarterly survey of Florida real estate trends that was completed in July.

New single-family home development is sluggish but considered stable by industry experts, while the condominium market continues to struggle, Archer said. However, overall the state is in better condition than the rest of the country, he said.

What sets Florida apart is its high growth rate, allowing quicker recovery from setbacks in the real estate market, Archer said. “If there is a problem with the housing market in Chicago, Indianapolis or Kansas City, people there may have to live with it for a long time because growth is relatively slow and it takes awhile for the problem to work itself out,” he said.

Another advantage Florida has is a rate of building that is moderate enough – with the exception of condos – to prevent large imbalances in supply and demand, he said.

The greatest fear right now is that subprime loans underlying many real estate securities will result in increasingly high defaults, foreclosures and losses for investors, Archer said. The crisis involving these unconventional loans has pervaded the entire financial system, causing declines in the stock market and generating fears about the kind of damage that might result in the future, he said.

“We have a liquidity crisis that is at the top of the news hour by hour and it’s very hard to conjecture how much impact this will have on the real estate picture in Florida,” he said.

The latest UF housing survey was conducted in July before the crisis had escalated. “If we could poll our respondents now, they might be quite a bit more apprehensive than they were two or three weeks ago,” he said.

Whatever happens to the single-family housing market in the future, the chances of homeowners defaulting on their mortgages are small, he said.

Archer, who has spent most of his professional career studying mortgages, said people underestimate the tenacity of homeowners to remain in their homes. “Even if a homeowner gets in trouble, it takes a severe disruption in their household or their life before they will abandon their mortgage and their home,” he said. “They will fight to keep that house. They’ll give up their car. They’ll take on four jobs. They’ll do whatever it takes.”

The same cannot be said, though, about people buying second homes or houses as speculative investments, he said.

Unlike second homes or condominiums, owner-occupied single family homes continue to be a good investment, Archer said. Although there has been a flattening in single-family housing prices, with prices in some markets likely to drop over the next year to adjust to a correction in the market, Archer said he does not foresee widespread declines.

“I think homeowners have not yet come to terms with the fact that the price increases we’ve seen in the last two or three years are not going to continue,” he said.

Condos, especially in certain cities, are in much bigger trouble, Archer said. By some estimates, there are as many as 40,000 condo units for sale in Miami and not even a fraction of those are needed, he said.

Unless there is some movement by foreign investors to buy these condos, the market is likely to be hurting for a long time, he said.

On a positive note, the survey shows remarkable stability in capitalization rates, the measure of how fast an investment pays off in net cash, Archer said. If there is growing apprehension about the real estate market, capitalization rates should increase in response to lenders’ rising fears about perceived risk, he said.