Articles

Buying Can Beat Renting in Less Than a Year, Report States - 5/5/14 - By: Paul Owers, Sun-Sentinel

In the rent vs. buy debate, Kelly Foley wonders what there’s even to discuss. When the database analyst moved to South Florida from Michigan with her husband, John, they rented a two-bedroom house in Oakland Park for $1,650 a month. In March, they paid $190,000 for a three-bedroom home with a pool in Delray Beach — a bigger place that even came with a cheaper mortgage payment of just $1,430. “Oh, definitely, we really got a lot more bang for our buck,” Kelly Foley said. “We’ve got so much more, and now we own it.” As rental rates and home values escalate, buying is becoming a better option sooner for many South Floridians, according to a first-quarter report from Zillow.com. In Palm Beach County, buying a home is cheaper than renting it after an average of 1.3 years, the website said. In Broward County, it’s 1.1 years. The “break-even” point is less than a year in some communities, including Lake Worth (six months), Greenacres (seven) and Lake Park (nine). Lauderhill (six), Tamarac (seven) and Coconut Creek (nine). Among the 35 largest metro areas nationwide tracked by Zillow, the tri-county South Florida region had the fourth-shortest break-even point at 1.2 years, after Riverside, Calif. (less than a year), Orlando (one year) and Tampa (1.1 years). Photos: Athletes making weird faces Homeowners have to stay put the longest in Washington, D.C. (4.2 years), Boston (four years) and Phoenix (3.3 years) before buying wins out over renting. Traditionally, owners have had to wait five to seven years before buying made sense. While real estate agents and analysts say consumers should still look at homeownership as a long-term investment, the Zillow data show some people planning to stay in an area for only a few years would be better off buying than renting. “Even if you’re not going to stay in it for very long, it will pay off,” said Jackie Smith, an agent for Balistreri Realty in South Florida. Smith’s client, Jay Davis, 58, rented a Lighthouse Point apartment for three years, paying $1,100 a month. But when he found a waterfront condo nearby for $165,000 — with a mortgage payment of $850 a month — the decision was made for him. “I can’t believe I own what I own for what I pay,” he said. “People are crazy if they don’t buy something right now.” Seattle-based Zillow said it factored in all possible costs for buying and renting (up-front payments, closing costs, estimated monthly rent, mortgage payments, insurance, taxes, utilities and maintenance costs). It then used historic and expected home value appreciation rates to determine how long it would take before buying becomes a better deal than renting. “If a home appreciates in value over time, you will capture that because you will have equity,” said Svenja Gudell, director of economic research for Zillow. “If rents increase over time, it just means your costs are going up.” Rents for apartments and single-family homes have steadily risen in recent years, mostly because of demand from former homeowners who can’t yet qualify for another mortgage. Palm Beach County’s average monthly rental rate for apartments is $1,313, up about 3 percent from $1,281 a year ago, according to Reinhold P. Wolff Economic Research in Oakland Park. The firm does not track rental rates for single-family homes and townhomes. Despite the higher rental rates, renting remains the more attractive option for many people because they don’t have the money saved for a down payment or they’re leery of buying only to see prices fall again. Others say home maintenance is too much of a burden or they want to remain mobile for job opportunities. “A lot of people say, ‘I can call someone if my toilet breaks, and buying can make all the sense in the world, but I’m willing to pay extra to rent,’ ” Gudell said. Powers@tribune.com, 561-243-6529 or Twitter @paulowers http://www.sun-sentinel.com/business/realestate/fl-zillow-buy-versus-rent-20140505,0,6895163.story

Be Ready to Buy Your First Home - 5/2/14 - By: Karen Cheney, CNNMoney

(Money Magazine) First-time home buyers have it tough. The supply of homes for sale is tight, and lenders are tightfisted. Student debt, at an all-time high of nearly $30,000 per grad, is getting in the way of saving for a down payment, says David Stevens, president and CEO of the Mortgage Bankers Association. But it’s a great time to get your foot in the door. How much cheaper buying is vs. renting nationwide 38% Average credit score for approved mortgage applicants 755 Percentage of borrowers opting for fixed-rate loans 92% SOURCES: Trulia.com; Realtor.org; HSH.com; Svenja Gudell, Zillow.com; David Stevens, president and CEO, Mortgage Bankers Association; Linda Descano, president and CEO, Women & Co.; Walter Molony, National Association of Realtors “Interest rates remain the envy of even your grandparents,” says Keith Gumbinger, vice president of mortgage publisher HSH.com. First, make your finances sparkle. THE TURNING-POINT CHECKLIST 12 months in advance Make sure the time is right. Use Trulia.com’s rent or buy calculator to see if you’d really come out ahead, based on loan rates, taxes, and where rents and prices are headed in your area. Nationwide it’s 38% cheaper buying vs. renting. Clean up your act. Devote this year to saving money and paying down debt. You’ll need at least 3.5% down for an FHA loan, or 10% to 20% for a conventional mortgage. Lenders also like to see job stability, so settle in for now. Learn what you like. When a home catches your eye — a listing, say, or a photo — pin it to a board on Pinterest. Or try Swipe, a new app from the site Doorsteps, which lets you browse listing photos and mark them pass or save. Six months out Look better to lenders. To boost your credit score, order your free credit reports at annualcreditreport.com and fix any mistakes. Pay bills on time, chip away at credit card balances, avoid new debt, and don’t close any accounts or apply for new credit. The average credit score for approved mortgage applicants is 755. Related: Budgeting for a new home, and a disability Figure out what you can buy. Use an online calculator like the one at Zillow.com to estimate how much house you can afford based on your income, savings, and debts. That’ll help you research homes and drill down on costs. Forecast future bills. With an idea of how big a house you can buy, you can do a more detailed budget. Scan listings for property taxes on homes you like. Get a homeowners insurance quote at Insweb.com. Call local utility companies for the typical bills. And tack on 1% of the home’s value for yearly maintenance. Three months out Pick your loan. Fixed mortgage rates, now 4.4%, may edge up to 5% this year, forecasts HSH.com. If you are confident this is a starter home, you can save with a 7/1 adjustable-rate loan, now 3.5%. The risk: You end up staying longer than seven years and rates rise sharply. Most — 92% of mortgage borrowers — opt for fixed-rate loans. Related: Baby on the way? Time to make a budget Prove you’re a serious shopper. Based on your income and credit, a bank will give you a mortgage pre-approval. “It’s the No. 1 thing you want in your back pocket when you go shopping,” says Svenja Gudell, an economist with Zillow. Even better in a hot market: Pay a few hundred to go through underwriting upfront. Find a guide. Look for a realtor who has worked in the neighborhood where you hope to live. And in a tight market like today’s, ask candidates what their strategies are for unearthing listings and handling potential bidding wars. Send a letter to the editor about this story to money_letters@moneymail.com.http://money.cnn.com/2014/05/01/real_estate/first-time-home-buyers.moneymag/index.html

New Homebuyers Getting Priced Out in Cities Across U.S. - 4/4/14 - By: Les Christie, CNNMoney

In big cities across the country, home buyers are growing increasingly frustrated as rising home prices and stiff competition shut them out of the market. In cities like Las Vegas, San Francisco, San Diego, prices have climbed by as much as 20% or more in the past year, well above the national average of 13%, according to Case Shiller. Plus mortgage rates are up by nearly a point to 4.3%, so borrowers today are paying 25% more than they would have a year ago. Related: ‘I’ve been priced out of my housing market’ Even those who have no problem affording a home on their own are having a hard time closing the deal. Helen Cittadino bid $600,000 in cash on an 890 square-foot two-bedroom condo in Palo Alto, Calif. — a $20,000 premium to the seller’s $580,000 listing price. And she was still outmatched by a higher all-cash offer. “What’s crazy is how many people here are capable of putting in all-cash offers,” said Cittadino. Nationwide, about 35% of all offers were in cash in February, a nearly 30% increase from a year earlier, according to RealtyTrac. Related: Buy vs. rent: What you’ll pay in 10 biggest cities In the Bay Area, the cash is coming from deep-pocketed tech workers. In New York, Wall Street workers, flush with bonus checks, and foreign buyers looking to park assets, are paying with cash. Meanwhile, South Americans have been buying up real estate in South Florida as a safe haven for their money. In February, more than 71% of sales in the Miami area were all-cash deals. Zillow CEO: Hottest housing markets Zillow CEO: Hottest housing markets All of these cash buyers are picking up what little housing there is available in these hot markets. New home construction is still well below normal levels, which has kept inventory tight. Making matters worse: many prospective sellers are waiting to put their homes on the market for fear they won’t be able to buy a home to move into. Related: Cost of living — how far will my salary go in another city? As housing becomes more expensive some worrisome trends that occurred during the bubble years are re-emerging, said Stan Humphries, chief economist for Zillow. These include a greater reliance on non-traditional financing, like low-downpayment loans and adjustable-rate mortgages, and a greater pressure to move further away from urban job centers in order to find affordable housing. Jeff Cuthbertson and his wife have bid on more than a dozen homes in Austin, Texas over the past several years and have been outbid on every one. “We have been priced out of the market — literally,” he said. “Now we are planning a move, probably to North Carolina or Tennessee.” http://money.cnn.com/2014/04/03/real_estate/priced-out-homebuyers/index.html

Florida Renters Finding a Tough Market - 4/1/14 - By: John Salman, Herald-Tribune

It’s an expensive time to be a renter in Southwest Florida, and that reality doesn’t appear as if it will change any time soon. The cost to rent an apartment in Sarasota and Manatee counties is rising at more than double the national average, with Southwest Florida boasting one of the highest occupancy rates in the U.S. during February, new figures show. Although the rental market has softened some from a peak last year, a lack of units for lease and strong demand for those available are expected to further boost the cost of monthly rent for at least another two years. “Our phones are ringing off the hook, and we’re renting everything we have out there,” said Scott Corbridge, broker at Sarasota Management & Leasing. “It’s a great time to be a landlord.” The local gains are consistent with surging rental markets across the country, especially in California and Florida, where job markets are rebounding but the ability to buy a home is still out of reach for many. Apartment occupancy in the North Port-Bradenton-Sarasota metropolitan statistical area dipped to 96.33 percent in February, down only slightly the same time last year, according to data from industry researcher Axiometrics Inc. The region’s occupancy remains more than two percentage points above the U.S. average, ranking Southwest Florida among the most competitive rental markets in the nation. “Our vacancy rate is less than 2 percent now — it’s just been very strong,” said Andrew Harrington, broker of Oak Leaf Property Management in Manatee County. “The stuff that’s available moves quick, which means we can charge higher prices. Our investor owners are very happy right now.” Industry analysts attribute the recent moderation in occupancy rates to institutional investors, who have saturated the market with single-family rentals that in many cases had been vacant because of foreclosures. But new mortgage regulations expected to make it more difficult for first-time homebuyers to get loans could offset more inventory with greater demand. Rents already are climbing. The monthly rent on a year-long lease in the Sarasota-Bradenton area has jumped 5.22 percent over the year, to reach an average of $1,002 in February. But that growth also is down slightly from the 6.85 percent rent increases during the same period in 2013. Even so, the region remains one of just 21 markets nationwide where residential rents are appreciating by more than 5 percent each year. Naples led the country with annual effective rent growth of 13 percent in February, followed by Odessa at 11.5 percent; Santa Rosa, Calif., at 9.4 percent; Oakland, Calif., at 8.6 percent; and San Francisco at 8 percent. By comparison, the national average was 2.8 percent. As the cost to buy homes also rises, amid relatively stagnant wages, there have been growing questions about whether housing costs are rising out of reach. “Affordability could be an issue with so many high-priced units coming to the market,” said Jay Denton, vice president of research for Axiometrics. “The next few quarters will be telling.” The sustained increases in rents come as a result of basic supply and demand. In the immediate aftermath of the financial meltdown, the supply of apartments here and elsewhere dwindled. Many of the area’s larger complexes were converted to condos during the real estate boom and a lack of financing for development froze new apartment construction throughout the Great Recession. Meanwhile, demand from renters spiked as many homeowners were evicted because of foreclosures. The volatility of the housing market — and the inability to secure necessary credit — also kept many young Americans from buying. That rental supply is now making a slow comeback, with 932 new units expected to be made available this year, and another 576 units planned in Sarasota-Bradenton for 2015, Axiometrics reported. That “identified supply” measures projects already under construction. More developments could break ground during the next 18 to 24 months, pushing that estimate higher. But added inventory may not help to reduce rental prices all that much. That is because this new supply is slated for urban cores and in the form of Class A properties, which tend to be more expensive and luxurious than typical apartments, the Axiometrics research shows. In Southwest Florida, recent apartment development has migrated to Lakewood Ranch, the master-planned community that straddles Sarasota and Manatee counties. There, a Winter Park developer is adding 256 units to its existing Lost Creek Apartments, and a subsidiary of Atlanta-based Davis Development plans to build a 280-unit apartment complex at Pope Road near State Road 70. “We have always known we needed more apartments on the ranch, and we’re working on that now,” said Jimmy Stewart, vice president of sales for LWR Communities, an affiliate of Lakewood Ranch master developer Schroeder-Manatee Ranch. Customers have been across the board, Stewart said: “Students, people who are rebuilding credit, and a generation that doesn’t even know if they want to own a home.” http://www.heraldtribune.com/article/20140401/ARTICLE/140409994/2416/NEWS?p=all&tc=pgall

Miami Takes Top Score in Latest Case-Shiller Real Estate Report - 1/28/14 - By: Doug Hanks, Miami Herald

Home values in South Florida showed no weakness in November, soaring 17 percent compared to the prior year, according to the latest Case-Shiller numbers. The closely watched real estate index gave the greater Miami market the largest November increase of any of the 20 metropolitan markets it tracks. Between October and November, the Miami index increased .7 percent, the 23rd straight month of rising values. Taking a 12-month view, the Miami index grew the fastest since June 2006. With values soaring, industry analysts expect price increases to moderate in 2014. The S&P/Case-Shiller index reports on conditions from several months earlier, so it is considered a lagging indicator. The latest numbers offer more evidence of the real estate market’s quicker pace in 2013. In November 2012, the Case-Shiller Miami index, which includes Broward and Palm Beach, was up 10 percent from the prior year. The Miami Herald’s Economic Time Machine seeks to give the long view on the latest financial numbers for South Florida. Visit miamiherald.com/economic-time-machine for analysis of the numbers that drive the local economy. Our ETM index tracks more than 40 local indicators to measure where the economy has “landed” post-bust when compared to earlier economic conditions. The latest reading: July 2004. http://www.miamiherald.com/2014/01/28/3897985/miami-takes-top-score-in-latest.html#storylink=cpy