South Florida Real Estate, a 2007 Real Estate Recap

The upcoming forecast for local real estate markets holds generally good news – especially for the second half of 2008.

Here are the top South Florida real estate stories of 2007: Topping the list was the slowing real estate market, followed by concerns specific with Florida real estate, property taxes and property insurance along with troubles in the mortgage market and, finally, a proposed Hometown Democracy constitutional amendment that could go before voters in 2008.
Here are the issues that shaped Florida's real estate world in 2007 and a glimpse at what the New Year holds.

Home sales: They went from bad to worse; will they get better?

Home sales dwindled to an all time low in 2007 with some parts of the South Florida real estate market fairing better than others. This is one story set off by a multitude of causes: Real estate investors with too much money and not enough sense to forecast the future, mortgage brokers and other lending facilities too eager to give a homebuyer more money than he has capability to pay back, and homebuyers who were too eager to borrow than read the small print concerning the terms of their mortgage.

Florida with a handful of other states seemed to find itself at the center of this real estate slump. In the October monthly sales report from The Florida Association of Realtors reported in October that the year-over-year number of home sales fell 29% even though home prices had only declined by 8%.
To show you how out-of-control the real estate market was during the year 2007: At the present time, Florida home sales compare favorably to that of five years ago and the housing prices have actually risen more than any other state with exception to Hawaii.
The beginning of 2008 brings a generous inventory for buyers to choose from and the demand exists but many of these buyers fear the prices will drop a bit more choose to wait it out. While that view comes more from anxiety than actual fact, the market will change direction, slowly and stubbornly excluding any new housing-related crises such as the mortgage meltdown that peaked in August.

Property tax: When will we get relief?

The problem is that real estate property values skyrocketed and property taxes increased with them and most local governments spent it. Those homeowner’s protected by the Homesteaded act, Florida's Save Our Homes constitutional amendment, saw only minor increases. Even these trivial increases were viewed as unfair by non-homesteaded homeowner’s who picked up the slack. Commercial real estate property owners and owner’s of non-homesteaded properties balked and demanded property tax cuts.

There are several possible solutions:

• To be voted on in January, a constitutional amendment approving property tax portability.
• A citizen’s amendment being promoted by House Speaker Marco Rubio.
• An amendment that will be created by Florida's Taxation and Budget Reform Commission.
• New laws created by the 2008 Florida Legislature that expand the property tax reform laws passed during a June 2007 special session.
• The result of a court case involving a property tax reduction plan approved at that same June session.

Perhaps 2008 will bring all of the changes listed above, or none at all.

Property insurance: Slowly improving.

In the first part of 2007,  at the top of FAR's list of real estate stories was property insurance. Things have been improving slightly  since then and in January, a session of the Florida Legislature increased the state's reinsurance fund which lowered the risk for insurers. These savings were less than promised, so the state toughened up  when insurers requested rate adjustments. Florida property owners now have a few more affordable choices thanks to the Property Insurance Corporation, the state's insurer, who froze rates and expanded coverage.

The state of Florida has experienced two years without a hurricane hitting land and fingers are crossed that the future brings South Florida the same luck.  Even though they enjoyed highly profitable years, another blow will again send insurers packing.

Mortgage meltdown.

Mortgage lenders thought their risk was limited due to rising home values. It was ok if a homeowner put no money down because if he lost the home to foreclosure, banks recoup their investment and possibly more if the home went up in value. However the lenders' risk increased when home prices started to decline, even on mortgages issued under the old rules.

During the height of the seller's market, mortgage lending was out of control. Now that the dust has settled and we can see clearly, here's what's left heading into 2008:

• Tightened lending standards:  In August industry experts were caught by surprise by the peaked subprime mortgage meltdown . Lenders raised their credit standards and Mortgages became harder to get. However, borrowers that are credit-worthy should see a brighter 2008.

• Financial bankruptcies: Homeowners aren't the only ones to face bankruptcy; there’s a list of lenders that are in trouble as well: Cutting back their mortgage businesses significantly was Washington Mutual and Countrywide; H&R Block backed out; Citigroup reported numerous troubles; and the list goes on.

• FHA resurgence: Because subprime mortgages are so hard to come by these days, the federal government plans to expand mortgage programs under the FHA, and bills to do so are already working their way through Congress.

The Hometown Democracy. Undemocratic?

The Florida Hometown Democracy Amendment is “…a proposed constitutional amendment that would take responsibility for planning away from local planners and elected officials and require the voters to decide on every comprehensive plan amendment.”  This amendment would force the citizens of Florida citizens to make decisions on complicated land-use planning issues.

Contributed by MLR Realty