Friday, June 26, 2009

Florida Home Sales Increase for 9th Straight Month

ORLANDO, FL (June 23, 2009) – Florida’s existing home sales rose in May – the ninth month in a row that sales activity increased in the year-to-year comparison, according to the latest housing data released by the Florida Association of Realtors (FAR). Statewide sales showed gains over the previous month’s sales level in both the existing home and existing condominium markets. Also, for the first time in many months, the statewide median sales price in May for existing homes and for existing condos ($144,400) rose over the previous month’s figure ($138,500) by 4.26%.

Existing home sales rose 16% last month with a total of 13,921 homes sold statewide compared to 12,044 homes sold in May 2008, according to FAR (see chart above). Statewide existing home sales in May increased 6.2% over April’s statewide activity.

Florida’s median sales price for existing homes last month was $144,400; a year ago, it was $203,800 for a 29% decrease. However, the statewide existing home median price in May ($144,400) was higher than the statewide median price reported in each of the previous four months ($139,500 in Jan., $141,900 in Feb., $141,300 in Mar. and $138,500 in Apr.).

MP: Just like in California, we now have both rising home sales (units) and rising median home prices in Florida for May, suggesting that both markets have probably bottomed and are now in the early states of recovery.

5 Comments:

At 6/26/2009 1:30 PM, Anonymous Junkyard_hawg1985 said...

The sales increase in Florida and California are goood signs; however, I will urge caution with the median price data. Median home price data is not seasonally adjusted even though there is a seasonal effect. Here is the Feb-May national median home price data for 2007, 2008 & 2009:

Feb 07: $212,800
Mar 07: $217,400
Apr 07: $220,900
May 07: $222,700

Feb 08: $195,600
Mar 08: $200,100
Apr 08: $202,300
May 08: $208,600

Mar 09: $169,900
Apr 09: $166,600
May 09: $173,000

The March-May increase in 2009 (+1.8%) is worse than 2008 (+4.2%) and 2007 (+2.4%). One thing that does make 2009 more hopeful is that inventories are falling.

Part of the reason I know there is a seasonal trend is that I thought we had hit bottom in 2008 on very similar data:

http://www1.investorvillage.com/smbd.asp?mb=3041&mn=433&pt=msg&mid=5065056

A 15% drop later, I'll have to admit that I really missed that call.

 
At 6/26/2009 3:07 PM, Blogger Expected Returns said...

I think it's a little early to be calling bottoms in those markets. Nothing goes down in a straight line, and median home sales price is an imperfect measure.

The reality is that Option ARMS are about to reset en masse, unemployment continues to deteriorate, and mortgage rates are spiking. I think we're years away from a bottom

 
At 6/26/2009 4:43 PM, Anonymous Anonymous said...

Mortgage rates are spiking? At 5.75%? Wow! How quickly we became accustomed to those sub-5% rates...for the short time they were available.

I've said it before and I'll say it again...the ARM resets will be a GOOD thing. LIBOR is now lower than it was when the ARMs were taken out a few years ago. People are and will be resetting at a lower rate.

 
At 6/26/2009 5:45 PM, Anonymous Anonymous said...

I've said it before and I'll say it again...the ARM resets will be a GOOD thing.

You said it again and you're wrong again:

Option ARMs in Wikipedia

Sophisticated borrowers will carefully manage the level of negative amortization that they allow to accrue.

In this way, a borrower can control the main risk of an Option ARM, which is "payment shock", when the negative amortization and other features of this product can trigger substantial payment increases in short periods of time.

For example, the minimum payment on an Option ARM can jump dramatically if its unpaid principal balance hits the maximum limit on negative amortization (typically 110% to 125% of the original loan amount). If that happens, the next minimum monthly payment will be at a level that would fully amortize the ARM over its remaining term. In addition, Option ARMs typically have automatic "recast" dates (often every fifth year) when the payment is adjusted to get the ARM back on pace to amortize the ARM in full over its remaining term.

Any loan that is allowed to generate negative amortization means that the borrower is reducing his equity in his home, which increases the chance that he won't be able to sell it for enough to repay the loan. Declining property values would exacerbate this risk.

Option ARMs Explained

The most important distinction in an option arm is the difference between RATE and PAYMENT RATE. Unscrupulous lenders have latched on to the option arm as a way to advertise "rates as low as 1%." The truth is, mortgage lenders don't lend money at 1% or anywhere close to it. Those low advertised rates are actually "payment rates."

The fourth option is what all the fuss is about. The fourth option is usually LOWER THAN INTEREST ONLY. That interest doesn't magically disappear. It must be accounted for. Therefore, it is added back onto the balance (or principle) of the loan. This is known as negative amortization.

The amount that is added back onto the principle is exactly equal to the interest only payment minus minimum payment. In equation form

Interest Only Payment - Minimum Payment = amount added back to principle.

Mortgage Professor

What’s Are the Risks of an Option ARM?

For those electing the minimum payment option, the major risk is "payment shock" – a sudden and sharp increase in the payment for which they are not prepared.

The rule that the minimum payment can rise by no more than 7.5% a year has two exceptions. The first is that every 5 or 10 years the payment must be "recast" to become fully-amortizing. It is raised to the amount that will pay off the loan within the remaining term at the then current interest rate – regardless of how large an increase in payment is required.

The second exception is that the loan balance cannot exceed a negative amortization maximum, which can range from 110% to 125% of the original loan balance. If the balance hits the negative amortization maximum, which can happen before 5 years have elapsed if interest rates have gone up, the payment is immediately raised to the fully amortizing level.

Either the recast provision or the negative amortization cap can result in serious payment shock.

----

Now shut up, once and for all, about lower interest rates being the deus ex machina for Option ARMS!

 
At 6/29/2009 12:38 PM, Anonymous Cheech (in) Marin said...

More salt to pour onto the wound:

Option ARMs reset threatens housing rebound

 

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