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Commercial Real Estate: Vacancy Rates Expected to Decline
According to NAR an improvement in the economy, coupled with an increase of liquidity in Commercial Mortgage Backed Securities, is projected to decrease current vacancy rates across the commercial sectors.
Although these are positive indications that the commercial sector didn’t fall as far or for as long as the residential market, it is still a buyer’s market where cash is king.
Miami Real Estate: High Affordability + Low Prices = Buy
An article in today’s Wall Street Journal uses Miami as one example as to why 2011 may be the year to buy.
- Affordability, which looks at how many months of income an average family would take to pay for a home, is at the lowest level in 35 years
- Pricing is believed to be at or close to bottom
- Investors are getting back in the market
The article does a good job of differentiating between buying a home and investing in real estate. In terms of buying a home, Michael Larson, a real-estate analyst in Florida, is quoted, “Pricing is down so much in some markets that when you analyze renting versus owning it makes much more sense to own”.
If you are planning to buy for investment, the article returns to the old adage of “buy and hold”. They recommend at least a 10-year hold plan for investment real estate or suggest investing in funds that have real estate in the mix if you want to make real estate a part of your portfolio.
Remember to see what the numbers are in the area you are planning to purchase. While the affordability index was high in most areas, it is low in Washington D.C.
Mortgage Interest Deductions: Should They Be Eliminated?
Since before I owned or started selling real estate, the mortgage interest deduction has existed and been one of the main benefits espoused for buying a home. In addition to building up equity, it has been argued that this is one of the deductions that is helpful for lowering taxes due, especially for individuals and couples with few other tax deductions.
The mortgage interest deduction was one of the items recommended be trimmed, to help control the national debt, by President Obama’s deficit-reduction commission last December. The panel addressed the interest deduction for first and second mortgages and equity lines of credit. Other real estate targets included in the were tax write-offs for property taxes paid and the capital gains exclusions ($250,000 and $500,000) for individual and married taxpayers who make a profit when they sell their residence.
As a homeowner, Realtor, and real estate investor, I want to keep all of these deductions. However, there are some I would be willing to live without in exchange for decreasing the national debt. I would be willing to forgo the mortgage interest on second homes and on equity lines of credit to keep the deduction on primary home interest, capital gains exclusion and property tax write off? What do you think? Are there any you would be willing to give up? If so, which ones?
How Rising Mortgage Rates Affect Your Buying Power
This table from the KCM post “The Cost of Waiting for Prices to Fall” is a great visual to update my post from yesterday regarding mortgage rates hitting the 5% mark
Mortgage Rates Hit 5%
Mortgage rates are inching up, currently hovering around 5%. According to a CNNmoney.com report, interest rates at 5% don’t affect home buyers. While 5% is still low, and would only add slightly to a monthly mortgage, a continued increase in rates will affect the amount of home a buyer can purchase.
Other posts that discuss mortgage rates include:
Mortgage Rates – How An Increase In Rates Affects Your Purchasing Power
Fannie Mae and Freddie Mac Increasing Interest Rates and Fees
The Difference between Cost vs. Price
Coconut Grove, FL Real Estate – Market Summary
Market information from the Multiple Listing Service for single family homes for the month of January are as follows:
- Closed sales: 8. None were short sales, 7 were REOs. 5 were cash sales.
- Price range of closed sales: $565,000 – $48,000
- Pending sales: 12. 2 short sales, 1 REO
- Price range of pending sales: $2.39 million – $57,900
- Active listings: 176. 18 short sales, 5 REOs
- Price range of active listings: $16.9 million – $49,900 (no, I didn’t forget a zero!)
Distressed sales made up less of the sales going to contract in January, but made up the majority of closed sales. the actual closings for the month are of regular sales. Based on the number of active listings, distressed sales make up 13% of the market.
What does this mean if you are a buyer? Based on the number of active listings to closed sales, there is still a lot of inventory to work through, so it is still a buyers market. Once you narrow down your price range and specifications however, there won’t be as much to choose from, so use the statistics and market information to negotiate your price. If the house you like is a regular sale and it is priced right, you won’t have as much room to negotiate as you will on one that is overpriced. Cash was king in the distressed sales for January, so if you are going in with financing, make sure you have a very tight offer, including your pre-approval letter for a mortgage, a realistic deposit, and good timing for inspections and other due diligence.
What does this mean if you are a seller? You have a lot of competition so price really does matter, especially in the higher price ranges (84 of the current active listings are over $1,000,000, but the highest closed sale for January was under $600,000). Look at the active sales that most closely match your home in terms of size, location, updates, lot size, amenities. Consider pricing it 10-15% below your closest competition, make sure it has great curb appeal, and de-clutter and freshen up the inside with some elbow grease and a fresh coat of neutral paint. The good news is that if your house is priced right compared to your competition, it will sell.
Fannie Mae and Freddie Mac Increasing Interest Rates and Fees
Starting in March 1 for Freddie Mac and April 1 for Fannie Mae interest rates for loans over 15 years could almost double, even if you have perfect credit.
Remember, if you are a buyer the cost of owning a home is more important than the price of the home. Obviously you don’t want to overpay for a home, but by waiting for prices to “bottom out” you may be overlooking the most important part of purchasing a property or home – interest rates. Trying to time the real estate market perfectly is like trying to time the stock market.
You Have Heard It But Do You Believe It
Miami Real Estate – If You Are Looking To Invest, Miami Is Top Choice
According to Mark Vitner, an economist for Wells Fargo, Miami is his top choice of a market poised for economic growth. How can that be? We have one of the highest unemployment, foreclosure and number of underwater homes in the country. However, Vitner stated that Miami is currently posting some of the highest taxable sales and number of jobs created in the state.
Miami has always been blessed with gorgeous weather, colorful landscapes, tourquoise waters, and beautiful beaches. One of the main reasons our economy has been chugging along better than most is due to our popularity with tourists, especially international ones, who have helped both our tourism and retail industries.
5601 Collins Avenue #810, Miami Beach, FL
According to AccuWeather.com, it was 29 degrees in New York and Boston yesterday, and 74 degrees on Miami Beach. This is the view from every room in this beautiful one bedroom apartment, smack dab on the beach. Instead of shoveling snow, you could be frolicking in the surf, playing volleyball or taking a leisurely stroll down the beach.
Wish you were here?
Miami Real Estate – Condo Inventory Continues to Shrink
According to Condovultures.com, only 16% of the 22,231 condo units built in Greater Downtown Miami during the latest boom are still available for sale. If you continue to wait for prices to drop further, you will probably find you missed the boat. That doesn’t mean prices are going to appreciated rapidly, or at all, in the next year or two. We still have short sales, older construction, and regular owner foreclosures (vs developer foreclosures) to work our way through.
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