David's Orlando Real Estate Blog

David Welch's Orlando Real Estate Blog Featured on Realtor.com

2008-10-10T09:16:44Z

My Orlando Real Estate Blog, www.RealEstateOptimist.com is the featured blog on Realtor.com for my post on October 8th about the Fed. You can check out what I said by by going to www.Talk.Realtor.com. Just look on the left side under October 8th, and click on the link to my post. This is the second time I have been featured on Realtor.com's blog site. I have to say that I have already had a number of comments on this post on my ActiveRain blog site. You can see what other had to say by going to www.ActiveRain.com/RealEstateOptimist.

Speaking of rates, it is curious to me that the LIBOR is staying so high after all the central banks cut their rate to the banks. Could the banks be keeping it artificially high for all those borrowers with adjustable rate mortgages based on the LIBOR? Believe me, I am no conspiracy theorist, but it is suspicious that the LIBOR has not come down. Keep in mind, even with all the foreclosures and short sales, the vast majority of borrowers are still making their payments. If something does not happen with the LIBOR soon, I would be concerned about why it is really still so high.

www.DavidWelch.com, Orlando Real Estate Blog

Orlando Real Estate Statistics 10/10/2008

2008-10-10T07:15:01Z

The official numbers came out yesterday, a day early, and I think there may be a mistake on the median price. I will be contacting the association as soon as I can to get some clarification on it. I have been reporting sales of 1,329, and the official number was 1,335. That is easily explained by exactly when the number is pulled from the data. I have also reported a median sales price in the mid $180's. Originally, I found a median of $185,000, but I repulled the numbers the next day, and it had dropped to $182,900. The association is reporting a median of $210,000. The official numbers and mine are rarely off by much, so I am really questioning the official result on this. I would love to say that prices are starting back up, but it is the lower prices that have lead to the increase in sales. In fact, sales this September were 37% better than September 2007. That is something to get excited about.

I am sticking by my numbers until I get to the bottom of the official numbers. By the way the median list price of the current pending contracts is around $188,000. At these prices homes are selling much closer to their asking price, so I suspect October's median to again be in the low to mid $180's. Check back to read what I find out about the price situation.

www.DavidWelch.com, Orlando Real Estate Blog

Fed Rate Cut 10/08/08

2008-10-08T07:35:57Z

I just blogged yesterday that I thought the Fed might drop the rate half a basis point, and I read in the paper (online of course) today they did just that. They may cut it again at their next scheduled meeting. Just in case you are a buyer and think that this means mortgage rate dropped half a point too, they did not. The Fed rates are short term rates that are charged to banks that are literally borrowing overnight to make sure they have adequate balances for reserves. Mortgages are tied to long term money rates. The Fed rate has an effect on mortgages in the long run, because they have an impact on banks liquidity or access to funds.

In the near term, this could actually have the effect of raising interest rates on mortgages, since this move underscores the Fed's negative view of the economy. If the Fed is concerned about the economic situation, then banks are too. That concern equates to more risk, and therefore higher rates of default on loans. If loans are riskier, the banks will require higher returns which means higher rates. If this action begins to stimulate the economy, and the financial picture starts to look better, then rates will come back down.

www.DavidWelch.com, Orlando Real Estate Blog

Global Rate Drop?

2008-10-07T07:13:11Z

With the stock market meltdown yesterday, and the Fed meeting today, look for a rate cut. Other central banks around the world, I expect will also be cutting rates to stem the tide of sentiment that the economy is shrinking. I say a headline yesterday that said that a majority of people surveyed expect us to head into a depression. The difference between a recession and a depression you ask? In a recession you lose your job, in a depression I lose mine. Hopefully, the central banks around the world will be able to put together their own bailout plans and cut rates sufficiently to put some confidence back in the market place.

I still firmly believe that if we had elected officials with the backbone to say that things will get better, it would go along way toward turning the sentiment around. You see 94% of people still have jobs and earn the same amount of money that they were earning last year for the most part. They are just afraid to do anything with it. There are probably a third of them that do not own a home, and they are not taking advantage of the greatest buyers market in decades, because they are concerned about where things are going. So, you see sentinment has a great deal to do with the success of all this. If everyone keeps waiting for someone to say its OK, then nobody will buy, and eventually the negativity becomes self-fulfilling.

www.DavidWelch.com, Orlando Real Estate Blog

European and Asian Markets

2008-10-06T12:00:03Z

The Dow is tanking today over global credit concerns. The EU failed to come up with their own financial bailout package, sending investors into a selling spree. If I read correctly, Asian markets were off 8.5% and the European markets were off about 8% in overnight trading. Keep in mind that if someone is selling there must be someone buying to effect the sale. It is very hard to predict when or where the bottom is until we are headed back up, so try to take the long term view on whatever investment you have. This is hard to do in today's immediate gratification oriented world. I wish I was sitting on a pile of cash, so I could take advantage of the deals in the real estate and financial markets.

When the Orlando real estate statistics are published for September look for the median home price to have fallen to $185,000. That is a 7.5% drop from August, with an increase in the number of closed sales of about 100 or 8%. Looking ahead at the pending sales, the median list price is around $188,000. As these properties close, look for the Orlando median price to drop to below $175,000. Investors should take a serious look at Orlando at these prices. I showed downtown condos this weekend that could return 10% on the rental income without factoring in any appreciation.

www.DavidWelch.com, Orlando Real Estate Blog

September Sale Surge

2008-10-04T08:33:12Z

As of this morning 1,322 closed sales were recorded for September, that is up from 1,225 in August. October is usually a better month, so hopefully buyers will not have trouble getting loans funded this month ahead of the effects of the bailout. I believe we could see over 1,400 closed sales in October which would be around the same number of sales we saw in June and July (our peak months). Although prices have come down considerably. I am noticing an increase in buyer activity. Personally, I will be out showing downtown Orlando condos, and homes all day today.

The condos downtown are an amazing bargain right now. They are literally half price from where they were last year. Many of the units I am showing today sold in the last two years for $130,000 to $150,000 and are now priced from about $60,000 to $90,000. The one bedrooms rent from around $800 to nearly $1,000 per month. If you pick one up for $72,000 and have a net rent after association dues and taxes of $600 that is a 10% pre-tax return. Assuming no appreciation, you are still doing better than most any investment I can think of right now.

www.DavidWelch.com, Orlando Real Estate Blog

Bailout Vote and Mary Poppins

2008-10-02T11:06:06Z

Just a spoon full of sugar helps the medicine go down. Remember that song from Mary Poppins? Well, that is apparently what it took to get the Senate to take their medicine on the bailout bill. Hopefully, the house will take up the issue today, and agree to take their medicine as well. I do not like this much government intervention in anything, but I do feel like something has to be done to stabilize the financial markets. Unfortunately, many are paralyzed by the uncertainty in all the markets. The housing market, mortgage market, financial market, and commodities market are each taking hits from the overall negative sentiment. Of course, this has caused an influx to the bond market, specifically the government bond market is seen as a bit of a safe haven.

The dollars have gotten huge in all of this, so look for potentially big swings in all of these markets if this gets passed. First, if the governement goes to the bond market to raise the capital for this infusion of cash, it will push long term borrowing rates up effecting mortgage rates. There will be cash available, but it may come at a higher cost than what it is right now. This could have a downward effect on inflation, and therefore push commodities down since they are often purchased as a hedge against inflation. With any luck, cheaper oil will encourage economic expansion. Home purchases should encourage economic expansion, and we could get back on track. However, until we get through the inventory of foreclosed houses, don't look for real estate price stabilization for at least a few quarters.

www.DavidWelch.com, Orlando Real Estate Blog

September 2008 Orlando Real Estate Statistics (So Far)

2008-09-30T12:49:54Z

I always like to remind everybody that these are not the official stats. When I report the official numbers, the title will indicate that they are official. So far there are 26,500 active listings in the tri-county area of Orange, Seminole and Osceola. I measure this number slightly differently than the official statistics that are reported, but the do reflect an increase in the inventory of available homes. There are currently 3,523 contracts pending which is slightly down but relatively close to what we have been seeing. Of the active listings 22.4% or 5,932 are properties listed in distress, such as pre-foreclosure, foreclosure or bank owned status. More than 41% or 1,467 of the pending contracts are distressed properties.

Of the 1,100 closed sales 335 are distressed representing 30% of the closed transactions. Speaking of the closed sales, the median asking price was $194,995 which I usually don't report. The median sales price, which is more relavent, fell 7.5% to $185,000. The average time on market for these closed sales was 111 days. Distressed properties are having a greater impact on our market each month. While the percentage of listings has not risen so much in the last six months or so, the percentage of closed sales has increased pretty dramatically. At the same time they have had an impact on prices which are off their highs in the $250's.

Earlier I said I would have something about reverse mortgages, so here it is. Last week at the Florida Association of Realtors conference, here in Orlando, I met a gentleman with MetLife. His name is Dennis Loxton, and he is the area manager for MetLife. He said that they are getting into reverse mortgages in a big way to offer an alternative form of financing. This is another creative way to get into a second/vacation/retirement home here in Florida. This could really help out those baby boomers who want to take advantage of the lower prices here in the sunshine state, but may not be ready to move just yet. It could be more difficult to get financing on the purchase than to take out a reverse mortgage on your existing home. Check with Dennis for details. Then contact David Welch, so he can help you find you a home here in Orlando.

www.DavidWelch.com, Orlando Real Estate Blog

Bailout Vote

2008-09-29T06:53:36Z

It looks like something is going to the floor of congress today, and we should all be praying that political gamesmanship was put aside. I guess we should find out today the specifics of the legislation. I believe in my last post, I wrote about the two possible strong case scenarios. The first would involve only the purchase of the financial instruments. This may be more expediant, but could have the banks dumping foreclosed homes. I think under this scenarios investors are the big winners. It sounds like there is a bit of this going on with the "guarantees" that are being placed on some of the investments. This saves some money initially, and may clear some of the foreclosures (and short sales?) out of the system. The other end of the spectrum would involve the goverment actually taking possession of the real assets. This could involve actually taking over the management and maintenance of these properties. This would be more costly up front, but could help stabilize prices, if the government holds these properties off the market for a period of time. It sounds like there may be some of this involved in the plan as well.

I think the best thing that can come out of this is some positive talk by our officials. I have said it before, and of course I will say it again, and again until somebody actually starts to listen. People want somebody to tell them it's going to be OK! Hopefully, this plan will give banks confidence to start loaning money again. By the way, the median price in Orlando looks like it is down to $185,000. That is a $15,000 drop from last month. Foreclosures and shorts are starting to get closed. Best of luck to everyone reading this today. Make it a great day.

www.DavidWelch.com, www.RealEstateOptimist.com

Bailout Thoughts

2008-09-23T15:43:37Z

Bailout always makes me think of when I was a kid watching the old cartoons where somebody was in a sinking boat. Remember the ones I'm talking about. Probably every cartoon character at some point was in a a little row boat that started to sink. They pulled out a pail and started to empty the water out of the boat. Of course, something always happened to keep it from working. The pail had a hole in it, or they emptied the water right back into a different part of the boat. While it was fun to watch the failure of those bailouts, the one our government is putting together now is far more serious. Our government cannot fail with this one or our whole economic ship could go under water.

In some ways we are just bailing the water back into the ship, because eventually we as a society have to pay for this. Hopefully, that payback will be easier to take over time. Right now, our legislators, the Fed, and the Treasury need to make sure of two very important factors: have a big enough pail, and move the water fast enough. Without knowing exactly what the plan is just yet, it is hard to guess what may come of this. What I do know is, government rarely gets exactly what they expected and rarely moves with great speed. The plan itself may be adopted quickly, but the implementation will undoubtedly take some time. There will be unintended consequences to whatever plan is adopted. The cost will be greater than anticipated.

First, the size of the pail should be based upon some fixed point in time. We cannot leave it open ended or the pail will grow unmanageable. What is being bailed out must be specific and measured to the point in time that is set. By doing this up front, hopefully we will get the right size plan to get the result we are looking for. Second, moving the water fast enough is probably harder to quantify. The extremes are: dump all the foreclosures, or take them all off the market until things get settled in the real estate market. If you dump them all, they will certainly cause more caos in real estate markets around the country. If you hold them off the market, the holding costs could be extraordinary. Washington is often known for knee-jerk reactions, but I do hope that this is not of them. If they take care in putting this together, we can right the ship until we can get into safer waters. We are already wet, but hopefully we won't have to abandon ship. I for one am optimistic.

www.RealEstateOptimist.com

Zillow Searches on My Website

2008-09-17T07:21:06Z

I added an additional feature to my website that allows you to perform a Zillow search. You can go to David Welch's Zillow Search, and check it out. Now you can get Zillow's Zestimate on any of the properties I have listed as well as any other property in their database. The information and values in Zillow make it easy to access public and some privately entered information about properties. For the true market value of a home, seek the advice of a professional Realtor in the area.

If you are a Realtor reading this entry, check out the different tools Zillow has available on their website. Some of the widgets they have can be useful tools to add value to your website. Several of the widgets are already applications on my site, but the Zillow search adds an additional feature I did not have. These tools also make for a great opportunity to cross market with Zillow too. This kind of cross marketing helps raise value of your website with links to and from Zillow's site. If you Google Orlando Real Estate or Winter Park Florida Real Estate, you will find that www.DavidWelch.com comes up in the first two pages thanks to blogging and cross marketing like this.

www.DavidWelch.com, Orlando Real Estate Blo g

The Fed

2008-09-16T10:25:03Z

The Fed primarily impacts short term interest rates. It does this a couple of ways. First, through open market operations the Fed can expand or contract the money supply by purchasing or selling treasury bonds on the open market. Yesterday, they infused $70 billion into the money supply. They do this regularly, and it typically does not get much press. By putting that much more cash out into the marketplace, liquidity is improved. The credit crunch, and the recent financial failures have banks holding onto higher reserves of cash. Another way the Fed can effect short term rates, that involves the money supply indirectly, is through the reserve requirements they set for banks. If banks have to hold more in reserve, then they have less to lend. If money is more scarce, interest rates go up. Of course the most direct way the Fed has of impacting short term rates is through the rate that they charge to loan money to banks. This is the most direct, and least often used method of impacting rates.

It will be interesting to see if the Fed acts today by lowering the rate again. Apparently, it is at least a topic of discussion. With oil coming down, and the effect of slightly lower energy costs on inflation, they may just lower the rate preemptively. Hopefully, this will get banks to loan more money in turn stimulating business investment. I have taken way too many economics courses, so I hope this was not too dry.

www.DavidWelch.com, Orlando Real Estate Blog

Orlando Real Estate Statistics for August 2008

2008-09-10T10:04:46Z

The numbers are in for August, and they are pretty much where I have been blogging they would be. There were 1,225 recorded sales with a median price of $200,000 that is off $8,000 from July. The inventory of homes for sale went up again slightly by 92 properties, but the average time on market came down a bit to 113 days. That is actually the fastest turnaround this year. Check my front page www.DavidWelch.com for a link to pull up the full report.

www.DavidWelch.com, Orlando Real Estate Blog

Using YouTube Video

2008-09-05T12:48:33Z

I have a couple moving down from New York, and they are purchasing a new condo that is under construction. I wanted to keep them up to date on the progress that was being made on their new home. Pictures are great, and thanks to the internet and digital photography, very easy to share with my out of state customers. I use YouTube videos to advertise my listings, so I thought, "why not use video to give them more perspective on the construction process?" I decided to take it a step further, but creating a page on my website www.DavidWelch.com dedicated to their condo being built. That way if they had difficulty with their e-mail, they could always refer back to the web page. Since they were referred to me by their daughter (she and her husband have been great customers of mine for years), she could also check out the web page and see how things were going.

Over the years I have worked with a lot of people moving here from out of state, and many times they have been in this exact same position. Now thanks to video and the ease of sharing it with YouTube and similar technologies, I can really keep my customers in the loop. If you would like to take a look at the page just check out www.DavidWelch.com/BaldwinParkCondo

www.RealEstateOptimist.com

Majority of buyers are not investors...

2008-09-03T08:53:53Z

...at least not in the Sunshine State. A recent study conducted by the Florida Association of Realtors shows that an overwhelming majority (98% of those surveyed). This confirms what I have been seeing personally, and hearing from other agents that I know. The investors are the missing component of our market here in Orlando. In the past, investors and second home buyers have made up a considerable percentage of our market. What we are seeing right now as far as the volume of sales represents the base buyer which is people actually looking for a permanent residence. Another interesting finding is that a fairly large number of those buyers are first time buyers (about 15%).

The most important thing in the study to me is where these buyers said they found their agent. A huge 73% found their agent on-line. We have heard for years that about 80% of people start their home search on line, but now it is becoming a much larger factor in how people select their agent as well. About 11% found their agent from a for sale sign, 9% from a mail out or other advertising, and 6% from a referral or personal source. I can tell you that 50% of my customers last year came from the internet and 50% were either past customers, personal referrals or people I know. By the way as of yesterday there have been 1159 recorded sales in the MLS for August. The median price for those sales was down $7,000 to $200,500.

www.DavidWelch.com, www.RealEstateOptimist.com

Time is Running Out on Seller Funded Down Payment Assistance

2008-08-29T15:55:31Z

The mortgage bailout law recently enacted, starts effecting the market place today. While there were a number of incentives in the law, there were a couple of items that make getting an FHA loan a little harder for cash strapped buyers. They are somewhat related, because they both impact the amount of money buyers need to come to closing. The increase in the required downpayment from 3% to 3.5% is pretty straightforward. This does not seem like much of a change, but in conjunction with the elimination of seller funder down payment assistance it can really impact a number of buyers.

In the past, sellers could pick up the buyers down payment by going through a third party not for profit. The two biggest players in this were Nehemiah and Ameridreams. The seller makes a contribution to one of the programs, and they in turn give a gift equal to the seller contribution to the buyer for their down payment. The programs make money off of a handling fee they charge the seller to facilitate the exchange. The new law makes this type of program illegal. So, for those buyers who would normally be relying on the seller to help with the down payment, home ownership may be delayed until they save the 3.5% required. Other buyers are borrowing from their 401K or IRA's to make the down payment, with the plan to replace it when they receive the tax credit in the spring.

This seller funded down payment assistance is good until the end of September, but many if not most lenders are not allowing it after today. Why? Because there is such a demand for this, with the September 30th deadline looming, they are afraid they will not be able to close in time.

www.DavidWelch.com, www.RealEstateOptimist.com

Sales up Higher than Expected

2008-08-25T09:50:28Z

NAR announced July sales, which were up 3.1% compared to June. Economists had only expected a 1.6% increase. The pace set in July is still 13% off last year, and prices are also down by 7.1%. Right now what we have going on is all about supply and demand. Supply is still high, and sellers that really need to sell are dropping their prices to move their properties. The demand curve itself is not necessarily moving upward, but prices have come down to meet the demand that exists. That price point is where we seem to be approaching in markets around the country. We have been seeing a rising trend in sales here in Orlando since the beginning of the year. July was slightly off June, but that is actually typical in our market. One more set of numbers that I found interesting in the report today is the median price of $212,000. The median here in Orlando last month was $207,500, so once again Orlando is a relative bargain compared to the national median price. I believe the August median will probably be down a little more here as bank owned properties and short sales begin to have a greater impact on our market.

www.DavidWelch.com, www.RealEstateOptimist.com

Orlando Quality of Life

2008-08-22T15:10:15Z

Read the discussion sections in the media in Orlando, and you would think nothing is going right. You will find a ton of negativity about everything, and all I can say to these people is look around you. Orlando enjoys a quality of life that most people around the world cannot even comprehend. I heard a statistic that 95% of Americans will visit Orlando in their lifetime. People dream of coming here to spend a week or two. We get to live here.

I consider myself pretty lucky to be a lifetime resident of Central Florida. It has been a bit soggy around here thanks to Fay, but it beats shoveling snow. Here are just a couple of positive items in the news today. You can find them at www.OrlandoSentinel.com right on the front page. First, both of the major hospital systems here in town Orlando Health and Florida Hospital have been given permission to begin heart transplant programs. This makes Orlando the only city in the state to have two such programs. US News and World Report again ranked Winter Park's Rollins College #1 in the South for "masters universities". US News also ranked UCF #7 among up and coming universities. UCF is currently the sixth largest university in the country, and is opening a new medical school as part of Orlando's Bio-Medical city.

Add to these the performing arts, events and sports venues projects that are under way and commuter rail, and Orlando is truly a city that has a bright future.

www.DavidWelch.com, www.RealEstateOptimist.com

Orlando REO's

2008-08-21T07:10:32Z

I have spoken this week with some of the agents I know that specialize in bank owned properties. All of them are saying the same thing, "the banks are coming around." The banks are coming around to the fact that they have to drop their prices to get these properties sold. I have heard it from the agents, and I have seen it out in the market place. One agent in my office had 40 bank owned properties go under contract last month. Another agent I know has nearly 30 bank owned properties under contract. I have been working with a couple from out of state, and we found three bank owned properties that appear to be in pretty good condtion and priced well. We will probably be writing an offer on one of them today.

This is going to have a ripple effect throughout our market place as these properties begin closing. We saw the median price last month drop to $207,500, and sales have improved so far this year. This has been partly fueled by the short sales and bank owned sales, which look to increase over the next few months. Last month short and bank owned contracts made up 40% of the total pending contracts, but only 25% of the closed sales. The short sales take longer, and are more likely to fall apart before closing. The bank owned sales are moving right along with 30 closings. These should help make the case for lower prices on the short sales, which may aid in getting some of them closed as well.

This leaves the everyday seller in the position of either reducing their price, or taking their properties off the market until we move through this stage of recovery. Yes, I said recovery. Go back and read my blogs from January. I believe we have already seen our low from a sales point of view back in January. I think we are pretty close to our low for prices now. Looking at the pending contracts outstanding, prices may go down another 5%. First time homebuyers (anyone who has not owned a home in the last 3 years) now have a 10% tax credit up to $7,500 available to them as an incentive to buy between now and next summer. First time home buyers are already the biggest segment of the market, so this should spur additional activity. The additional demand along with the declining inventory should bring prices into balance.

www.DavidWelch.com, www.RealEstateOptimist.com

Orlando Real Estate Statistics July 2008

2008-08-19T15:01:29Z

The statistics for July as prepared by the Orlando Regional Realtor Association are available in this month's Market Pulse. If you have trouble opening this link, just go to my home page at www.DavidWelch.com. Check out some of the graphs at the bottom, especially the price and sales charts. You can see that prices came down and sales responded by picking up every month this year through June. July sales typically fall a little behind June, and this years was no exception. Look for August to be a little slower still as school resumed this week. September will also be a little behind the summer numbers, but we usually see a rebound in October. Of course, there is a huge number of pending sales that could finally get closed creating a sales spike.

New construction numbers came out today, and nationally they are at their lowest level in 17 years. This is consistent with what we have been seeing here as builders are hesitant to build speculatively. Consequently, the new home inventory is really starting to go down.

www.RealEstateOptimist.com

It's Your Choice

2008-08-12T07:37:31Z

I am reading a book by Stephen Covey "The Eighth Habit". Obviously by the title it continues from his highly acclaimed "Seven Habits of Highly Successful People". He reminded me of two truths, that I sometimes forget, last night in what I read. First, you really learn more when you teach than when you are being taught. Second, every day you choose how you to live your life.

As far as the first truth is concerned, maybe I am fulfilling part of what he challenges you to do if you read the book. He recommends you read a chapter, try to teach it, and then live it out for a month. After that you can move on to the next chapter. I'm not so sure that I will live up to that challenge, due to a lack of patience on my part. I do try to write about positive influences, because I am the RealEstateOptimist.com after all. So, you will probably here more about this book as I finish going through it. I encourage anyone who reads this to try and teach someone something today. To say it another way mentor somebody today.

The second truth may be harder to live out, because it is very easy to react to our circumstances. We read every day how bad the real estate market is. Truthfully, the market is neither good nor bad. It is just the market. Right now market conditions favor buyers. Each of us can choose to be at the mercy of the market or we can choose to change the market. Please think about this today, and I always welcome comments.

www.DavidWelch.com, www.RealEstateOptimist.com

Pending Sale Index Up

2008-08-07T11:01:35Z

The Pending Sales Index unexpectedly jumped more than 5% in June with the greatest increase coming in the South. This was reported today by Reuters. The pending sales in Orlando have been rising since January, but July actually had slightly fewer contracts written than June. Higher oil and gas prices are holding the economy back, with Wal-Mart even taking a bit of a hit. I believe the Fed will probably hold interest rates steady through the end of the year if this continues. This could effect mortgage rates by keeping them about where they are right now. Inflationary concerns though could still put some upward pressure on rates wiping out some of the price declines.

Here in Orlando we are still seeing a slight decline in the available inventory of homes for sale. Combined with somewhat recovering sales numbers and the building slowdown, the months of inventory has steadily declined since the beginning of the year. Builder inventories are down to about a seven month supply. Typically a six month supply is considered to be in balance with demand. I am looking for the new home supply to continue to decline with fewer housing starts. Overall though, the supply of homes for sale is about three times what it should be in a balanced market. Unless there is an increase in demand or a sudden drop in the inventory, we will be working through this for a while to come.

www.DavidWelch.com, www.RealEstateOptimist.com

Orlando Real Estate July Sales

2008-08-05T14:05:59Z

The official sales numbers get pulled today to be reported around the 10th of the month. I am not quite sure when they are checked, but I just looked and there are 1,401 sales recorded in the MLS for July which is just shy of June's sales. It looks like several of July's end of month sales were late getting recorded. The median price has moved up just a bit too at $208,000. These are not the official numbers, but I'm usually very close.

www.DavidWelch.com, www.RealEstateOptimist.com

Short Sales and Bank Owned

2008-07-31T09:02:19Z

Wow! I was out showing homes this past week, and all but one that I saw was either a short sale or a bank owned property. I was looking in the $150,000 to $200,000 price range, in the south Orange county and Osceola county areas. I waslooking for pool homes too, which limited the search quite a bit. This seems to be the "sweet spot" for distressed properties. If you are looking for properties in this price range in our area, you should understand the difference between short sales and foreclosed properties.

First, the short sale or pre-foreclosure. If the owner is still responsible for the property, and it is going into foreclosure, you are probably dealing with a short sale. This means the owner and their real estate agent are trying to get the lender to accept less than the principle amount of the loan on the house. (ex the loan on the house is $225,000, but it is listed for $179,000). This sounds like a great deal for the buyer, but it requires the lenders approval which could take months. Let me rephrase that - it will take months, and there is no guarantee the lender will approve the lower price. Our experience in Orlando is that the banks will take at least three months to give you an answer on an offer. If the property has already had offers there may be a pre-negotiated price. This may shorten the time get a response, but not necessarily.

The foreclosure is a totally different animal. A foreclosure or bank owned or REO, sometimes listed as corporate owned property is now in the possession of the bank or mortgage company. They usually want it sold as quickly as possible. Often the pricing is very aggressive, and you may be able to get answers to your offer within one to two business days. Sometimes these homes can be in very rough condition, so have a thorough building inspection completed. This is true of the short sales too.

www.DavidWelch.com, www.RealEstateOptimist.com

Orlando Florida Real Estate Investment

2008-07-27T12:23:20Z

This post is in response to a message I received from Judy.

"Dave ... come again with the incentive of investing in fla homes,,,, I'm a landlord an i pay2.5 times as much as my neighbor does,,,,,,, I sugguest you get your facts str8 before you open that wide mouth of yours,,,,,,,,,I pay 3100 mean while my neighbor is skating by only paying 1200 hmmmmmmm some incentive that is ,,,,,,,"

Judy, I have no idea which of my posts you are referring to in your message. I did mention an article by Forbes that named Orlando a top ten market for real estate investment. If you read my post, I questioned how they came to their conclusions, because they don't make sense to me. I can only assume that they expect higher appreciation since Orlando is more affordable than most of the other markets in their article. Personally, I believe a real estate investment should provide positive cash flow in addition to having appreciation potential to make sense. The rents in Orlando are not that great relative to pricing which makes it hard to have positive cash flow without a substantial (usually 30% or more) down payment.

As a landlord myself, I certainly know how bad the taxes have become. The taxes and insurance are eating into the cash flow on both of my rentals. Taxes shoud not continue to escalate at the same pace they have over the past few years, since values have actually come down. In fact as a result of the some of the property tax law changes, my cash flow has improved slightly. A new property tax measure on the ballot in November could reduce property taxes by up to 29%. This will greatly improve cash flow on residential investment properties.

Of course commercial investment properties typically pass taxes on to the tenants, so it may not have as much impact on cash flow. It should improve the commercial leasing market a bit though.