Wednesday, November 30, 2005
Tuesday, November 22, 2005
Lakewood Ranch is a Buyers' Market
Lakewood Ranch real estate has become a buyers market. The number of listings have substantially increased. Prices have not dropped but we see the effect of the increased inventory as flattening the price levels. ...Buyers market
Saturday, November 12, 2005
Effect of "As-Is" Clauses on Brokers and Sellers
When purchasing a property, the effects of any "as-is" clauses can be big problems. If the contract contains these clauses in my opinion it should be reviewed by an attorney. ...more Effect of "As-Is" Clauses on Brokers and Sellers
Friday, November 11, 2005
REALTOR� Magazine - Daily News
REALTOR� Magazine - Daily News: "
Fla.: Ruling Sides With Builders on Impact Fees
(November 7, 2005) -- Homebuilders in Florida won a legal victory in October when a circuit court judge ruled against Osceola County�s new $9,708 per unit impact fee. The fee applies to single-family homes, multifamily units, and mobile homes. The judge ruled that the fee overstated the impact new school users (generated by new construction) would have and reduced the fee to $7,608 per unit.
The ruling came on the heels of a September hearing on a motion for rehearing and reconsideration filed by the Florida Home Builders Association and the Home Builders Association of Metro Orlando. Edie Ousley, FHBA�s public affairs director, says the group is pleased with the judge�s ruling but is still concerned about a statewide trend toward higher impact fees.
�We had contended for quite some time that it was unfair to in essence charge twice for one fee,� Ousley says. �The judge�s ruling on a motion filed for reconsideration by the FHBA and the HBA of Metro Orlando also will require that the Osceola County officials credit homebuilders $2,100 for fees already paid.� The court will rule on how refunds will be handled on Nov. 17.
Ousley says the revised $7,608 figure for each new home built in Osceola County is still a high price to pay for new development. Because such fees are passed through to homebuyers, schoolteachers, firefighters, police officers, and others could have a hard time finding affordable housing as a result of the increased costs, she says.
�By Bridget McCrea for REALTOR� Magazine Onlin"
Fla.: Ruling Sides With Builders on Impact Fees
(November 7, 2005) -- Homebuilders in Florida won a legal victory in October when a circuit court judge ruled against Osceola County�s new $9,708 per unit impact fee. The fee applies to single-family homes, multifamily units, and mobile homes. The judge ruled that the fee overstated the impact new school users (generated by new construction) would have and reduced the fee to $7,608 per unit.
The ruling came on the heels of a September hearing on a motion for rehearing and reconsideration filed by the Florida Home Builders Association and the Home Builders Association of Metro Orlando. Edie Ousley, FHBA�s public affairs director, says the group is pleased with the judge�s ruling but is still concerned about a statewide trend toward higher impact fees.
�We had contended for quite some time that it was unfair to in essence charge twice for one fee,� Ousley says. �The judge�s ruling on a motion filed for reconsideration by the FHBA and the HBA of Metro Orlando also will require that the Osceola County officials credit homebuilders $2,100 for fees already paid.� The court will rule on how refunds will be handled on Nov. 17.
Ousley says the revised $7,608 figure for each new home built in Osceola County is still a high price to pay for new development. Because such fees are passed through to homebuyers, schoolteachers, firefighters, police officers, and others could have a hard time finding affordable housing as a result of the increased costs, she says.
�By Bridget McCrea for REALTOR� Magazine Onlin"
Law of Fixtures
If you are about to purchase a property become familiar with the "Law of Fixtures". When purchasing your home what you see is not always what you will get. more... Law of Fixtures
Thursday, November 10, 2005
Affordable Housing Impact
Further debunking myths about high-density housing, a new study reveals a certain type of affordable housing has little if any negative impact on surrounding home values. To the contrary, under some conditions, affordable housing can give general home values a boost. more...
Realty Times - Real Estate News and Advice
Realty Times - Real Estate News and Advice
Monday, November 07, 2005
What is an appraisal
An appraisal is a dispassionate, third-party estimate of the value of a piece of property. It can either give you peace of mind by affirming your offering price or it can put the kibosh on a transaction entirely.Sarasota Real Estate, Sarasota Florida Real Estate, Siesta Key, Bradenton, Sarasota new homes, Sarasota house, Lakewood Ranch Real Estate, Lakewood Ranch, Sarasota County Real Estate, Sarasota Florida, Sarasota, Florida, Gary Brey
Buying a New Home
If you are purchasing a new home in Sarasota chance are you will be purchasing new construction. As a Buyers Agent I act solely on the Buyer's behalf. It is important to understand the on-site development sales people represent the Builder only.
The following is an article from BankRate.com which offers some great advise when purchasing new construction. Buying a New Home
The following is an article from BankRate.com which offers some great advise when purchasing new construction. Buying a New Home
Sunday, November 06, 2005
Florida State Parks
There are several state parks in the vicinity of Lakewood Ranch. (Always something to do) For more information ...
Florida State Parks
Florida State Parks
Manatee Players win top honors
The Manatee Players, Bradenton's highly acclaimed community actors troop, is at it again. more...
Manatee Players win top honors
Manatee Players win top honors
Saturday, November 05, 2005
Jazz at the Ranch
Jazz at the Ranch
When: 2:00pm - 5:00pm
Where: Sarasota Polo club
Jazz at the Ranch
On November 6, 2005 the Jazz Club of Sarasota and Lakewood Ranch have teamed up to bring you a Sunday afternoon of jazz at the Sarasota Polo Club. Tampa Bay�s Les Sabler will take the stage at 2 PM, getting you relaxed and ready for the fabulous Spyro Gyra. Tickets are available at Town Hall, Sarasota Herald Tribune, The Jazz Club of Sarasota or online at tickets.lakewoodranch.com"
When: 2:00pm - 5:00pm
Where: Sarasota Polo club
Jazz at the Ranch
On November 6, 2005 the Jazz Club of Sarasota and Lakewood Ranch have teamed up to bring you a Sunday afternoon of jazz at the Sarasota Polo Club. Tampa Bay�s Les Sabler will take the stage at 2 PM, getting you relaxed and ready for the fabulous Spyro Gyra. Tickets are available at Town Hall, Sarasota Herald Tribune, The Jazz Club of Sarasota or online at tickets.lakewoodranch.com"
Wednesday, November 02, 2005
Lakewood Ranch Dream Home Search
You can locate all properties for sale in Lakewood Ranch here ...
Find properties for Sale in Lakewood Ranch
Find properties for Sale in Lakewood Ranch
Welcome to Lakewood Ranch
Lakewood Ranch is Florida's premier planned community. In the early 1900s, John Schroeder of Milwaukee, Wisconsin, began to assemble the land known today as the Schroeder-Manatee Ranch (SMR). An owner of furniture, turpentine, milling and lumber businesses, Schroeder selected this land for its abundant natural resources and beauty.
In 1922, the Uihlein family, founders of Schlitz Brewing Company, acquired the land and continued to expand the agricultural operations, which are still active today. Cattle ranching, vegetable and citrus farming, timber, turf and shell mining are but a few of these businesses.
In 1994, after 19 years of planning and approvals, real estate development was added into the mix with the introduction of Lakewood Ranch. The historic presence and careful dedication to the land is a natural comfort for prospective homebuyers. The strength of a great American family, combined with a history of successful land management and a strong financial plan using Community Development Districts make Lakewood Ranch a sound investment and a great place to live. With each new homebuyer, the rich sense of family and place continues to make connections at Lakewood Ranch
In 1922, the Uihlein family, founders of Schlitz Brewing Company, acquired the land and continued to expand the agricultural operations, which are still active today. Cattle ranching, vegetable and citrus farming, timber, turf and shell mining are but a few of these businesses.
In 1994, after 19 years of planning and approvals, real estate development was added into the mix with the introduction of Lakewood Ranch. The historic presence and careful dedication to the land is a natural comfort for prospective homebuyers. The strength of a great American family, combined with a history of successful land management and a strong financial plan using Community Development Districts make Lakewood Ranch a sound investment and a great place to live. With each new homebuyer, the rich sense of family and place continues to make connections at Lakewood Ranch
Sarasota Voted Great Place to Re-Invent Your Life!
The 15 Best Places to Reinvent Your Life
Baby boomers are redefining retirement-and leading the move to a new generation of dream towns
By Grace Lichtenstein, Elaine Robbins, and Michael Dupuis
Once again, baby boomers are breaking the rules. This influential group has bumped traditional retirement off its list of priorities. While "their parents were off fleeing to Leisure Worlds," says historian William Strauss, boomers are contemplating what to do in the next stage-and where.
A recent AARP study estimated that 70 percent of those 45 and older plan to continue working in their "retirement" years, and a Roper Starch Worldwide survey found that the number may be as high as 80 percent. Financial stability isn't the only reason; the Roper study notes that pure enjoyment of work (35 percent of those questioned) or just a desire to try something new (5 percent) will also keep people on the job.
The choices boomers make-in everything from jobs to zip codes-will alter the country's future physical and financial landscape in substantial ways. "Fully situated in middle-age, boomers have become a serious economic as well as social force with which to be reckoned," says William H. Frey, a University of Michigan demographer and a leading researcher of age-migration trends. "And, as usual, all eyes are on them." Already, it's possible to discern certain trends.
Among those ages 45 to 54, only 4.7 percent-fewer than one out of 20-move across county lines each year, while even fewer move across state lines, according to Frey. So it's likely that the largest portion of this demographic will stay put. Why? Boomers "see their homes as legacies," explains Strauss. And since they tend to get along with their kids, they have no plans to get away from them.
How We Picked the Cities
Our research team looked at 10 criteria reflecting the needs, interests, and tastes of Americans age 50 and older. Not all of the towns excel in every category, but each ranked high in several, and many scored high in most. You'll see some surprises here-we made a genuine attempt to spotlight sleepers-vibrant towns and cities that may not have occurred to you.
Availability of jobs, since many in this group will work beyond age 65.
Affordable housing-many cities have costs on par with or below the national median price of $161,600.
Culture and entertainment (from museums and opera to shopping and sports events).
Access to outdoor recreation, from skiing and biking to walking and hiking.
Safety-personal and property safety, and a generally secure feeling.
Colleges or universities (for continuing education and a multigenerational vibe).
Sense of community (often places with a vital and walkable downtown).
Proximity to comprehensive, well-regarded health care facilities.
Good public high schools, since many boomers still have teens at home.
Ease of getting around (public transportation, traffic, access to an airport).
For those who will move, sometimes the pull of the familiar is key. Many will move to be near family. One of the differences between baby boomers and the older "silent generation," says Strauss, is that this younger group is not rebelling against family ties. In fact, remaining close to loved ones is a priority. College towns, too, offer a familiar feel. The experience for those who "were in college from the middle 1960s into the early '70s," says Strauss, "was something that set the whole generation on a life-cycle trajectory. College communities were the closest thing boomers had to the beaches of Normandy."
In addition to the community aspect, universities generate jobs and lend a youthful vibe. And they often come with arts centers, medical facilities, and sophisticated restaurants.
Another trend: choosing a new locale first-opting for one with appealing cultural and recreational lifestyles-and only afterward looking for ways to earn a living there. Strauss calls this the "aesthetic choice." Some who make this jump wind up telecommuting, starting a small business, or working part-time.
This is particularly true of the region Frey calls "the New West." Colorado, Washington, Idaho, Wyoming, and other states have recently lured long-time Californians (others are coming along, too) who loved the Golden State lifestyle but became fed up with high taxes and crowds. Flush from cashing out their equity in houses whose value mushroomed, these California migrants are transplanting themselves to attractive neighborhoods in nearby states.
Also a popular choice: purchasing vacation homes with a view to spending more time there in the future. Again, the New West-particularly Colorado-is seeing much of this activity. Other hot spots? West Virginia, Tennessee, and Arkansas-all quieter, less crowded destinations that come with lower prices.
Since "boomers and middle age are now synonymous," says Frey, "the whole country will become more middle-aged-but some places more than others." Where might those places be? We've compiled a list of 15 highly livable towns by looking at a range of criteria-from affordability to community life to job growth. Ultimately, of course, choices are as varied as the people making them. But this is a good place to start dreaming.
SARASOTA, FL
Sarasota, a small, civilized city on Florida's Gulf Coast, has it all-35 miles of beaches, a temperate climate, golf courses and tennis courts aplenty, and good boating in the Gulf and Sarasota Bay. Fine dining has rendered the early-bird special an endangered species-you'll have no trouble finding first-rate food at places like Pattigeorge's on Longboat Key or late-night burgers at Patrick's downtown. The local economy is robust (unemployment is a mere 2.8 percent), and there is a mix of jobs in tourism, the financial and health fields, and information technology.
But, apart from the sun, what residents love most is the range of cultural opportunities. What other small Florida city has an opera, a symphony, a film society, a theater scene (from Broadway classics like Porgy and Bess to a cabaret where you can dine while watching original productions), lots of art galleries-and The Ringling Museum of Art (with paintings by Rubens as well as circus props). "If you can't find something to do around here," says Regina Kelley, a local teacher, "you'd better check your pulse."
Baby boomers are redefining retirement-and leading the move to a new generation of dream towns
By Grace Lichtenstein, Elaine Robbins, and Michael Dupuis
Once again, baby boomers are breaking the rules. This influential group has bumped traditional retirement off its list of priorities. While "their parents were off fleeing to Leisure Worlds," says historian William Strauss, boomers are contemplating what to do in the next stage-and where.
A recent AARP study estimated that 70 percent of those 45 and older plan to continue working in their "retirement" years, and a Roper Starch Worldwide survey found that the number may be as high as 80 percent. Financial stability isn't the only reason; the Roper study notes that pure enjoyment of work (35 percent of those questioned) or just a desire to try something new (5 percent) will also keep people on the job.
The choices boomers make-in everything from jobs to zip codes-will alter the country's future physical and financial landscape in substantial ways. "Fully situated in middle-age, boomers have become a serious economic as well as social force with which to be reckoned," says William H. Frey, a University of Michigan demographer and a leading researcher of age-migration trends. "And, as usual, all eyes are on them." Already, it's possible to discern certain trends.
Among those ages 45 to 54, only 4.7 percent-fewer than one out of 20-move across county lines each year, while even fewer move across state lines, according to Frey. So it's likely that the largest portion of this demographic will stay put. Why? Boomers "see their homes as legacies," explains Strauss. And since they tend to get along with their kids, they have no plans to get away from them.
How We Picked the Cities
Our research team looked at 10 criteria reflecting the needs, interests, and tastes of Americans age 50 and older. Not all of the towns excel in every category, but each ranked high in several, and many scored high in most. You'll see some surprises here-we made a genuine attempt to spotlight sleepers-vibrant towns and cities that may not have occurred to you.
Availability of jobs, since many in this group will work beyond age 65.
Affordable housing-many cities have costs on par with or below the national median price of $161,600.
Culture and entertainment (from museums and opera to shopping and sports events).
Access to outdoor recreation, from skiing and biking to walking and hiking.
Safety-personal and property safety, and a generally secure feeling.
Colleges or universities (for continuing education and a multigenerational vibe).
Sense of community (often places with a vital and walkable downtown).
Proximity to comprehensive, well-regarded health care facilities.
Good public high schools, since many boomers still have teens at home.
Ease of getting around (public transportation, traffic, access to an airport).
For those who will move, sometimes the pull of the familiar is key. Many will move to be near family. One of the differences between baby boomers and the older "silent generation," says Strauss, is that this younger group is not rebelling against family ties. In fact, remaining close to loved ones is a priority. College towns, too, offer a familiar feel. The experience for those who "were in college from the middle 1960s into the early '70s," says Strauss, "was something that set the whole generation on a life-cycle trajectory. College communities were the closest thing boomers had to the beaches of Normandy."
In addition to the community aspect, universities generate jobs and lend a youthful vibe. And they often come with arts centers, medical facilities, and sophisticated restaurants.
Another trend: choosing a new locale first-opting for one with appealing cultural and recreational lifestyles-and only afterward looking for ways to earn a living there. Strauss calls this the "aesthetic choice." Some who make this jump wind up telecommuting, starting a small business, or working part-time.
This is particularly true of the region Frey calls "the New West." Colorado, Washington, Idaho, Wyoming, and other states have recently lured long-time Californians (others are coming along, too) who loved the Golden State lifestyle but became fed up with high taxes and crowds. Flush from cashing out their equity in houses whose value mushroomed, these California migrants are transplanting themselves to attractive neighborhoods in nearby states.
Also a popular choice: purchasing vacation homes with a view to spending more time there in the future. Again, the New West-particularly Colorado-is seeing much of this activity. Other hot spots? West Virginia, Tennessee, and Arkansas-all quieter, less crowded destinations that come with lower prices.
Since "boomers and middle age are now synonymous," says Frey, "the whole country will become more middle-aged-but some places more than others." Where might those places be? We've compiled a list of 15 highly livable towns by looking at a range of criteria-from affordability to community life to job growth. Ultimately, of course, choices are as varied as the people making them. But this is a good place to start dreaming.
SARASOTA, FL
Sarasota, a small, civilized city on Florida's Gulf Coast, has it all-35 miles of beaches, a temperate climate, golf courses and tennis courts aplenty, and good boating in the Gulf and Sarasota Bay. Fine dining has rendered the early-bird special an endangered species-you'll have no trouble finding first-rate food at places like Pattigeorge's on Longboat Key or late-night burgers at Patrick's downtown. The local economy is robust (unemployment is a mere 2.8 percent), and there is a mix of jobs in tourism, the financial and health fields, and information technology.
But, apart from the sun, what residents love most is the range of cultural opportunities. What other small Florida city has an opera, a symphony, a film society, a theater scene (from Broadway classics like Porgy and Bess to a cabaret where you can dine while watching original productions), lots of art galleries-and The Ringling Museum of Art (with paintings by Rubens as well as circus props). "If you can't find something to do around here," says Regina Kelley, a local teacher, "you'd better check your pulse."
Tuesday, November 01, 2005
Experts Agree-No Sarasota Real Estate "Bubble!"
Home Price Analysis for Sarasota-Bradenton-Venice
By the Research Division of the National Association of REAL TORS@
Executive Summary
With home prices rising strongly in most parts of the country, there has been widespread media coverage on the possibility of a housing market bust. A thorough analysis of the Sarasota-Bradenton- Venice metro market, as detailed below, reveals that there is very little danger of this.
In fact, the local housing market is in excellent shape with a
potential for significant housing equity gains, particularly for homebuyers who plan to remain in their house for the long run.
Because prices have risen faster than income, the ratio of price-to-income is currently above the historical norm. This measure is frequently cited to imply that there is a housing market bubble.
But this ratio is a misleading measure in assessing bubble
prospects.
A more relevant measure is the mortgage servicing cost relative to income.
This ratio is at a very manageable level. It implies no widespread financial
overstretching to purchase a home in the region. Furthermore, the nationwide supply of homes on the market relative to home sales is very lean, suggesting similarly tight market conditions in the local area.
Price Activity
The current price of $367,800 is 80% above the national average.
The median home price rose 23% in 2004 and 92% in the past three years.
Home price growth has been weak throughout the 1990s.
So part of the recent
increase is attributable to the "catch-up" effect.
Affordability
Because the prices have risen faster than income in recent years, the ratio of price-to-
income has been rising strongly. This measure is frequently cited to imply that there
is a housing market bubble.
Mortgage rates declining to 45-year lows have been a major force in boosting home
prices in recent years. Lower rates allow homebuyers obtain a larger loan without
necessarily increasing monthly mortgage payments.
A more relevant measure for assessing the risk of a home price bubble is the median
mortgage servicing cost relative to the median income. This ratio is currently above
the local historical average, but well below the worrisome levels of the early 1980s.
It implies no widespread financial overstretching to purchase a home in the region
Furthermore, the newly arriving retirees may not get reflected in the income data
since they are not working, but they could have substantial wealth holdings.
Local Sarasota Fundamentals
The job market has been exceptionally strong. There have been 41,000 payroll job
additions in the past five years. Many new job holders seek their own housing units.
The region added in the past five years an estimated 56,000 new housing units of
which about 42,000 were single-family units.
The ratio of five-year job gains to five-year new home construction shows the
"hangover" impact of the housing shortage, or housing surplus.
In our case, the localmarket is at a neutral level as the ratio is right near one. With recent job gains
and the expected continued economic expansion, the jobs-to-new home ratio could further
increase. In addition, as mentioned earlier, the newly arriving retirees will not show
up in the jobs data, though they will need housing.
Other Factors
There is no good data on ARMS or interest-only loan composition for the local
market. But, there have been some reporting in the media of a higher use of these
loans in recent years compared to the past. If true, some homeowners will feel the
pinch of higher rates over time.
The baby boomers are in their peak earning years and have been active in purchasing
second homes, which many consider as their future retirement homes. The baby
boomer impact will continue for another 10 to 15 years.
The region is a prime retirement destination. The local market will benefit from
second-home purchases by U.S. baby boomers as well by wealthy foreigners.
Stress Test
Price declines in the local market are unlikely according to our stress test.
The local housing market will experience a price decline of 5% only under
extreme unlikely scenarios.
For example, mortgage rates rising to 9% in
combination with 33,000 job losses could lead to a price decline. Other scenarios
that could lead to a price decline of 5% are shown below.
Such scenarios are highly unlikely. Most credible forecasts predict the region will
create at least 12,000 jobs over the next 24 months and mortgage rates will hover
around 7% by the end of 2006, which bodes well for future price gains.
Even in the unlikely event of prices declining by 5%, most homeowners will maintain
sizable equity build-up in their homes.
Housing equity will most likely continue to accumulate to local homeowners. The
equity gains under three price growth scenarios are presented below.
One scenario assumes a historical conservative price appreciation of 1.5% above consumer price
index inflation.
With most credible inflation forecasts pegged at 2.5%, home prices
can expect to rise by 4% per year under normal circumstances. The two other
scenarios assume slightly below (1.5%) and slightly above (6.5%) the normal rate of
appreciation.
The local market is more likely to appreciate at an above-normal rate because of the
on-going wealthy baby boomer searching for retirement destinations.
Additional Discussion Points
Home price declines are very rare. In fact, the national median home price has not
declined since the Great Depression of the 1930s. Stock market collapses, the OPEC
oil crunch, economic recessions, and even wars have not negatively impacted national
home prices since the 1930s.
There have been few times when local prices declined. In nearly all these cases, the
price declines were accompanied by sharp prolonged job losses. It is difficult to
foresee a price decline in ajob creating economy.
Homes trade far less frequently than financial assets (about one home sale every 7 to
10 years for most homeowners). There are also larger transaction costs associated
with selling a home due to the lengthy careful examination demanded by home
buyers and sellers. Therefore, home prices are not prone to fluctuations as in the
stock market.
There are neither panic sells nor margin calls associated with homes.
Many non-quantifiable factors could be important for this metro market in
determining home prices.
Access to cultural life, the quality of museums, nearby
local and national parks, water views, exclusive neighborhoods, weather, the
international airport, city vibrancy, restaurants, and a host of other non-quantifiable
factors could have an important influence on the overall pricing.
There are immense tax benefits to owning a home. These tax considerations were not
considered in the analysis. For example, the 1998 law permitting primary owner
occupants to trade down without having tax consequences.
Also most home sales results in no capital gains tax. In addition, long-term capital gains tax rates were reduced in 2003, thereby providing higher return for home investors. These positive
benefits, if accounted for in the analysis, would have shown an even stronger case for
housing fundamentals in supporting home prices.
Price Activity
The current price of $367,800 is 80% above the national average.
The median home price rose 23% in 2004 and 92% in the past three years.
Home price growth has been weak throughout the 1990s.
So part of the recent
increase is attributable to the "catch-up" effect.
Affordability
Because the prices have risen faster than income in recent years, the ratio of price-to-
income has been rising strongly. This measure is frequently cited to imply that there
is a housing market bubble.
Mortgage rates declining to 45-year lows have been a major force in boosting home
prices in recent years. Lower rates allow homebuyers obtain a larger loan without
necessarily increasing monthly mortgage payments.
A more relevant measure for assessing the risk of a home price bubble is the median
mortgage servicing cost relative to the median income. This ratio is currently above
the local historical average, but well below the worrisome levels of the early 1980s.
It implies no widespread financial overstretching to purchase a home in the region
Furthermore, the newly arriving retirees may not get reflected in the income data
since they are not working, but they could have substantial wealth holdings.
Local Sarasota Fundamentals
The job market has been exceptionally strong. There have been 41,000 payroll job
additions in the past five years. Many new job holders seek their own housing units.
The region added in the past five years an estimated 56,000 new housing units of
which about 42,000 were single-family units.
The ratio of five-year job gains to five-year new home construction shows the
"hangover" impact of the housing shortage, or housing surplus.
In our case, the localmarket is at a neutral level as the ratio is right near one. With recent job gains
and the expected continued economic expansion, the jobs-to-new home ratio could further
increase. In addition, as mentioned earlier, the newly arriving retirees will not show
up in the jobs data, though they will need housing.
Other Factors
There is no good data on ARMS or interest-only loan composition for the local
market. But, there have been some reporting in the media of a higher use of these
loans in recent years compared to the past. If true, some homeowners will feel the
pinch of higher rates over time.
The baby boomers are in their peak earning years and have been active in purchasing
second homes, which many consider as their future retirement homes. The baby
boomer impact will continue for another 10 to 15 years.
The region is a prime retirement destination. The local market will benefit from
second-home purchases by U.S. baby boomers as well by wealthy foreigners.
Stress Test
Price declines in the local market are unlikely according to our stress test.
The local housing market will experience a price decline of 5% only under
extreme unlikely scenarios.
For example, mortgage rates rising to 9% in
combination with 33,000 job losses could lead to a price decline. Other scenarios
that could lead to a price decline of 5% are shown below.
Such scenarios are highly unlikely. Most credible forecasts predict the region will
create at least 12,000 jobs over the next 24 months and mortgage rates will hover
around 7% by the end of 2006, which bodes well for future price gains.
Even in the unlikely event of prices declining by 5%, most homeowners will maintain
sizable equity build-up in their homes.
Housing equity will most likely continue to accumulate to local homeowners. The
equity gains under three price growth scenarios are presented below.
One scenario assumes a historical conservative price appreciation of 1.5% above consumer price
index inflation.
With most credible inflation forecasts pegged at 2.5%, home prices
can expect to rise by 4% per year under normal circumstances. The two other
scenarios assume slightly below (1.5%) and slightly above (6.5%) the normal rate of
appreciation.
The local market is more likely to appreciate at an above-normal rate because of the
on-going wealthy baby boomer searching for retirement destinations.
Additional Discussion Points
Home price declines are very rare. In fact, the national median home price has not
declined since the Great Depression of the 1930s. Stock market collapses, the OPEC
oil crunch, economic recessions, and even wars have not negatively impacted national
home prices since the 1930s.
There have been few times when local prices declined. In nearly all these cases, the
price declines were accompanied by sharp prolonged job losses. It is difficult to
foresee a price decline in ajob creating economy.
Homes trade far less frequently than financial assets (about one home sale every 7 to
10 years for most homeowners). There are also larger transaction costs associated
with selling a home due to the lengthy careful examination demanded by home
buyers and sellers. Therefore, home prices are not prone to fluctuations as in the
stock market.
There are neither panic sells nor margin calls associated with homes.
Many non-quantifiable factors could be important for this metro market in
determining home prices.
Access to cultural life, the quality of museums, nearby
local and national parks, water views, exclusive neighborhoods, weather, the
international airport, city vibrancy, restaurants, and a host of other non-quantifiable
factors could have an important influence on the overall pricing.
There are immense tax benefits to owning a home. These tax considerations were not
considered in the analysis. For example, the 1998 law permitting primary owner
occupants to trade down without having tax consequences.
Also most home sales results in no capital gains tax. In addition, long-term capital gains tax rates were
reduced in 2003, thereby providing higher return for home investors. These positive
benefits, if accounted for in the analysis, would have shown an even stronger case for
housing fundamentals in supporting home prices.
By the Research Division of the National Association of REAL TORS@
Executive Summary
With home prices rising strongly in most parts of the country, there has been widespread media coverage on the possibility of a housing market bust. A thorough analysis of the Sarasota-Bradenton- Venice metro market, as detailed below, reveals that there is very little danger of this.
In fact, the local housing market is in excellent shape with a
potential for significant housing equity gains, particularly for homebuyers who plan to remain in their house for the long run.
Because prices have risen faster than income, the ratio of price-to-income is currently above the historical norm. This measure is frequently cited to imply that there is a housing market bubble.
But this ratio is a misleading measure in assessing bubble
prospects.
A more relevant measure is the mortgage servicing cost relative to income.
This ratio is at a very manageable level. It implies no widespread financial
overstretching to purchase a home in the region. Furthermore, the nationwide supply of homes on the market relative to home sales is very lean, suggesting similarly tight market conditions in the local area.
Price Activity
The current price of $367,800 is 80% above the national average.
The median home price rose 23% in 2004 and 92% in the past three years.
Home price growth has been weak throughout the 1990s.
So part of the recent
increase is attributable to the "catch-up" effect.
Affordability
Because the prices have risen faster than income in recent years, the ratio of price-to-
income has been rising strongly. This measure is frequently cited to imply that there
is a housing market bubble.
Mortgage rates declining to 45-year lows have been a major force in boosting home
prices in recent years. Lower rates allow homebuyers obtain a larger loan without
necessarily increasing monthly mortgage payments.
A more relevant measure for assessing the risk of a home price bubble is the median
mortgage servicing cost relative to the median income. This ratio is currently above
the local historical average, but well below the worrisome levels of the early 1980s.
It implies no widespread financial overstretching to purchase a home in the region
Furthermore, the newly arriving retirees may not get reflected in the income data
since they are not working, but they could have substantial wealth holdings.
Local Sarasota Fundamentals
The job market has been exceptionally strong. There have been 41,000 payroll job
additions in the past five years. Many new job holders seek their own housing units.
The region added in the past five years an estimated 56,000 new housing units of
which about 42,000 were single-family units.
The ratio of five-year job gains to five-year new home construction shows the
"hangover" impact of the housing shortage, or housing surplus.
In our case, the localmarket is at a neutral level as the ratio is right near one. With recent job gains
and the expected continued economic expansion, the jobs-to-new home ratio could further
increase. In addition, as mentioned earlier, the newly arriving retirees will not show
up in the jobs data, though they will need housing.
Other Factors
There is no good data on ARMS or interest-only loan composition for the local
market. But, there have been some reporting in the media of a higher use of these
loans in recent years compared to the past. If true, some homeowners will feel the
pinch of higher rates over time.
The baby boomers are in their peak earning years and have been active in purchasing
second homes, which many consider as their future retirement homes. The baby
boomer impact will continue for another 10 to 15 years.
The region is a prime retirement destination. The local market will benefit from
second-home purchases by U.S. baby boomers as well by wealthy foreigners.
Stress Test
Price declines in the local market are unlikely according to our stress test.
The local housing market will experience a price decline of 5% only under
extreme unlikely scenarios.
For example, mortgage rates rising to 9% in
combination with 33,000 job losses could lead to a price decline. Other scenarios
that could lead to a price decline of 5% are shown below.
Such scenarios are highly unlikely. Most credible forecasts predict the region will
create at least 12,000 jobs over the next 24 months and mortgage rates will hover
around 7% by the end of 2006, which bodes well for future price gains.
Even in the unlikely event of prices declining by 5%, most homeowners will maintain
sizable equity build-up in their homes.
Housing equity will most likely continue to accumulate to local homeowners. The
equity gains under three price growth scenarios are presented below.
One scenario assumes a historical conservative price appreciation of 1.5% above consumer price
index inflation.
With most credible inflation forecasts pegged at 2.5%, home prices
can expect to rise by 4% per year under normal circumstances. The two other
scenarios assume slightly below (1.5%) and slightly above (6.5%) the normal rate of
appreciation.
The local market is more likely to appreciate at an above-normal rate because of the
on-going wealthy baby boomer searching for retirement destinations.
Additional Discussion Points
Home price declines are very rare. In fact, the national median home price has not
declined since the Great Depression of the 1930s. Stock market collapses, the OPEC
oil crunch, economic recessions, and even wars have not negatively impacted national
home prices since the 1930s.
There have been few times when local prices declined. In nearly all these cases, the
price declines were accompanied by sharp prolonged job losses. It is difficult to
foresee a price decline in ajob creating economy.
Homes trade far less frequently than financial assets (about one home sale every 7 to
10 years for most homeowners). There are also larger transaction costs associated
with selling a home due to the lengthy careful examination demanded by home
buyers and sellers. Therefore, home prices are not prone to fluctuations as in the
stock market.
There are neither panic sells nor margin calls associated with homes.
Many non-quantifiable factors could be important for this metro market in
determining home prices.
Access to cultural life, the quality of museums, nearby
local and national parks, water views, exclusive neighborhoods, weather, the
international airport, city vibrancy, restaurants, and a host of other non-quantifiable
factors could have an important influence on the overall pricing.
There are immense tax benefits to owning a home. These tax considerations were not
considered in the analysis. For example, the 1998 law permitting primary owner
occupants to trade down without having tax consequences.
Also most home sales results in no capital gains tax. In addition, long-term capital gains tax rates were reduced in 2003, thereby providing higher return for home investors. These positive
benefits, if accounted for in the analysis, would have shown an even stronger case for
housing fundamentals in supporting home prices.
Price Activity
The current price of $367,800 is 80% above the national average.
The median home price rose 23% in 2004 and 92% in the past three years.
Home price growth has been weak throughout the 1990s.
So part of the recent
increase is attributable to the "catch-up" effect.
Affordability
Because the prices have risen faster than income in recent years, the ratio of price-to-
income has been rising strongly. This measure is frequently cited to imply that there
is a housing market bubble.
Mortgage rates declining to 45-year lows have been a major force in boosting home
prices in recent years. Lower rates allow homebuyers obtain a larger loan without
necessarily increasing monthly mortgage payments.
A more relevant measure for assessing the risk of a home price bubble is the median
mortgage servicing cost relative to the median income. This ratio is currently above
the local historical average, but well below the worrisome levels of the early 1980s.
It implies no widespread financial overstretching to purchase a home in the region
Furthermore, the newly arriving retirees may not get reflected in the income data
since they are not working, but they could have substantial wealth holdings.
Local Sarasota Fundamentals
The job market has been exceptionally strong. There have been 41,000 payroll job
additions in the past five years. Many new job holders seek their own housing units.
The region added in the past five years an estimated 56,000 new housing units of
which about 42,000 were single-family units.
The ratio of five-year job gains to five-year new home construction shows the
"hangover" impact of the housing shortage, or housing surplus.
In our case, the localmarket is at a neutral level as the ratio is right near one. With recent job gains
and the expected continued economic expansion, the jobs-to-new home ratio could further
increase. In addition, as mentioned earlier, the newly arriving retirees will not show
up in the jobs data, though they will need housing.
Other Factors
There is no good data on ARMS or interest-only loan composition for the local
market. But, there have been some reporting in the media of a higher use of these
loans in recent years compared to the past. If true, some homeowners will feel the
pinch of higher rates over time.
The baby boomers are in their peak earning years and have been active in purchasing
second homes, which many consider as their future retirement homes. The baby
boomer impact will continue for another 10 to 15 years.
The region is a prime retirement destination. The local market will benefit from
second-home purchases by U.S. baby boomers as well by wealthy foreigners.
Stress Test
Price declines in the local market are unlikely according to our stress test.
The local housing market will experience a price decline of 5% only under
extreme unlikely scenarios.
For example, mortgage rates rising to 9% in
combination with 33,000 job losses could lead to a price decline. Other scenarios
that could lead to a price decline of 5% are shown below.
Such scenarios are highly unlikely. Most credible forecasts predict the region will
create at least 12,000 jobs over the next 24 months and mortgage rates will hover
around 7% by the end of 2006, which bodes well for future price gains.
Even in the unlikely event of prices declining by 5%, most homeowners will maintain
sizable equity build-up in their homes.
Housing equity will most likely continue to accumulate to local homeowners. The
equity gains under three price growth scenarios are presented below.
One scenario assumes a historical conservative price appreciation of 1.5% above consumer price
index inflation.
With most credible inflation forecasts pegged at 2.5%, home prices
can expect to rise by 4% per year under normal circumstances. The two other
scenarios assume slightly below (1.5%) and slightly above (6.5%) the normal rate of
appreciation.
The local market is more likely to appreciate at an above-normal rate because of the
on-going wealthy baby boomer searching for retirement destinations.
Additional Discussion Points
Home price declines are very rare. In fact, the national median home price has not
declined since the Great Depression of the 1930s. Stock market collapses, the OPEC
oil crunch, economic recessions, and even wars have not negatively impacted national
home prices since the 1930s.
There have been few times when local prices declined. In nearly all these cases, the
price declines were accompanied by sharp prolonged job losses. It is difficult to
foresee a price decline in ajob creating economy.
Homes trade far less frequently than financial assets (about one home sale every 7 to
10 years for most homeowners). There are also larger transaction costs associated
with selling a home due to the lengthy careful examination demanded by home
buyers and sellers. Therefore, home prices are not prone to fluctuations as in the
stock market.
There are neither panic sells nor margin calls associated with homes.
Many non-quantifiable factors could be important for this metro market in
determining home prices.
Access to cultural life, the quality of museums, nearby
local and national parks, water views, exclusive neighborhoods, weather, the
international airport, city vibrancy, restaurants, and a host of other non-quantifiable
factors could have an important influence on the overall pricing.
There are immense tax benefits to owning a home. These tax considerations were not
considered in the analysis. For example, the 1998 law permitting primary owner
occupants to trade down without having tax consequences.
Also most home sales results in no capital gains tax. In addition, long-term capital gains tax rates were
reduced in 2003, thereby providing higher return for home investors. These positive
benefits, if accounted for in the analysis, would have shown an even stronger case for
housing fundamentals in supporting home prices.
Understanding a "Housing Bubble"
HOUSING BUBBLE PROSPECTS Q&As
What is a housing bubble?
As broadly interpreted, a housing bubble refers to an unsustainable gain in home prices. The premise is that a
price bubble is at risk of "popping," resulting in a loss of equity.
Has there ever been a national housing price bubble?
No, not since good recordkeeping began in 1968. There was a national decline in the 1930s during the Great
Depression; however, home prices were not a prime concern in that era. The greatest issues were essentials such
as food, clothing, employment and shelter of any kind. Declining home prices were a natural result of a general
economic collapse caused by the stock market crash in 1929.
What is the "normal" rate of home price growth over time?
Since 1968, the national median existing-home price has increased an average of 6.4 percent per year.
However, that includes a period of high inflation. A better frame of reference is in relation to the overall rate of
inflation. Home prices typically have increased 1.5 percentage points faster than the rate of inflation, as
measured by the Consumer Price Index.
What are the biggest factors that drive home prices?
In simple terms, it gets down to supply and demand. The inventory of homes available for sale has been
historically low since 2001, which is why home prices have been rising at above normal rates.
In a balanced market between home buyers and sellers, there typically is a six-month supply of homes on the
market. Over the last four years, the supply has hovered around 4.5 months. By contrast, in the recessionary
period of 1990-1991, there was in excess of a 9-month supply.
What conditions are necessary for home prices to soften or decline?
Generally, two conditions are necessary for price softness in a given area: an oversupply of homes available for
sale, and adverse economic conditions -generally a weak local job market. Sometimes these conditions occur
against a backdrop of overall economic weakness, recession or high interest rates.
Where and when have home prices declined in the past? What were the general market conditions?
Most metropolitan areas, especially in the Midwest and South, have not experienced price declines in the era of
modem recordkeeping. Iii the period from the mid-1980s though the early 1990s, many metros in the Northeast
and on the West coast saw localized declines. Typically, this occurred in large population centers with very
little capacity for growth. When housing shortages developed during a period of high demand, prices grew at
sharp double-digit rates -often over 20 percent per year -for several consecutive years.
After local economic conditions declined in those areas, home sales stalled and the inventory of unsold homes
rose, which eventually led to price softness or decline.
How long have home prices declined in the past?
Although there are exceptions to any general fmding, most metro areas that experienced price declines were
relatively short lived (several years). Most homeowners who went through such downturns --but stayed in their
home for a normal period of homeownership --still netted healthy gains when they sold. People view
homeownership as a long-tenn investment as opposed to the kind of quick-in, quick out investment that Wall
Street is fond of. Unlike stocks, homeowners don't panic sell simply because a home down the street sold for
less. Home prices tend to be sticky on the downside --usually a single digit decline in any given year following a
sustained period of double digit gains. Very few people buy at the top of a market and then sell in a short
timeframe. After several years, home prices level and return to normal appreciation patterns.
Should we be concerned that home prices are rising faster than family income?
No. There are three components to housing affordability: home prices, income, and financing costs -the latter
are historically low.
During the last four-and-a-halfyears of record home sales, there has been a shortage of homes available for sale.
As a result, home prices during this period have risen faster than family income. However, in much of the
1980s and 1990s, the reverse was true -incomes rose faster than home prices.
On a national basis, according to the Housing Affordability Index published by the National Association of
Realtors@, a median income family who purchases a median-priced existing home is spending a little over 20
percent of gross income for the mortgage principal and interest payment. In the early 1990s, a typical mortgage
payment was in the low 20s as a percent of income, and in the early 1980s it was as high as 36 percent. Overall
housing affordability remains favorable in historic terms.
What are the prospects of a housing bubble?
There is virtually no risk of a national housing price bubble, based on the fundamental demand for housing and
predictable economic factors. It is possible for local bubbles to surface under the right circumstances, but that
also is unlikely in the current environment. There are tight supplies of homes available for sale in most of the
country, and labor markets have been improving. In other words, the two conditions necessary for price softness
do not exist in most of the country.
The strong underlying demand for homes results from the simple fact that the population is growing faster than
the supply of homes. In addition, it is highly unlikely that the cost of construction will decline. In fact, .
construction material shortages are expected to continue and the cost of building and development is trending
up.
Baby boomers remain in their peak earning years. Echo boomers -the children of the baby boom generation -
are just entering the period of life in which people typically buy their first home. The echo boom is the second
largest generation in U.S. history. Considering the median age ofa first-time buyer is 32, echo-boomers will be
a big factor over the next decade. In addition, immigration has been strong for many years. Census data shows
that immigrants eventually achieve homeownership rates higher than do native born Americans -this also will
be a strong factor in housing demand in the future. Also, minority ownership rates have been trending up.
All this means the demand for housing is historically high and is one of the reasons 2005 will be the fifth
consecutive year of record home sales. Even in an economic downturn, the demand remains. If conditions
become unfavorable, home buying may be postponed, but a general price decline remains highly unlikely.
What is likely to happen with home prices?
The forecast is for mortgage interest rates to rise slowly over the next year, which will have a minor breaking
effect on home sales. The good news is that will help inventory levels to recover and allow the market to come
into a closer balance between buyers and sellers.
In other words, a general slowing in the rate of price growth can be expected, but in many areas inventory
shortages will persist and home prices are likely to continue to rise above historic norms.
What is a housing bubble?
As broadly interpreted, a housing bubble refers to an unsustainable gain in home prices. The premise is that a
price bubble is at risk of "popping," resulting in a loss of equity.
Has there ever been a national housing price bubble?
No, not since good recordkeeping began in 1968. There was a national decline in the 1930s during the Great
Depression; however, home prices were not a prime concern in that era. The greatest issues were essentials such
as food, clothing, employment and shelter of any kind. Declining home prices were a natural result of a general
economic collapse caused by the stock market crash in 1929.
What is the "normal" rate of home price growth over time?
Since 1968, the national median existing-home price has increased an average of 6.4 percent per year.
However, that includes a period of high inflation. A better frame of reference is in relation to the overall rate of
inflation. Home prices typically have increased 1.5 percentage points faster than the rate of inflation, as
measured by the Consumer Price Index.
What are the biggest factors that drive home prices?
In simple terms, it gets down to supply and demand. The inventory of homes available for sale has been
historically low since 2001, which is why home prices have been rising at above normal rates.
In a balanced market between home buyers and sellers, there typically is a six-month supply of homes on the
market. Over the last four years, the supply has hovered around 4.5 months. By contrast, in the recessionary
period of 1990-1991, there was in excess of a 9-month supply.
What conditions are necessary for home prices to soften or decline?
Generally, two conditions are necessary for price softness in a given area: an oversupply of homes available for
sale, and adverse economic conditions -generally a weak local job market. Sometimes these conditions occur
against a backdrop of overall economic weakness, recession or high interest rates.
Where and when have home prices declined in the past? What were the general market conditions?
Most metropolitan areas, especially in the Midwest and South, have not experienced price declines in the era of
modem recordkeeping. Iii the period from the mid-1980s though the early 1990s, many metros in the Northeast
and on the West coast saw localized declines. Typically, this occurred in large population centers with very
little capacity for growth. When housing shortages developed during a period of high demand, prices grew at
sharp double-digit rates -often over 20 percent per year -for several consecutive years.
After local economic conditions declined in those areas, home sales stalled and the inventory of unsold homes
rose, which eventually led to price softness or decline.
How long have home prices declined in the past?
Although there are exceptions to any general fmding, most metro areas that experienced price declines were
relatively short lived (several years). Most homeowners who went through such downturns --but stayed in their
home for a normal period of homeownership --still netted healthy gains when they sold. People view
homeownership as a long-tenn investment as opposed to the kind of quick-in, quick out investment that Wall
Street is fond of. Unlike stocks, homeowners don't panic sell simply because a home down the street sold for
less. Home prices tend to be sticky on the downside --usually a single digit decline in any given year following a
sustained period of double digit gains. Very few people buy at the top of a market and then sell in a short
timeframe. After several years, home prices level and return to normal appreciation patterns.
Should we be concerned that home prices are rising faster than family income?
No. There are three components to housing affordability: home prices, income, and financing costs -the latter
are historically low.
During the last four-and-a-halfyears of record home sales, there has been a shortage of homes available for sale.
As a result, home prices during this period have risen faster than family income. However, in much of the
1980s and 1990s, the reverse was true -incomes rose faster than home prices.
On a national basis, according to the Housing Affordability Index published by the National Association of
Realtors@, a median income family who purchases a median-priced existing home is spending a little over 20
percent of gross income for the mortgage principal and interest payment. In the early 1990s, a typical mortgage
payment was in the low 20s as a percent of income, and in the early 1980s it was as high as 36 percent. Overall
housing affordability remains favorable in historic terms.
What are the prospects of a housing bubble?
There is virtually no risk of a national housing price bubble, based on the fundamental demand for housing and
predictable economic factors. It is possible for local bubbles to surface under the right circumstances, but that
also is unlikely in the current environment. There are tight supplies of homes available for sale in most of the
country, and labor markets have been improving. In other words, the two conditions necessary for price softness
do not exist in most of the country.
The strong underlying demand for homes results from the simple fact that the population is growing faster than
the supply of homes. In addition, it is highly unlikely that the cost of construction will decline. In fact, .
construction material shortages are expected to continue and the cost of building and development is trending
up.
Baby boomers remain in their peak earning years. Echo boomers -the children of the baby boom generation -
are just entering the period of life in which people typically buy their first home. The echo boom is the second
largest generation in U.S. history. Considering the median age ofa first-time buyer is 32, echo-boomers will be
a big factor over the next decade. In addition, immigration has been strong for many years. Census data shows
that immigrants eventually achieve homeownership rates higher than do native born Americans -this also will
be a strong factor in housing demand in the future. Also, minority ownership rates have been trending up.
All this means the demand for housing is historically high and is one of the reasons 2005 will be the fifth
consecutive year of record home sales. Even in an economic downturn, the demand remains. If conditions
become unfavorable, home buying may be postponed, but a general price decline remains highly unlikely.
What is likely to happen with home prices?
The forecast is for mortgage interest rates to rise slowly over the next year, which will have a minor breaking
effect on home sales. The good news is that will help inventory levels to recover and allow the market to come
into a closer balance between buyers and sellers.
In other words, a general slowing in the rate of price growth can be expected, but in many areas inventory
shortages will persist and home prices are likely to continue to rise above historic norms.
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