The Catch-22 of Trying to Sell Your Home in Florida: Prices Going Down, Buyers Can’t Find Home Loans – But Things May Be Changing

Posted By on May 31, 2011

Standard & Poor’s is an internationally-recognized financial markets analysis company, providing a number of research statistics and indices to help measure what is happening in the American economy.  You may recognize its stock index, the S&P 500, which the news media report on daily along with the Dow Jones and other stock market indices.

Its S&P/Case-Shiller Home Price Index is considered one of the most trustworthy ways of determining what is happening, and may be happening, in the American residential housing market.   S&P monitors real estate prices in the residential real estate markets of 20 different metro areas across the country, including Miami, as well as watching the residential real estate market from an overall national perspective.

On the last Tuesday of very month, S&P releases their findings for the past two-month period. Their latest Home Price Index was released today, the last Tuesday in May 2011.

Home prices are at the lowest point they have been in five years. Miami and Tampa are particularly hard hit.

From the new S&P/Case-Shiller Home Price Index, we know that Miami and Tampa are two of the 12 metropolitan residential housing market suffering the most; the others are Atlanta, Charlotte, Chicago, Cleveland, Detroit, Las Vegas, Minneapolis, New York City, Phoenix, and Portland.

What does this mean for you?  This impacts everyone in South Florida.

Lower home prices is bad news for everyone, especially those living in Miami and Tampa.  Here’s why:

  1. For most Floridians, their home counts for a third to a half of their total net worth.   As prices head lower, so does the asset column of the Average Joe’s balance sheet.
  2. For Florida’s taxing authorities, lower property values mean lower property taxes and less revenue to provide public services.
  3. For Floridians who are underwater in their mortgage, they are going even further in the red – and the pressure to walk away from that note is increasing.
  4. Those wanting to short sale their home face stiffer competition in the residential market because prices of the other homes for sale in their area are dropping – and that short sale may be less of a discount or advantage to a prospective buyer.
  5. For those trying to modify loans with lenders, the lower home price gives them less bargaining power, and banks fearful that the values are going to plunge further may have an incentive to foreclose faster.

Where are the Buyers?  Good news may be on the way.

One of the reasons that this current economy is so tough on everyone – and why so many need short sale counseling and foreclosure defense help — is because even though their homes are at bargain prices, there aren’t enough buyers out there to purchase the good deals.   No matter how good your short sale price may be, it’s nothing without a buyer to take you up on your offer.

A reasons why there aren’t many buyers is because banks are not lending mortgage money like they used to do.  It’s very hard to get approved for a home loan in Florida.  Only cash deals and those with stellar credit ratings are able to buy right now.

However, this is America, and there are companies out there that are finding opportunity in this crisis.  For example, a company called Springleaf (actually a real estate investiment trust) is raising $500 million specifically for nonconforming commercial loan financing.  Nationstar, another investor/finance company, is purportedly raising $400 million in an initial public offering, which is a big deal since Nationstar is one of the top five non-bank mortgage servicers in the country today.

Hopefully, these new entrants to the mortgage financing pool will provide some much needed relief and will be the start of others entering the mortgage market.  If buyers can find mortgage money, then Florida homes will start selling.  At least I hope so.

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