Understanding the number of closings on residential real estate properties in the country, as well as in the State of Florida and your local area, is important when you are considering buying a home or condo here. Especially for first-time home buyers, understanding the local marketplace can be very helpful not only in negotiating with the seller but in finding the best financing for the home loan.
1. Florida Statistics: Residential Real Estate Closings
Right now, things may be looking up for home buyers looking to purchase residential homes in Florida. RealtyTrac researchers show Florida home sales (closings) slowing down this summer. Home sales in June went down a significant amount (25%) from May; however, to keep things in perspective they were up 171% from the same time last year.
RealtyTrac’s top two cities for residential real estate closings in Florida were the cities of Fort Lauderdale and Miami. Fort Lauderdale saw 1650 total residential sales with a median sales price of $250,000. Miami had 1368 total residential sales with a median sales price of $289,000. Jacksonville came in third with 1293 total sales with a median sales price of $165,000.
In South Florida, researchers with Realtor.com find the residential real estate market is “cool” compared to other parts of the country. Specifically, the Miami- Fort Lauderdale – West Palm Beach residential real estate market ranked 285 out of 300 in national metropolitan areas for residential real estate sales. According to Realtor’s data, a home in Miami- Fort Lauderdale – West Palm Beach will take 3 months or more to close (median days on the market was 92.5 in August 2018). This is almost a month longer than the national average.
For more details, consider the following:
Hallandale, Florida
According to data compiled by Movato, it takes 7% longer to close on a residential home in Hallandale, Florida, now than it did a year ago. The median list price in Hallandale was $299,900, almost the same as it was a month ago but a good 4% lower than it was in September 2017.
Residential sales closed within 133 days of being on the market.
Miami Beach, Florida
On September 10, 2018, according to Movato’s research, the median list price in Miami Beach was $549,000, which was less than 1% change from the previous month. Distressed properties such as foreclosures and short sales remained the same as a percentage of the total market in September.
Residential sales closed within 151 days of being on the market.
West Palm Beach, Florida
Movato reports that in September 2018, West Palm Beach was selling faster than other parts of South Florida. The median list price in West Palm Beach was $254,000, rising 1% from the previous month.
Residential sales closed within 81 days of being on the market.
[Source: U.S. Census Bureau]
2. United States Statistics: Residential Real Estate Closings
According to the United States Census Bureau’s latest monthly report on residential home sales (dated August 23, 2018), new home sales in July 2018 were at a seasonally adjusted annual rate of 627,000.
This means residential closings were 1.7% below the previous month’s rate of 638,000, but remained 12.8% above July 2017 closing rate of 556,000. As for what the average sales prices is in a residential closing, the Census Bureau found the median sales price of new houses sold in July 2018 was $328,700, and the average sales price was $394,300. When looking at the number of homes available for home buyers, the agency’s data found there were approximately 309,000 new homes for sale in July 2018, representing a supply of 5.9 months at the current sales rate.
Statista’s studies of the United States Residential Real Estate market find that there were around 5,500,000 residential real estate closings (sales) in the United States last year (2017). Statista research shows residential real estate sales have been rising each year since 2008.
Statistically, home buyers are more optimistic and more interested in closing on a home (and getting a home loan) than in past years. Statista forecasts there will be around 6.44 Million residential real estate closings (sales) in 2019.
Nationally, Case-Shiller reports that the country overall has a strong economy and not enough residential properties for sale. Prices for residential real estate are rising because of increased buyer demand and not enough supply.
In fact, according to Case-Shiller, residential real estate prices rose around 6% over the past year in the United States.
The NAR warns that things may be changing. Looking at the monthly Case-Shiller data, economists with the National Board of Realtors warn “…signs of changing conditions are evident.” Inventory is building in the higher-priced markets and prices are being cut in others.
This bodes well for home buyers looking to buy a residential property, as the country becomes less of a residential seller’s market.
Closing Prices
According to a new home sales report released by ATTOM Data Solutions, closing prices for homes across the country were above pre-recession levels in 65% of the country. Their research reveals that the average home price at a closing in this country was $255,000 in Q2 2018. This is 6% higher than the average home price at closing of $241,648 in Q3 2005.
Median home prices in 79 of the 122 metro areas analyzed for median home prices in the report were above their pre-recession peaks in Q2 2018. The highest was in Houston, Texas (79 percent above); followed by Dallas-Fort Worth (78 percent above); Greeley, Colorado (76 percent above); and Denver, Colorado (75 percent above).
Meanwhile, median home prices at residential closings remained below closing prices seen before the 2008 recession in 43 of the 122 metros analyzed by the researchers. These included Atlantic City, New Jersey (36 percent below); York, Pennsylvania (34 percent below); Salisbury, Maryland (21 percent below); and Naples, Florida (19 percent below).
New Construction versus Existing Homes
As for new home construction versus existing home sales, according to the United States Census Bureau, both are rising. New homes in this data are considered as “[a] sale of the new house occurs with the signing of a sales contract or the acceptance of a deposit.” This home is a new build that can range from being on the blueprints to being ready for move-in.
The majority of new home construction closes before the build is completed (75%); only a quarter of new residential homes are sold after completion.
Existing home sales data was retrieved from the National Association of Realtors by the Census Bureau for comparison. Researchers found that most existing homes closed after one or two months after the sales contract was signed; in these sales, the closing was dependent upon nailing down a mortgage to finance the sale.
From this, the Census Bureau found that nationally, new home sales close faster than existing home sales. The buyer of new construction should see closing on the residential home a month or two earlier than a comparable buyer who is purchasing an existing home due to the difference in when and how financing is obtained.
Home Flipping
Last week, ATTOM Data Solutions published its Q2 2018 U.S. Home Flipping Report. According to their findings, 48,768 U.S. single family homes and condos were flipped in the second quarter of 2018. These residential closings account for 5.2% of all residential real estate sales. In the first three months of 2018, closings on flipped homes were 6.6% of the total number of residential closings; in Q2 2017, they accounted for 5.4% of residential sales.
Researchers forecast that the number of residential closings on flipped homes will continue to fall during the remainder of 2018. One reason may be a loss in revenue: ATTOM reports that the average profit after closing on a flipped residential property was at a two year low (the lowest since Q2 2016). In Q2 2018, closing on a flipped home resulted on an average profit to the seller of $65,520 (the amount exceeding what the flipper paid for the property at the initial closing).
Another reason for fewer residential closings on flipper properties is because there are less distressed sales (foreclosures, short sales) today than in past years. Only 32% of the flipped residential closings were on properties bought in distressed sales in Q2 2018. This compares to 68.2% of residential closings involving distressed properties bought by flippers in Q1 2010.
For details, read “U.S. Home Flipping Returns Drop to Nearly Four-Year Low in Q2 2018,” published by ATTOM Data on September 6, 2018.
Other Factors
Also from ATTOM Data, one of the nation’s premier real estate research organizations, we know that residential real estate closings may be impacted by the following:
There was an increase in the number of U.S. residential properties entering the foreclosure process this summer; ATTOM reports this is the first year-over-year increase in foreclosure starts nationwide after the country has enjoyed 3 years (36 consecutive months) of year-over-year decreases. Florida was up 35% in year-over-year increases in foreclosure filings.
Last month, ATTOM also released its Q2 2018 U.S. Home Equity & Underwater Report. It reveals that more than 5.1 million U.S. residential properties were seriously underwater, or 9.3% of all U.S. properties with a mortgage. Meanwhile, over 13.9 Million U.S. homes were “equity rich,” meaning that the home had a market value that was at least 50% higher than the remaining home loan balance. This accounted for 24.9% of all U.S. homes with mortgage.
Finally, ATTOM released its Q2 2018 U.S. Home Sales Report, reporting U.S. single family homes and condos sold for a median price of $255,000 in the second quarter, up 6.3% from a year ago to a new all-time high but the slowest annual appreciation since Q2 2016. According to Daren Blomquist, senior vice president at ATTOM Data Solutions, the appreciation of home prices across the country has slowed for 5 quarters in a row. Economist Blomquist brings good news to home buyers:
“Although home sellers are still in the driver’s seat of this housing market, moderating home price appreciation is good news for prospective homebuyers and signals that rising mortgage rates and other housing headwinds are cooling red-hot home price appreciation in some areas.”
3. First Time Home Buyer Mortgage Programs
Those looking to buy their first home may be surprised to learn of the number of programs available to them as first time home buyers. Both the federal government and the State of Florida have a variety of long-established programs to help people purchase their first home.
A. Federal First Time Home Buyer Mortgage Programs
Among the federal home ownership assistance programs are the following that help first time borrowers with their home loans and mortgage financing:
1) The Federal Dollar Home Program
The federal government offers certain homes for sale directly to home buyers. These are homes that have been the subject of foreclosure by the FHA. Some real bargains can be found here (check out the eligible Florida $1 Homes here.)
2) Fannie Mae and Freddie Mac Conventional 97 Program
Fannie Mae and Freddie Mac are two government programs that buy home loans from lenders, and they help first time home buyers through their “Conventional 97 Mortgage.”
Here, qualified home buyers need only put down 3% toward the purchase price and the federal government will loan the remaining 97%. Another big help to first time home buyers: the down payment can be a gift from a family member.
3) FHA Home Loan Program
Most home buyers are aware of FHA home loans. FHA Loans are very important for any first time home buyer to consider, because it is easier to qualify for an FHA loan that a traditional mortgage from the local bank. FHA Home Loans are available to buyers will a FICO Score of 500 or higher.
Two other huge benefits for first time home buyers with an FHA Loan: only 3.5% down is needed (as long as their FICO score is over 580; otherwise, they will need a 10% down payment). Down payments can be gifted, and closing costs can be rolled into the mortgage.
4) Good Neighbor Next Door Program: Teachers, Firefighters, EMTs, Police Officers
The federal government reaches out to Florida’s teachers, firefighters, emergency medical technicians (EMTs), and police officers with a special home loan program that provides for only $100 down payment. Additionally these first time home buyers may be able to find a real bargain with homes for 50% off list price (see eligible Florida homes here).
5) HomePath Mortgage
Fannie Mae offers the HomePath program for first-time home buyers. Under HomePath, the first time buyer need only put down 3% of the contract price and the program will cover 3% of the closing costs.
Borrowers must complete a course (the HomePath Ready Buyer™ course) in order to get a Fannie Mae HomeReady® mortgage loan.
6) HUD First Time Home Buyer Programs
The Department of Housing and Urban Development (HUD) offers grants to qualified first time home buyers that cover both down payments and closing costs. The buyer must work with a HUD-registered real estate agent as well as an approved HUD Home lender.
HUD Homes are sold by the federal government. They are located within certain regions or areas within the State of Florida. These communities are determined by having at least 70% of households earn 80% or less of the state median income. Eligible Florida HUD Homes can be viewed at the HUD Home Store.
7) Indian Home Loan Guarantee Program
The Indian Home Loan Guarantee Program is limited only to borrowers who are American Indian families, or in tribally designated housing entities. Congress established this program in 1992 to help Native Americans with homeownership and to support Native American Communities.
These home loans are guaranteed as “Section 184 mortgages” by the Office of Native American Programs. Here, the federal government backs the borrower; if there is a default, the lender will be repaid in full. Eligible home buyers benefit from a low down payment and flexible underwriting.
They are available for homes located both on and off tribal lands. The entire State of Florida has been approved for Section 184 Mortgages. First time home buyers from the Seminole Tribe are eligible for these home loans.
8) USDA Rural Home Loans
The Department of Agriculture offers its own “Single Family Housing Guaranteed Loan Program.” Home buyers interesting in purchasing a home in a Florida rural area may be eligible to receive a 90% loan guarantee from the USDA. No down payment is required. Homes must be located in an USDA Eligible Area; almost all of the State of Florida is within the USDA’s lending area (see map). For details on a USDA Home Guaranteed Loan, read the Program Factsheet here.
There is also the USDA “Single Family Housing Direct Home Loan Program. “ Here, the USDA offers payment assistance to boost the first time rural home buyer’s ability to meet loan requirements. This is in the form of a subsidy and is not a loan. It lasts for a limited period of time, and the amount of the assistance paid by the USDA depends upon the individual borrower’s adjusted income. For details on a USDA Direct Loan, read the Program Factsheet here.
9) VA Loans
The Veterans Administration offers a home buyer program that requires no down payment whatsoever. It applies to both active and retired military personnel. No mortgage insurance is required.
If a first time home buyer is eligible for a VA home loan, this may be the best option (and least expensive) financing available to him.
10) Section 203(k) Home Rehab Loans
First time home buyers willing and able to rehabilitate a home in need of repair (the “Fixer Upper”) may find a federal Section 203(k) home loan their best option. This is a federal home loan program designed specifically for buyers who want to buy an older property that must have substantial repair and rehabilitation. Buyers will need a minimum FICO score of 640.
Section 203(k) loans are an extension of the standard FHA Home Loan program. Borrowers will have to do their homework; a proposal detailing the necessary rehab work must be provided with the loan application. The loan must go through a bank approved by the FHA.
B. Florida First Time Home Buyer Mortgage Programs
Many years ago, the Florida Legislature set up the Florida Housing Finance Corporation (“Florida Housing”) as an organization focusing on helping Floridians with home ownership. Florida Housing offers several programs to help home buyers, and it also coordinates programs offered by government agencies and non-profit groups, at the local, state, and federal levels.
Florida Housing works with qualified veterans. It works with first-time buyers. It also helps anyone looking to buy a home in Florida that is located within one of the federally designated target areas established by HUD (the federal Department of Housing and Urban Development).
1) Florida Housing Finance Corporation Help for First Time Buyers
The Florida Housing homeownership programs include:
- Homebuyer Loan Programs;
- Down Payment Assistance Programs (DPA);
- Mortgage Credit Certificates (MCC); and the
- Homeownership Pool Program (HOP).
Florida Housing financial assistance is available in all 67 counties in the State of Florida. To be eligible for Florida Housing programs, the home must be located with the State of Florida and the buyer must live in the home as his or her primary residence. The buyer must take a special “home buyer education” course. All borrowers through Florida Housing have to meet Florida Housing’s income, credit, and home purchase price requirements.
a) Florida HFA Preferred Conventional Loan
Some home loans through Florida Housing are “HFA Preferred Conventional Loans.” These give the home buyer reasonably priced mortgage insurance on a 30-year fixed-rate loan. Lowering these costs increased the likelihood that the home buyer can move forward with the purchase.
b) Florida HFA Preferred 3% Plus Conventional Loan
Florida Housing also has a program that allows for a low down payment (3%) as well as a state grant to cover closing costs. This is called the “Florida HFA Preferred 3% Plus Conventional Loan.”
c) Florida Down Payment Assistance
In some situations, the home buyer may qualify for the “Florida Assist” program, where they can borrow their down payment (up to $7500) as a second mortgage on the property in order to complete the purchase. The down payment loan comes at a zero interest rate (0%) and payments are not due until the home is sold; the buyer moves out; or the mortgage is refinanced.
d) Florida Preferred Grant
Another Florida program offers grants to home buyers that covers up to 3% of the purchase price of the home, which is to be used to cover closing costs or the down payment. As a state grant, the home buyer does not have to repay it.
How Can A Florida Real Estate Lawyer Help a Potential Home Buyer?
Home buyers do not have to hire a lawyer to give them legal advice before they negotiate and finalize their purchase of a new home. Many buyers choose not to do. A buyer does not have to have a lawyer review his closing documents or help him decide whether or not to proceed with the purchase or with the financing.
Nevertheless, for almost everyone, getting a mortgage and buying a home is a major life event. It is a stressful process. The actual closing of the transaction may take hours, with stacks of legal documents to sign.
Meanwhile, hiring an experienced Florida real estate lawyer may be less expensive than most home buyers realize. In many situations, the client discovers that having an attorney’s representation in the transaction has saved him a lot of money as well as saved him considerable stress and anxiety.
If you are looking to buy residential property here in Florida, then consider speaking with an experienced Florida real estate lawyer to learn about your rights. Most real estate lawyers, like Larry Tolchinsky, offer a free initial consultation (over the phone or in person, whichever you prefer) to answer your questions.
For more, read:
6 Tips For First Time Home Buyers In Florida
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