04/16/2013 Florida Realtors News

TODAY'S TOP STORIES Housing starts surpass 1 million in March WASHINGTON (AP) – April 16, 2013 – U.S. homebuilders broke the 1 million mark in March for the first time since June 2008. The gain signals continued strength for the housing recovery at the start of the spring buying season. The overall pace of homes started rose 7 percent from February to March to a seasonally adjusted annual rate of 1.04 million, the Commerce Department said Tuesday. Apartment construction, which tends to fluctuate sharply from month to month, led the surge: It jumped nearly 31 percent to an annual rate of 417,000, the fastest pace since January 2006. By contrast, single-family home building, which makes up nearly two-thirds of the market, fell 4.8 percent to an annual rate of 619,000. That was down from February’s pace of 650,000, the fastest since May 2008. The government said February’s pace was a sharp 5.2 percent higher than it had previously estimated. Applications for building permits, a gauge of future construction, declined 3.9 percent to an annual rate of 902,000. It was down from February’s rate of 939,000, which was also nearly a five-year high. Paul Ashworth, chief U.S. economist at Capital Economics, called the data “obviously good news.” But he noted that the surge was due to a jump in volatile apartment construction and said the pace of building could drop in April. Steady job growth, near record-low mortgage rates and rising home values have encouraged more people to buy. In response to higher demand and a low supply of available homes for sale, builders have stepped up construction. March’s pace of homes started was nearly 46 percent higher than in the same month in 2012. Housing construction fell 5.8 percent in the Northeast but gained in the rest of the country, led by a 10.9 percent rise in the South. It rose 9.6 percent in the Midwest and 2.7 percent in the West. The National Association of Home Builders/Wells Fargo April survey released Monday showed that builders are concerned that limited land and rising costs for building materials and labor could slow sales in the short term. That led to a third straight monthly drop in confidence. Still, the builders’ outlook for sales over the next six months climbed to the highest level in more than six years, suggesting that the obstacles could be temporary. And construction firms have stepped up hiring in recent months. They added 18,000 jobs in March and 169,000 since September, according to the Labor Department. Though new homes represent only a fraction of the housing market, they have an outsize impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in tax revenue, according to statistics from the homebuilders.  Copyright © 2013 The Associated Press, Martin Crutsinger, AP economics writer. All rights reserved. Census Bureau: Nation’s rental vacancy rates down WASHINGTON – April 16, 2013 – The rental vacancy rates for the nation declined from 8.4 percent in 2009 to 7.4 percent in 2011, according to one of two American Community Survey briefs covering the housing market released today by the U.S. Census Bureau. Approximately four times as many metro areas experienced declines in rental vacancy rates as those that experienced increases. The share of U.S. households that rent rather than own increased from 34.1 percent in 2009 to 35.4 percent in 2011. Nearly a quarter of the nation’s metro areas saw a rise in renting households, while less than 3 percent of the nation’s metro areas saw a decline. Rental Housing Market Condition Measures: A Comparison of U.S. Metropolitan Areas examines four characteristics of the rental housing stock using American Community Survey data collected in 2009 and 2011: gross rent, gross rent as a percentage of household income, rental vacancy rates, and renter share of total households. When setting federal policy, a family is categorized as high rental if it spends 35 percent or more of household income on rent and utilities. In the study, the share of renters with high housing costs in the United States rose from 42.5 percent in 2009 to 44.3 percent in 2011. However, average rental rates in the United States declined from 2009 to 2011. “While we saw a decrease in rental vacancy rates and pricing in some areas, the burden of rental costs on households increased across many parts of the nation,” says Arthur Cresce, assistant division chief for housing characteristics at the Census Bureau. “Factors such as supply and demand for rental housing and local economic conditions play an important role in helping to explain these relationships.” Nationwide, only 11 metro areas reduced their shares of renters with high housing costs, while 62 metro areas increased their shares. Among the 50 most populous metro areas, some of the heaviest rental costs were borne by renters in metro areas in Florida, California and Louisiana in 2011, despite rent declines between 2009 and 2011. These includeMiami with 55.7 percent of renters experiencing heavy rental costs. Orlando, Fla. (52.9 percent); Riverside, Calif. (52.2 percent); and New Orleans (51.3 percent), whose shares did not differ significantly from one another, followed closely. Among the 50 most populous metro areas, only two became affordable for more renters – Richmond, Va., with a decline of 3.2 percentage points in the share of renters with high rental costs from 42.7 percent to 39.5 percent between 2009 and 2011, and Buffalo, N.Y., with a decline of 3 percentage points from 45.6 percent to 42.6. Rental costs • The median monthly rent plus the estimated cost of utilities (gross rent) was highest in San Jose, Calif. ($1,460) followed by Honolulu ($1,419). • The lowest median monthly rent plus the estimated cost of utilities (gross rent) was $502 in Wheeling, W.Va., and $536 in Johnstown, Pa. • Despite the large share of metro areas with declining vacancy rates, which could signal rent increases, 57 metro areas had gross rent declines and only 23 had gross rent increases. Rental vacancy rate • At 40.3 percent, the Myrtle Beach, S.C., metro area’s rental vacancy rate was the highest in the nation. • Among the 50 most populous metro areas, the increase in the rental vacancy rate in Richmond, Va. (from 7.8 percent to 13.2 percent) was the largest, followed by Virginia Beach, Va. (from 6.2 to 8.5 percent) and St. Louis (from 6.5 to 7.9 percent). • Among the 50 most populous metro areas, San Jose, Calif. (2.7 percent) and Milwaukee (3.5 percent), had the lowest rental vacancy rates but were not statistically different from each other.   Renter share of total households • Among the 50 most populous metro areas, the areas with the highest share of renting households were Los Angeles (50.8 percent) and New York (48.9 percent). Physical characteristics of housing Another brief released today is Physical Characteristics of Housing. Based on American Community Survey data covering 2009 to 2011, it has statistics on basic physical and structural characteristics of the total housing inventory at the national level and metro level. According to the American Community Survey, there were 131.8 million housing units in the United States on average from 2009 to 2011, with 81.1 million (61.5 percent) single-family houses not attached to another structure. In terms of current housing inventory in the U.S., more than 95 percent of the nation’s metro areas have detached, single-family houses as the primary housing structure. Only 6 percent of all housing units in the United States were newer houses (2005 or later), while older houses (before 1950) accounted for 19.3 percent of the total housing inventory. Housing inventory • Metro areas with the lowest shares of detached, single-family houses of the housing inventory were New York (36.3 percent), Naples, Fla. (40 percent) and Miami (42.3 percent). • Three metro areas had mobile homes account for more than 25 percent of their housing inventory: Farmington, N.M. (32 percent), Yuma, Ariz. (29 percent) and Lake Havasu City, Ariz. (26.7 percent). Newer/older houses • Newer houses accounted for more than 10 percent of the housing inventory in 39 metro areas. Gulfport, Miss. (16.4 percent) was the only metro area with more than 15 percent of its housing inventory built in 2005 or later. • Houses built before 1950 exceeded 45 percent of the housing inventory in Elmira, N.Y. (49.5 percent), Scranton, Pa. (48.8 percent), Johnstown, Pa. (47 percent), and Pittsfield, Mass. (46.9 percent). © 2013 Florida Realtors® Fla. Insurance Commissioner: Buy flood insurance now TALLAHASSEE, Fla. – April 16, 2013 – Florida Insurance Commissioner Kevin McCarty encourages Floridians to prepare for the upcoming 2013 hurricane season by purchasing flood insurance now. Most flood insurance policies – with a few exceptions – don’t take effect for 30 days. The National Flood Insurance Program (NFIP) administers the coverage rather than local insurers, and private policies – if available – generally cost significantly more. Homeowners’ policies generally cover water damage from wind and storms, but they don’t cover rising water in a flood, even though it’s the nation’s most common natural disaster. McCarty cites another reason to buy flood insurance sooner rather than later: NFIP policy rates are set to rise on Oct. 1, 2013. McCarty calls the increase “significant.” “Florida’s risk for severe weather is well-known and, even though a hurricane has not impacted our state in recent years, several tropical storms have caused significant flood damage to many Floridians,” says McCarty. “Regardless of the storm type, I strongly urge Floridians to prepare now and purchase flood insurance by May 1, as a typical flood insurance policy takes 30 days to become effective. This will ensure you are covered on June 1, the first day of hurricane season.” Florida consumers can purchase flood insurance from NFIP for up to $250,000 for property damage and $100,000 for personal contents. Excess flood insurance can be purchased for homes valued at more than $250,000. NFIP coverage is also available for commercial structures at $500,000 for building coverage and $500,000 for contents coverage. Check with an insurance agent for more information about access to the NFIP. In July 2012, the U.S. Congress passed the Flood Insurance Reform Act of 2012 extending the NFIP through Sept. 30, 2017. Key provisions of this legislation will be implemented over time and include raising premium rates to reflect the actual flood risk of the program, phasing out subsidies on properties with repetitive losses, allowing coverage availability for multifamily properties and minimum deductibles for flood claims, etc. To learn more, visit the new Hurricane Resource website page hosted by the Florida Insurance Commission. For more info on the National Flood Insurance Program, visit the federal website FloodSmart.gov. © 2013 Florida Realtors®     Meet your new landlord, Wall Street WEST PALM BEACH, Fla. – April 16, 2013 – Palm Beach County real estate investor Chip Bryan added 35 homes to his expanding cache in the first 60 days of the year. Backed by a private equity fund, he’s in buy, hold and rent mode. And he’s in a hurry. Bryan’s competition is America’s financial masterminds, corporate behemoths who have set their sights on Florida as Wall Street buys up Main Street. Another twist in the nation’s evolving housing market has hedge funds and multi-billion dollar companies becoming the landlords of the future, snapping up discounted single-family homes to rent out as they’ve done in the past with commercial properties and multi-family apartments. It’s been just a year since a spontaneous comment by billionaire Warren Buffett ignited the corporate world’s home-buying spree. But already the New York-based Blackstone Group has 20,000 homes nationwide, including 4,000 in Florida. Canada’s Tricon Capital, working with Lake Success Rentals, claims a bounty of 1,500 homes in South Florida and North Carolina. Colony Capital, based in Santa Monica, Calif., just announced its intention to buy 1,000 South Florida homes with a $2 billion nationwide investment. One of the more aggressive buyers in South Florida is the Connecticut-based Starwood Property Trust. Despite having “no news to share” when contacted by The Palm Beach Post for this story, the company has picked up more than 80 Palm Beach County homes at foreclosure auction since it began buying in late November. “This business used to be a subculture of deal makers and opportunists, mostly Realtors and contractors,” said Bryan, managing partner of Boca Raton-based Rebound Residential. “Then Wall Street arrived.” Don’t be late on rent The rapid-fire acquisitions are driven by a murky shelf life. Climbing home prices eat into profit, meaning a tipping point will arrive when the buy-hold-rent business model no longer makes sense. And unlike the mom and pop landlords of lore who may let a rent check slip in late now and then, corporations are all about the bottom line. During a Starwood Property earnings conference call in February, one executive likened buying homes to trawling for tuna. You catch a lot of fish, keep the tuna, and throw everything else back in the ocean. “It’s an interesting little business,” he said about the now-muddled American Dream. “We’ll see if it becomes a big business for us.” In late February 2012, Berkshire Hathaway Chairman Buffett sat in a director’s chair on CNBC’s Squawk Box and said if he had a way of managing them, he would buy “a couple hundred thousand single family homes.” $37 million in this county By April, the Blackstone Group was in the single-family landlord business, investing $3.8 billion nationwide. Blackstone created the new housing firm Invitation Homes to market and manage the rentals, buying heavily on Florida’s west coast with at least 700 homes in Hillsborough County, according to property appraiser records. Its South Florida purchases include about 150 homes in Palm Beach County, which cost a combined $37 million, according to the property appraiser’s office. Blackstone has another 500 homes in Broward and Miami-Dade counties. Invitation Home executives said there is no target for the number of properties the company wants to buy, which are purchased at foreclosure auctions and through traditional sales. The company, based in Dallas, has about 900 employees nationwide. “This is a growing market where people, more and more, are becoming renters either by choice or because of economic circumstances,” said Marcus Ridgway, chief operating officer for Invitation Homes. It’s difficult to get an exact measure of the large firms’ stockpile of homes in Florida because they often buy under multiple spin-off corporations with different names. Blackstone, for example, has bought under THR Florida, LLC. Starwood Property Trust uses Srp Sub, LLC. California-based Waypoint Homes, which is buying in Broward County with an intention of moving north into Palm Beach, is using the name Adalwin, which regional director Andrew Ginsburg said is a German name that means “noble friend.” ‘Sweet spot’ price Tricon Capital Group announced its partnership with Lake Success in July 2012 as part of an aggressive push to buy more distressed real estate. The basic business plan, said Lake Success co-founder Barry Bergman, is to buy homes at a “sweet spot” of between $75,000 and $150,000, spend an average of $15,000 on repairs, and rent them out until housing prices increase enough that it makes sense to sell. Lake Success has spent about $19.6 million in Palm Beach County for 140 homes. “If the market changes and home prices go crazy, then maybe we’ll sell them in five to 10 years,” said Bergman, whose firm buys at auction and through bulk sales of distressed homes. “But we think there is a long term paradigm shift in the affordability of people to own homes. There is a definite portion of this population who will be renters for a while and want to rent in nice communities.” Bryan, of Rebound Residential, said his company puts between $10,000 and $25,000 into remodeling a home before renting it out. The cleanup job at a home on Cam Lee Road in suburban West Palm Beach wasn’t even finished before potential renters started calling. The house is on a cul-de-sac with three bedrooms, two bathrooms, a big backyard and wood flooring. The company paid $80,100 for the home in February through a short sale. The previous owner bought in 2006 for $250,000. “Our game plan is to buy and rent for the long term, but we’re trying to be flexible because we don’t know how long this window will be open,” Bryan said. The general idea is the rent-and-hold model will work for another 18 months to two years until sale prices increase to an extent that it’s no longer profitable, said Jim Banford, chief executive of Real Estate Asset Disposition Corp., which has its main office in West Palm Beach. Could be a gamble Banford’s company, which bundles properties to sell in bulk, is working with three funds to buy discounted homes. But it’s all a bit of a gamble in a market known to be unpredictable. While more than 109,000 Palm Beach County homes have been foreclosed on since 2008  – creating renters out of thousands of former homeowners  – the seven-year ban on getting another mortgage has been reduced to three or less for some borrowers. That kind of market shift is better for traditional flippers, who have been frustrated by the influx of corporate buyers. Don Cameron, a real estate investor who owns a South Florida franchise of We Buy Ugly Houses, is concerned the Wall Street buyers are paying too much for homes, artificially driving up prices. He said the regulars at Palm Beach County’s online foreclosure auctions have backed off bidding because the companies are paying “maximum dollars.” “In the last seven, eight, 10 months, the market has been changing and changing rapidly,” said Cameron, whose firm bought about 100 homes in the past year to renovate and sell. In 2010, just 8.8 percent of homes bought at Palm Beach County’s foreclosure auction were purchased by third-party buyers who are typically investors. That increased to 28 percent during the first quarter of this year, according to the Palm Beach County Clerk and Comptroller’s office. Instead of curtailing his buying, Bryan, a former flipper, changed his business model. He said he saw the industry morphing in mid-2011 and began buying with the intent to rent in 2012. He believes local companies have an edge over Wall Street because they know the area better. Before buying a home he’ll spend an average of 50 hours doing research, taking pictures, even sweet-talking tenants to let him inspect the interior. “Sometimes you get a door in your face,” he said. “It can be time consuming.” Rebound Residential has about 100 homes in Palm Beach and Broward counties, up from just 25 a year ago. The Camp Lee Road home got a fresh coat of a “rice grain”-colored paint, new countertops and updated fixtures. It was leased for Rebound’s full asking price  –  $1,395 per month  – 45 days after the company closed on it. The typical turnaround time is about 75 days. “We consider ourselves to be midsized players, and are content in that position,” Bryan said. “To us, it is quality over quantity every time.” Copyright © 2013 The Palm Beach Post (West Palm Beach, Fla.) Distributed by MCT Information Services. Unmarried with children: cohabitation a new norm WASHINGTON – April 16, 2013 – Unmarried couples who live together are staying together longer than in the past – and more of them are having children, according to the first federal data out today that details just how cohabitation is transforming families across the USA. For almost half of women ages 15-44, their “first union” was cohabitation rather than marriage, says the report from the National Center for Health Statistics. For less than a quarter, the first union was marriage. The report was based on in-person interviews between 2006 and 2010 with 12,279 women ages 15-44. “Instead of marriage, people are moving into cohabitation as a first union,” says demographer Casey Copen, the lead author. “It’s kind of a ubiquitous phenomenon now.” Among the findings: • As a first union, 48 percent of women cohabited with a male partner, up from 43 percent in 2002 and 34 percent in 1995. • 23 percent of first unions were marriages, down from 30 percent in 2002 and 39 percent in 1995. The percentage of women who cohabited as a first union increased for all races and ethnic groups, except Asian women. Among Hispanics, the percentage increased 57 percent; for whites, 43 percent; for blacks, 39 percent. • 22 months is the median duration of first cohabitation, up from 20 months in 2002, 13 months in 1995. • 19 percent of women became pregnant and gave birth in the first year of a first premarital cohabitation. “The United States has long had the shortest cohabiting relationships of any wealthy nation and now these relationships are lengthening,” says sociologist Andrew Cherlin of Johns Hopkins University in Baltimore. Demographers say education plays a huge role. The data show 70 percent of women with no high school diploma cohabited as a first union, vs. 47 percent of those with a bachelor’s degree or higher. For women ages 22-44 with higher education, cohabitation was more likely to transition to marriage within three years (53 percent) than for those who didn’t graduate high school (30 percent). “What we’re seeing here is the emergence of children within cohabiting unions among the working class and the poor,” Cherlin says. “Having children within cohabiting unions is much more common among everybody but the college-educated.” “Cohabitation is a common part of family formation in the United States, and serves both as a step toward marriage and as an alternative to marriage,” the report says. Mark Mather, a demographer at the Population Reference Bureau, a Washington, D.C.-based non-profit research organization, says education is the “main determining factor of whether this is a transition to marriage or maybe a short-term union.” “Those with less education are much more likely to break up,” he says. “They may enter a second or third cohabiting union. There tends to be a lot more instability.” Sociologist Sarah Hayford of Arizona State University in Tempe, who studies cohabitation, says cohabitation is complicated. It’s “playing different roles for different people.” Copyright © USA TODAY 2013