Home Prices Turning the Corner: Are You?

Tampa’s premier home builder, Standard Pacific has recently published an article that sheds light on market conditions and trends in our area. The article is based on a report done by Barclays Capital that forecasts home prices rising as much as 5% – 7.5%!

The article also reveals some significant factors that are pushing home prices in an upward direction and how this is being done in two different types of markets. It gives an interesting look into the prime “A and B” markets, and also tells why the “C, D and F” locations will soon become more desirable.

On a local level, we are seeing this first hand. New homes in New Tampa are in higher demand than previous years and inventory is quite scarce. We are constantly in multiple offer situations and sometimes loosing the bidding war due to home buyers submitting low ball offers that do not hold up. Standard Pacific has a great presence in the New Tampa area and will soon run out of homes to sell. Don’t miss out on a home of your dreams because you still think the market is at the bottom..

Prices of New Homes

New Home prices have turned the corner and forces are driving rising prices in the foreseeable future. In this article, we discuss these forces and reveal the trends that are not evident to those who rely only on publicly-available data to form their views on home prices.

The popular aggregate price indices have shown a modest turnaround in home prices, rising nominally in recent months, but these median readings obscure the dramatic cross-currents that are at work underneath the surface. Effectively, there are two housing markets, each exhibiting distinct price trends. One consists of residential developments that are within a reasonable commute of job centers, with developed shopping and entertainment options and good schools. These are the projects that the builders care about, characterized by strong new-home demand and an increasingly scarce supply of homes and lots. The other “market” is the massive collection of remote lots, struggling subdivisions, and mothballed master-planned communities that were developed during the last year of the boom (2005/2006). Projects with these characteristics are almost completely dormant, and have very little impact on the builders.

Factors that will keep home prices rising in the “A” and “B” (good) locations are:

• New-home inventories are so low that builders who have standing or nearly-finished homes can command higher prices.

• Lot scarcities, expected to worsen in 2013, will force builders to raise prices, and the limited supply of new homes for sale means that builders have more pricing power.

• Rising costs (materials, lot prices, permitting/impact fees, and labor) will force builders to raise prices in order to be profitable.

• Pent-up demand re-emerging (people who were doubling up are now finding jobs and forming their own households, and people who were waiting for prices to bottom are now taking advantage of the buying opportunity and record-low mortgage rates). Household formation rates are forecast to increase by 50% over the next three years.

Meanwhile, in the “D,” and “F” locations, plentiful supplies of bank-owned homes for the moment continue to make new home construction a money-losing proposition. If buyers are willing to commute to those areas (‘drive ‘til you qualify’), they can buy homes from banks, at auction, short-sales, or from investors who bought from the banks or the agencies, and they can often do so at a price that is below replacement cost.

The “C” locations are neither good nor bad at present. While not all “C’s” are created equal, within two years many will rise to “B” status. No builder wants to be “below C level.” (very punny). I like Mike Castleman’s (Metrostudy’s CEO) statement during a presentation to a national builder client that builders will soon be “gnawing at the bone of C lot supplies.”

The Housing Market and Available Lot Supply…or…The ABC’s of VDL’s

At first glance at our data, it appears that there are lots of lots. But are there really?

Builders are complaining that they can’t find lots to buy, yet there is a huge 80-month supply of vacant, developed lots in the markets we track. The problem is that the vast majority of the lots are in the far-flung suburban areas that are NOT on builders’ radar, because they are so overbuilt and over-lotted.

Residential subdivisions that are close to where people work and shop, and within good school districts, are talked about as being in the “A” or “B” submarkets. Those that are farther away from the core, or are otherwise in inferior locations, are given lesser grades.

Builders have little use for those “D” and “F” lots, but have a growing appetite for A, B, and C locations, and it calls to mind the lament of Coleridge’s Ancient Mariner: “water, water everywhere, nor any drop to drink.”

This distinction is of critical importance in the hard-hit ‘bubble markets.’ In South Florida, there are 26,037 vacant, developed lots, but only 7,811 of them (30%) are within what Metrostudy has determined to be “A or B” locations. In Phoenix, there are 83,866 lots, but only 15,998 (19%) are in A/B areas. In Atlanta, there are 140,000 lots, but only 18% are in the A/B locations.

The distinctions become even more striking when one ‘drills down’ to individual submarkets. A market might have a 100-month supply of lots overall, but the submarkets where builders are preparing to build homes might only have a 20-month supply.

It should also be remembered that not all of the A and B lots represent available supply. Most of them are owned by builders or other entities. The barriers to entry into these coveted neighborhoods are high.

There is one major reason why the quality of the location matters: pricing power. Builders who have lot positions in the A and B submarkets not only command a pricing spread over the lesser locations, but they are also (in some cases) able to raise prices. Until six months ago, we had not heard of very many cases of builders raising prices. The fact that some builders are raising prices is of great significance; they would not attempt it if they did not feel secure that the higher prices would stick. This speaks to the new confidence that the builders have that demand is strengthening.

By contrast, in the C, D, and F locations, there are no price increases to be had. In fact, prices of resale homes and REO may still be declining in those areas. It will take time, but sooner or later the price levels in the A and B areas will force more buyers to make longer commutes. “Drive ‘til you qualify” is the expression.

This article was shared by Tampa’s premier home builder, StandardPacific. Information gathered for this article was found at the following sites.

http://www.metrostudyreport.com/national-housing-market/prices-of-new-homes http://money.cnn.com/2012/10/12/news/economy/housing-boom/index.html
http://www.metrostudyreport.com/national-housing-market/the-housing-market-and-available-lot-supply-or-the-abcs-of-vdls

Read More

Real Estate Tips: Buyers Agent for New Construction

Buying a new home can be very exciting, it is important that still being a savvy buyer while getting what you want in your new home. One of the most overlooked factors in a new home purchase is buyer representation. Although many builders are great and have great new homes sales consultants, as a buyer you need to have your own personal advocate and representative! Before viewing new construction homes and reviewing options, it is prudent to speak to a local agent who is familiar with the process and the area.

The prime example of real estate buyers seeking to go it alone is on new construction. Builders make it so convenient and easy to walk into a new community and get set up for your new home. Why would anyone consider having a buyer’s agent with them when viewing new construction? The following represent a few examples of your benefits:

Free Representation

The most important factor for any buyer having a designated agent is representation. This professional is your expert in the marketplace working to help you achieve your goals with having your best interest at heart. For most buyers this is completely free to you. Builders, all sellers, designate a commission right into their sales price; they do not negotiate that price down for new buyers who do not have a buyer’s agent. Would it bring you more comfort having someone in your corner at showings, contract negotiations, incentives from seller to buyer, final walk-thru and closing? I think so! Please be a savvy buyer and contact a buyer’s agent who is familiar with the area and procedures of new construction.

Increased Negotiation

The base price on newly constructed home is one the builders are not going to negotiate on, however most builders are willing to make some upgrades or changes to suit the new homeowner. Here at SI Real Estate our experience has shown us that you can get more by having an experienced agent at your side:

Our of our agents, Katie Crider, was able to negotiate all new flooring on a move-in ready home. They actually pulled up already installed carpet and laid down tile throughout the floor. Another client had all new fans and light fixtures added for no additional cost.

The key is having an agent familiar with what a builder is willing to negotiate on and have them negotiate the contract with you. Our Broker, Nibal Elsaadi, also has had great success with new construction lately. Buyers want to have modern and guaranteed homes. You cannot beat walking into a new home and giving the client exactly what they are looking for. Nibal was able to get one client over $22,000 worth of upgrades for just cost to the builder. It is also very common that he negotiates in closing costs, HOA fees for the first six months, or full appliance packages.

If you are exploring the idea of purchasing any home, again you should have a buyer’s agent! If you are looking to start looking into whether you can afford to purchase a home or have already been prequalified, please contact one of our agents at SI Real Estate. We can be reached at 813.631.5144 or email us at Yourhome@sirealestateinvestments.com. We understand the importance of integrity, hard work, and maintaining clients’ satisfaction.

Read More

Building Permits Fade Faster Than Expected

Single-family housing starts dropped by 21,000 units in April on a seasonally-adjusted annual basis.

The Housing Starts report measures the number of homes on which new construction "broke ground". It's tracked by the U.S. Department of Commerce which releases new data monthly.

Single-family housing starts fell 5 percent as compared to March 2011, and 30 percent as compared to April one year ago. 

The figures were worse than what Wall Street expected. For just the second time in 2 years, monthly single-family housing starts dropped below 400,000 units. In addition, single-family Building Permits fell in April as well, shedding 2 percent from March.

A building permit is a local government's approval to start home construction and when permits are down, new construction follows. This is because 93 percent of homes begin construction within 60 days of permit-issuance.

Fewer permits, as a consequence, means fewer new homes. Therefore, if you're looking at new construction in or around Kent , April's numbers may spark a sense of urgency.

Home prices are a function of home supply and demand and, based on the Housing Starts data, supplies appear headed for a fall. Meanwhile, on the other side of the equation, demand should be rising -- foot traffic is higher, mortgage rates are lower, and job growth is picking up. 

This should lead new home prices higher in time. For now, though, home affordability remains high.

It's a good time to look at new home construction.

Read More

Real Life Real Estate...New Construction vs. Foreclosure

A hot topic for potential homebuyers is, should I look Foreclosures, existing older homes, or New Construction? The hype lately seems to be on Short sales and Foreclosures. Bank owned properties are being snatched up by cash investors and we hear of bidding wars everyday in Tampa over bank owned properties. Investors have money to spend, and no desire to occupy the property personally, they can fix any issues that arise with no problems. It is very enticing for a buyer to see large discounts foreclosed and short sales but what else does a buyer need to consider when deciding on purchasing a home?


SI Real Estate has helped three clients purchase a new Construction home in the last two weeks. What made these buyers decide purchasing a new home was better than foreclosure and existing home options? There is a great website being advertised by Lennar homes, “Buying a New Home vs. a Foreclosed Home”. This website highlights advantages of purchasing new construction. Buyers need to consider all pros and cons of new homes vs. distressed properties before enduring the long process of locating an acceptable Foreclosed home or short sale, and hoping for the best.

Advantages of New Construction

• Affordability- Builder Incentives, Lower prices, and energy efficiency

• Timing- Immediate Occupancy or a set time frame you decide upon

• Customization- You can add the features you want before moving in and all of it is included in price of home.

• Warranties- Any credible builder will provide guarantees or warranties on labor, materials ad structural repairs so buyers can remain worry free.

Foreclosure Information

Florida and Tampa have both been affected by large amounts of Foreclosures for many months. It has impacted the entire real estate market. This could be starting to change however, according to Florida Trend, "For the second month in a row, no Florida cities posted foreclosure rates in the top 20 among U.S. metropolitan areas with a population of 200,000 or more," This is more important once you compare that statistic to projections in 2010 which names 9 metro areas in Florida in the top 20 foreclosures in the country.

There are advantages for certain buyers of short sales and bank owned properties. For instance, for investors with enough cash to purchase and repair the property, a bank owned property could be the best option. All buyers should consider the following precautions when considering Foreclosed properties and short sales. Distressed properties can be very difficult to find financing for. This is not an issue for cash investor and that is why they are collecting so many bank owned properties right now. Another factor to consider is timing, time frames on response and closings can vary greatly for each deal, extremes range from two weeks to two years. Finally, the most important detail to consider in any real estate purchase is knowing the condition of the property. Most foreclosed properties are bought with the understanding there will be no repairs, warranties, or guarantee of their condition.

Buying any property is a big decision, talk to an expert in the area you are considering the purchase. SI Real Estate can help you with all your real estate needs including new and existing homes, and bank owned and short sale properties in the Tampa Bay area. Please call our office at (813)631-5144 or email us at YourHome@SIRealEstateInvestments.com.

Read More