Keys Home Sales Up, Prices Down

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Stats

Homes sales in the Florida Keys were up 34 percent in 2009 compared with 2008.  It's the first time sales have increased over the previous year since 2004, when sales rose 4 percent. About 1,560 Keys homes were sold in 2009 -- roughly 400 more than in 2008. Key West retained the largest share of the market with 533 sales, a 25 percent increase over 2008.

The largest increase in sales activity occurred in the Lower Keys, where 65 percent more homes were sold in all of 2009 over 2008, for a total of 361 sales. The Middle Keys saw a 44 percent increase, while the Upper Keys saw a 21 percent increase.

The Lower Keys have the lowest average sales price, at $391,000. 110 more homes sold in the second half of the year than in the first half, a reversal of the usual pattern in which winter and spring sales outpace those of summer and fall. Activity in the second half of 2009 was partially bolstered by the first-time homebuyer tax credit. The $8,000 tax credit was supposed to expire Nov. 30, but was extended until this April. The greatest amount of activity has been on homes priced under $250,000, which are becoming harder to come by.

Key West saw a 25 percent decline in the average sales price in 2009, decreasing from $612,000 this time last year, to $460,000 currently. The trend was reflected throughout the Keys, where the average price decreased about 23 percent, to $453,000. At the end of 2008, the average sales price was at $588,000, a decrease from $731,000 in 2007.

Despite the large increase in the number of homes sold, the Middle Keys was hardest hit by the decline in prices, experiencing a 35 percent decrease. The average Middle Keys sales price in 2009 was $429,000, compared with $661,000 in 2008.

Multiple Listing Service (MLS) reports don't capture sales at the Ocean Reef Club, nor do they include properties that were not listed with a Realtor.

Upper Keys

Housing prices and the amount of inventory remain higher in the Upper Keys than most other parts of the island chain, an ominous sign that recovery could still be a ways off. The average sales price in the Upper Keys for open-water homes dropped 17.5 percent in 2009. Closing prices on canal-front homes dropped 22.3 percent, dry-lot homes went down 16.4 percent and condos plummeted nearly 30 percent. Inventory dropped at a slower rate than elsewhere in Monroe County. At the end of 2009, there were 35 months of properties on the Upper Keys real estate market, down 12 percent from the end of 2008. Inventory throughout the Keys was 28 months, a 26 percent improvement from a year earlier. Both figures remain well above the three to 10 months of inventory that could be found on the market during the boom years of 2002 to 2005.

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Forget the Mortgage, I'm Paying My Credit Card Bill

Amid high unemployment and sliding home prices, a growing number of struggling consumers are doing what was once considered unthinkable: paying their credit card bills instead of their mortgages. A recent study developed by TransUnion found the percentage of Americans who were current on their credit cards but behind on their mortgage increased to 6.6 percent in the third quarter of 2009, up from 4.3 percent in the first quarter of 2008. Meanwhile, the share of consumers making mortgage payments on time but behind on their credit cards moved in the opposite direction, sliding from 4.1 percent to 3.6 percent over the same time period.

The data reflects a "fundamental paradigm shift" in the way consumers prioritize payment of debt obligations, says Ezra Becker, of TransUnion. "This is dramatically different," he says. "It is a clear manifestation of the dynamics that lead up to the recession and the recession itself."

Before the housing crisis, bankers typically operated under the assumption that homeowners would do whatever possible to remain current on their mortgage--even if that meant falling behind on other bills. But a combination of factors linked to the current economic mess--falling home prices, high unemployment, and tight consumer credit--have lead many consumers to prioritize credit card payments above mortgage bills.

The development is rooted in the housing bust. When home prices turned south--falling roughly 30 percent from their peak in the second quarter of 2006--a great deal of borrowers watched the value of their homes drop below what they owed on their mortgages. Today, roughly one in four homeowners finds himself in this position, which is also known as being "underwater." Without equity in their homes, such borrowers are more likely to default. "They don't see any value in putting money into an asset that has lost that much value and will probably never regain that value to offset the mortgages," says Celia Chen, of Moody's Economy.com.

Walking away from a mortgage--even, at times, when borrowers can afford it--has become a less radical prospect. Credit cards can be used to pay for basic necessities, like food, gas, or clothes. And with the unemployment rate remaining near double digits, purchasing such items with credit has become more and more essential. At the same time, the tighter credit environment has made credit cards more difficult to obtain.

Still, another key factor is the disparate consequences associated with defaulting on a mortgage versus those for falling behind on a credit card. National anti-foreclosure efforts have worked to significantly extend the time period between a borrower's initial mortgage default notice and the foreclosure itself, says Edward Pinto, a former chief credit officer at Fannie Mae. "The last thing you have to worry about at this juncture is paying your mortgage because by the time they foreclose it could be six months, 12 months, or a year and a half down the road."

A credit card's ability to finance basic necessities make the trends highlighted in the TransUnion study less startling, especially in a time of high unemployment and widespread negative equity. For a borrower who has got a significant cash shortfall, it is a completely rational decision to pay off a credit card bill while defaulting on a mortgage.

Still none of these decisions are simple. When you hear about strategic defaults, and people choosing to walk away from their mortgages, nobody is flip or carefree about that. Decisions about who you are going to pay and who you are not going to pay are incredibly stressful.

Now a word from the Atlanta Federal Reserve Bank

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With last week's capital orders data giving signals of renewed growth in business fixed investment in equipment and software in the fourth quarter, the question turns to whether this growth will be sustained. So lets go to the Fed Reserve map for a survey of Southeastern businesses on what they plan to spend on capital orders within the next six months compared to the last six.

Of note, 36 percent of respondents indicated that they planned to increase spending over the next 6–12 months relative to actual spending over the past 6–12 months. Another 42 percent said they would leave their spending at about the same level (unchanged), and 22 percent indicated that their spending would fall. The difference between those planning to increase spending and those planning to decrease spending equals a net positive of 14 percent.

For those who planned to increase spending on new plant and equipment, the most commonly given reasons (respondents could select more than one reason) were that they expected growth in sales to be high (37 percent of those respondents), or they needed to replace information technology equipment (37 percent of those respondents). Also, 61 percent of those planning to increase spending indicated that at least some of that spending reflects investment that had been postponed because of the recession. Not surprisingly, for those who did not plan to increase spending, the most commonly cited reasons were the expectation of low growth in sales (cited by 47 percent of those respondents) and heightened economic uncertainty (cited by 39 percent of those respondents).

So where does that leave things? Probably with more questions than answers. For instance, the fact that about two-thirds of the firms that are planning on increasing spending are doing so because they had postponed capital expenditures during the recession would be consistent with some bounce in capital spending by businesses following the most recent recession. But how sensitive are firms to changes in economic conditions? Currently, we hear a lot anecdotally that cash is a high priority on firms' balance sheets as a precaution against economic uncertainty. If sales were to increase more than expected, how fast would firms rethink their investment spending plans?

Based on responses from 320 businesses across Alabama, Florida, Georgia, Mississippi, Louisiana, and Tennessee.

The groundhog has spoken

Punxsutawney (puhnk-suh-TAW'-nee) Phil has emerged to see his shadow before chilly revelers in Pennsylvania, meaning winter will last another six weeks.

FannieMae's Loan Workout Hierarchy

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The steps followed by the loan processors in examining what Loss Mitigation Options are available to you (the borrower).

Fannie Mae's loan workout hierarchy requires that you first determine if the Home Affordable Modification Program (HAMP) is appropriate. If the Home Affordable Modification Program is not appropriate, then consider other foreclosure prevention alternatives to resolve delinquencies.

View the Loan Workout Hierarchy fact sheet, which includes descriptions of each loss mitigation option.

Servicers Profit More by Foreclosing rather than Modifying

A new report from the National Consumer Law Center (NCLC) discloses that mortgage servicers – including many large banks – have found it cheaper to foreclose on homeowners than to offer loan modifications that would benefit homeowners and investors.

The result: Americans who might be able to stay in their homes under a loan modification plan are being moved right past that option and on to foreclosure.

The new NCLC report, “Why Servicers Foreclose, When They Should Modify, and Other Puzzles of Servicer Behavior,” reveals that servicers, unlike investors or homeowners, generally don’t risk losing money on foreclosures. In fact, servicers usually make money on foreclosures.