Mortgage rates and the housing market

[Lennys Tap]

The areas with the largest increases in housing on the market though has been in areas like Naples, Cape Coral and Sarasota. I’m not sure this proves or disproves your point but I think there are a lot of people with second homes that are exiting the market.

Purely anecdotal, but my community (Naples, 296 doors, mix of condos, villas and single family homes) has seen prices rise 150 - 200% in the last 6 years. Still a senior demographic, but the average age has actually fell from 75 to 67.5 in that time. Not more than a handful carry mortgages. 6-12 months ago places were selling 50 - 150,000 over asking price in a week. Now, 95 -100% of asking price usually within 30 days. I expect further softening but nothing radical. 2nd homes are a luxury in down markets but are less risky when the community as a whole is not leveraged.

[rocky_warrior]

I expect further softening but nothing radical.

This I agree with.  With an asterisk before softening. 

Charmin ain't coming.

[Herman Cain]

Goose:

Florida has some of the most cyclical real estate prices in the known universe. Period.

At the last real estate bust, 2008, our county (Indian River, located 70 miles north of Palm Beach and 60 miles south of the Space Center) had enough bankrupt real estate developments to make any self-respecting developer blush. Everywhere, there was vacant land that had been prepped for development but stopped cold as prices fell and demand went non-existent. We bought at the end of that cycle on a barrier island 1/4 mile from the Atlantic Ocean.

At the time, we bought a 2,800 square foot house, which we sold at nearly 2.5x what we paid for it after eight years. We sold our Illinois home and consolidated in Indian River County. We rent when we go back to Chicago.

Now, all of those 2008 bankruptcies have been acquired and filled in. Houses that sold in the $300,000s ten years ago are now selling for $1 million or more. And those have not cooled off yet because, as one poster noted, much of our market is cash purchases. New construction on our island in some cases is going for as much as $60 million if you're on the ocean. Off the island, prices are comparatively modest ($350,000 and up). Our community benefits from having a large number of millionaires here and heavy philanthropy. It also benefits from not being Miami, Palm Beach or Orlando.

If you're close to the ocean, the price for a home is at a premium. Further inland and things are more modest. Get out near Interstate 95 and things are downright affordable.

Finally, for those of you who ridicule us, so what if our state has a lot of boomers? We are growing like mad down here and that's not ALL old people. Folks of all ages come here because the climate is really nice eight months of the year and tolerable 10 months. Our state fosters economic growth, even if our governor, in his rodent control effort, took on the state's largest private sector employer. Our taxes are reasonable and our government services actually aren't bad. Now, if we could do something about our crappy healthcare in Indian River County!

We are on the Ocean on a barrier island in Florida . The home values are strong, Insurance is hard to find and expensive and property taxes are high. Demand is still strong for these properties . As the most desirable ones rarely trade and stay in their families .

Property Taxes and insurance combined 50 K . Maintenance high, had to buy three new HVAC units over the course of last year which cost another 40 K and they will last maybe 8 years due to salt air

Not too many retirees where we live . Neighbors know each other and its a lot of fun .

Came from an oppressive tax situation in NY. Annual Income tax savings are about  750 K which helps the cause .

Inland values definitely are more cyclical . The better Country club gates communities tens to hold their values well, they dip for sure , but rebound quick

[PointWarrior]

"Annual Income tax savings are about  750 K which helps the cause ."


Wow, saving 750K in annual income tax, surprised you spend so much time posting Hauser's stat lines every game. I assume you have a servant posting Hauser stat lines for you?




 

[rocky_warrior]

Wow, saving 750K in annual income tax, surprised you spend so much time posting Hauser's stat lines every game. I assume you have a servant posting Hauser stat lines for you?

Please refer to him as papa Hauser.  Or papapaghzxcbflhhhhhgh.   Either one is fine.

[The Hippie Satan of Hyperbole]

Purely anecdotal, but my community (Naples, 296 doors, mix of condos, villas and single family homes) has seen prices rise 150 - 200% in the last 6 years. Still a senior demographic, but the average age has actually fell from 75 to 67.5 in that time. Not more than a handful carry mortgages. 6-12 months ago places were selling 50 - 150,000 over asking price in a week. Now, 95 -100% of asking price usually within 30 days. I expect further softening but nothing radical. 2nd homes are a luxury in down markets but are less risky when the community as a whole is not leveraged.

What Wags and you are saying makes sense.

[Skatastrophy]

"Annual Income tax savings are about  750 K which helps the cause ."


Wow, saving 750K in annual income tax, surprised you spend so much time posting Hauser's stat lines every game. I assume you have a servant posting Hauser stat lines for you?

My buddies have a similar take when their biz went public and they each had a 9 figure net worth, suddenly. They each bought "primary" homes in Miami Beach and spend enough time down there for tax reasons, but they still mostly live in NYC because they're in their 40s and Florida isn't their speed.

[Uncle Rico]

My buddies have a similar take when their biz went public and they each had a 9 figure net worth, suddenly. They each bought "primary" homes in Miami Beach and spend enough time down there for tax reasons, but they still mostly live in NYC because they're in their 40s and Florida isn't their speed.

That’s why I own multiple places in Florida.  I never visit them but rent them out to immigrant families.

[dgies9156]

Since there's a lot of talk about buying in Florida, some thoughts about Florida living and homebuying:

1) Construction -- If you are looking at a Florida house, consider when it was built. In 1995, Hurricane Andrew reduced Homestead to rubble. Our legislature got serious and went from some of the softest building codes in the first world to some of the toughest. Look for reinforced concrete walls and impact resistant windows. Oh, and make sure the roof is tightly strapped to the house. This will help ensure you aren't homeless if a hurricane visits and your insurance rates will be lower. This is one of the things our legislature did well.

One construction issue in Florida today relates to condos. After Sunrise (notice a pattern here?), the legislature got tough on condos. Almost every condo building more than 30 years of age in Florida has been required to do an engineering study. Engineers are finding billions of dollars of deferred maintenance, sacrificed on the altar of low HOA fees. Make sure the maintenance has been addressed. Otherwise, expect either a massive one-time assessment or a big increase in fees.

2) Taxes -- Yes, Brother Herm was right. They're a lot lower. Everyone knows we have no state income taxes. Our state constitution calls for summary capital punishment for any politician who ever utters the words "state income tax." Our sales taxes are less than or on par with the Chicago area and our property taxes are reasonable and increases capped. We live off tourism and our government comparatively is efficient. It will be interesting to see what happens when and if Florida ever stops growing and whether our state can avoid income taxes -- but that's down the road a generation, or two, or six.

3) Home Maintenance -- Be prepared for some surprises. Like Herm, we've replaced two compressors in 10 years. In Illinois, I expect a compressor to last 20 years. In Florida, if the compressor does 12, you've lottoed. Also, many Florida homes have pools. Pool pumps, leaks and equipment replacement are very expensive. We've also had to do $17,000 in roof repairs in the last two years. This is not uncommon in our state because of salt near the ocean, heavy rains and extreme heat. Replace a roof? Yeah, count on a ridiculous cost!

4) Insurance -- OK, it's expensive too. We're not as bad as Brother Herm is -- about $5,000 -- but we don't live directly on the ocean either. We're 1/4 mile away. We looked at a frame home without hurricane shutters or impact resistant windows when we bought our current home two years ago. We were told the cost for insurance would be $15,000. We looked elsewhere. Florida saying: What do they call frame houses after a hurricane? Answer: kindling!

5) Alligators -- Florida's raccoons. Don't bother them. They won't bother you. But watch your dog if you live on the mainland near a retention pond (what our swarmey developers call "lakes").

6) HOAs -- Yeup, a very big part of Florida living. Count on your neighbor telling you what's wrong with your house. Or your lifestyle. Seriously, HOAs can either be helpful, as in maintaining yards, ensuring things in the community work and keeping the swimming pool up, or they can be like Cynthia on the Geico commercial a few years ago. HOAs are all but mandatory for condos and gated communities. We have had two. One was awful. The one we have now is reasonable.

7) Politics -- Once upon a time, Florida was a swing state that decided elections. Not any more. Much to the chagrin of our local media, we now have 900,000 more Republicans than Democrats. That means politicians bypass Florida and don't spend money here. Just like New York, or Illinois, we have some wackos here! But our's are conservative, like book banning and think fluoride in the water is a plot by Fidel Castro's successors. Oh, and don't ever bring up Castro around our state's Cuban expatriate population. They believe Justin Trudeau is Margaret Trudeau's and Fidel Castro's love child. Yeup, some do!!!!!! We try avoid to political discussions whenever we can (like Scoop), but it's awfully hard sometimes (like Scoop). My moderately liberal wife thinks the whole state is wacky. She's part of an underground organization called "Florida Democrats."

[MU82]

"Annual Income tax savings are about  750 K which helps the cause ."


Wow, saving 750K in annual income tax, surprised you spend so much time posting Hauser's stat lines every game. I assume you have a servant posting Hauser stat lines for you?

Yeah, that's good make-believe income for a make-believe guy.

[dgies9156]

Yeah, that's good make-believe income for a make-believe guy.

Much of what Brother Herm says about his home in Florida rings true. Our combined taxes, HOA and insurance are about $25,000, so I can see his point. His thoughts about high-end housing in Florida are spot-on.

He may be referring to his business taxes. If he's got decent pre-tax income on his business, that tax savings is possible compared to New York. Ya never know.

[MUBurrow]

Goose
No area is immune from price declines in its real estate. Florida’s recent boom is due for (and already in the early stages) of a correction. Florida is a big state, though, and some areas are less vulnerable. Places where all cash/no mortgage are the rule won’t (imo) suffer as much as others.

Lenny, do you think that so few of these properties are mortgaged has anything to do with insurance rates? (Nod to Sultan who mentioned that a bit earlier in the thread).  I've heard from some folks that flood and hurricane insurance has gotten so insanely expensive - and is obviously required if a buyer is taking out a mortgage - that it is starting to shrink the market, especially for larger properties.  Or is volume of no mortgage properties just a function of the average age of buyers being so relatively high, and just having the cash available?

[Goose]

Wags

I get weekly updates from a real estate agent in Sarasota and there definitely is a big uptick in inventory and price reduction. Not exactly sure how I got on her list, but I get weekly updates on condos between $300-400k. A year ago, I would get about ten listings and now well over twenty.

[Herman Cain]

Since there's a lot of talk about buying in Florida, some thoughts about Florida living and homebuying:

1) Construction -- If you are looking at a Florida house, consider when it was built. In 1995, Hurricane Andrew reduced Homestead to rubble. Our legislature got serious and went from some of the softest building codes in the first world to some of the toughest. Look for reinforced concrete walls and impact resistant windows. Oh, and make sure the roof is tightly strapped to the house. This will help ensure you aren't homeless if a hurricane visits and your insurance rates will be lower. This is one of the things our legislature did well.

One construction issue in Florida today relates to condos. After Sunrise (notice a pattern here?), the legislature got tough on condos. Almost every condo building more than 30 years of age in Florida has been required to do an engineering study. Engineers are finding billions of dollars of deferred maintenance, sacrificed on the altar of low HOA fees. Make sure the maintenance has been addressed. Otherwise, expect either a massive one-time assessment or a big increase in fees.

2) Taxes -- Yes, Brother Herm was right. They're a lot lower. Everyone knows we have no state income taxes. Our state constitution calls for summary capital punishment for any politician who ever utters the words "state income tax." Our sales taxes are less than or on par with the Chicago area and our property taxes are reasonable and increases capped. We live off tourism and our government comparatively is efficient. It will be interesting to see what happens when and if Florida ever stops growing and whether our state can avoid income taxes -- but that's down the road a generation, or two, or six.

3) Home Maintenance -- Be prepared for some surprises. Like Herm, we've replaced two compressors in 10 years. In Illinois, I expect a compressor to last 20 years. In Florida, if the compressor does 12, you've lottoed. Also, many Florida homes have pools. Pool pumps, leaks and equipment replacement are very expensive. We've also had to do $17,000 in roof repairs in the last two years. This is not uncommon in our state because of salt near the ocean, heavy rains and extreme heat. Replace a roof? Yeah, count on a ridiculous cost!

4) Insurance -- OK, it's expensive too. We're not as bad as Brother Herm is -- about $5,000 -- but we don't live directly on the ocean either. We're 1/4 mile away. We looked at a frame home without hurricane shutters or impact resistant windows when we bought our current home two years ago. We were told the cost for insurance would be $15,000. We looked elsewhere. Florida saying: What do they call frame houses after a hurricane? Answer: kindling!

5) Alligators -- Florida's raccoons. Don't bother them. They won't bother you. But watch your dog if you live on the mainland near a retention pond (what our swarmey developers call "lakes").

6) HOAs -- Yeup, a very big part of Florida living. Count on your neighbor telling you what's wrong with your house. Or your lifestyle. Seriously, HOAs can either be helpful, as in maintaining yards, ensuring things in the community work and keeping the swimming pool up, or they can be like Cynthia on the Geico commercial a few years ago. HOAs are all but mandatory for condos and gated communities. We have had two. One was awful. The one we have now is reasonable.

7) Politics -- Once upon a time, Florida was a swing state that decided elections. Not any more. Much to the chagrin of our local media, we now have 900,000 more Republicans than Democrats. That means politicians bypass Florida and don't spend money here. Just like New York, or Illinois, we have some wackos here! But our's are conservative, like book banning and think fluoride in the water is a plot by Fidel Castro's successors. Oh, and don't ever bring up Castro around our state's Cuban expatriate population. They believe Justin Trudeau is Margaret Trudeau's and Fidel Castro's love child. Yeup, some do!!!!!! We try avoid to political discussions whenever we can (like Scoop), but it's awfully hard sometimes (like Scoop). My moderately liberal wife thinks the whole state is wacky. She's part of an underground organization called "Florida Democrats."

Brother dgies956:
Relative to point 1, we invested in a supplemental home on the inland side of the Intercoastal. They frequently close the bridges after the hurricanes hit sometimes for extended times. Because of that we have encountered point 5 and 6 above. Can’t let the dog near the pond and HOA mandated improvements within 60 days. 

[Lennys Tap]

Lenny, do you think that so few of these properties are mortgaged has anything to do with insurance rates? (Nod to Sultan who mentioned that a bit earlier in the thread).  I've heard from some folks that flood and hurricane insurance has gotten so insanely expensive - and is obviously required if a buyer is taking out a mortgage - that it is starting to shrink the market, especially for larger properties.  Or is volume of no mortgage properties just a function of the average age of buyers being so relatively high, and just having the cash available?

Burrow

I think for properties already bought that age and cash on hand have been the driving factors, especially for relatively moderately priced ones. Going forward, skyrocketing insurance costs will make self insurance a legitimate (preferred?) option for those who can avoid a mortgage. The double edged sword - higher prices plus expensive insurance will imo shrink and therefore soften the market some in at least the near term.

[dgies9156]

Burrow

I think for properties already bought that age and cash on hand have been the driving factors, especially for relatively moderately priced ones. Going forward, skyrocketing insurance costs will make self insurance a legitimate (preferred?) option for those who can avoid a mortgage. The double edged sword - higher prices plus expensive insurance will imo shrink and therefore soften the market some in at least the near term.

I'm going to be optimistic. I think insurance rates have peaked.

Most of the homes built in the last 20 years in Florida were built to post-Andrew hurricane standards. Go back and see what happened in Ft. Myers in some of the newer neighborhoods, where homes were built like nuclear bunkers. Damage was minimal.

Second, insurance underwriters are getting smarter. They're inspecting homes BEFORE they insure them. On my home, they required a new water heater. On the home we sold, they required that trees be trimmed away from the house. We've heard of stories where homeowners have had to install new roofs for homes to be insured. They check everything and require proof of compliance before their policies go effective.

I think they're reducing risk and with it, a reduction in premiums are coming. Now, if I have a frame house with ordinary windows.... OUCHHH!!!!!

[MU82]

Not sure why you think rates have peaked. If you look at that link MUFiC posted in the US Economy thread, you'll see that not just Florida but numerous states have trended higher and higher for home insurance (and car insurance). Florida's a sneaky-expensive state for one that doesn't have a state income tax, and there's no sign that's coming down - except maybe the actual cost of buying houses. Those prices seem to be coming down.

[MU Fan in Connecticut]

(I'll repost here )

Money magazine must read Scoop.  This came up in my Google news feed from today.
I didn't want to put in the EV thread and drift it further away.


https://money.com/no-income-tax-states-expensive/

Why States With No Income Tax Aren't as Affordable as They Seem
By: Brad Tuttle
Editor: Julia Glum
Published: May 30, 2024 | 9 min read

There are nine states that don’t tax workers' wages. But just because a state doesn't have income taxes doesn't necessarily mean it's an affordable place to live.

If a state doesn’t charge income tax, it must find revenues elsewhere, which explains why other tax rates tend to be high in these locations. What’s more, the cost of living in some states with no income tax has soared in recent years, often as a result of skyrocketing home insurance prices related to climate change, as well as higher housing prices in general.

The point is: Moving to a state with no income tax is not a slam-dunk strategy to save money. In fact, if you don’t do the math to factor in other local living expenses, it can seriously backfire. (FYI, the states with no ordinary income tax are Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming.)

“The correlation between the cost of living and the absence of income tax in a state is relatively weak,” Andrey Yushkov, a senior policy analyst with the Center for State Tax Policy at the nonpartisan nonprofit Tax Foundation, explains to Money via email. “Many other factors affect the cost of living, including property and sales taxes, excise taxes and home insurance. Therefore, the absence of income tax does not necessarily imply that it is cheaper for everyone to live there.”

(See link for rest of article.)

[4everwarriors]

That’s why I own multiple places in Florida.  I never visit them but rent them out to immigrant families.

You, obviously, still enjoy playin' Monopoly, aina?

[21Jumpstreet]

Since there's a lot of talk about buying in Florida, some thoughts about Florida living and homebuying:

One construction issue in Florida today relates to condos. After Sunrise (notice a pattern here?), the legislature got tough on condos. Almost every condo building more than 30 years of age in Florida has been required to do an engineering study. Engineers are finding billions of dollars of deferred maintenance, sacrificed on the altar of low HOA fees. Make sure the maintenance has been addressed. Otherwise, expect either a massive one-time assessment or a big increase in fees.

This is a stone cold fact. Bought my condo in New Smyrna Beach in 2019, HOA a month was $400. Grew to $700 this past year always with a “pay as you go” for any and all additional assessments while not funding reserves. Largest additional annual assessment had been about $6K.

With the new FL laws, we have to fully fund our reserve on an annual basis which now might be in the $300-500K range spread out over 35 units. It is a substantial change. We have done a good job keeping up on the building, so our engineering study came back in pretty good shape. I think the law goes into effect in 2025, maybe there will be a change in the final rules.

[MU82]

This is a stone cold fact. Bought my condo in New Smyrna Beach in 2019, HOA a month was $400. Grew to $700 this past year always with a “pay as you go” for any and all additional assessments while not funding reserves. Largest additional annual assessment had been about $6K.

With the new FL laws, we have to fully fund our reserve on an annual basis which now might be in the $300-500K range spread out over 35 units. It is a substantial change. We have done a good job keeping up on the building, so our engineering study came back in pretty good shape. I think the law goes into effect in 2025, maybe there will be a change in the final rules.

Gov. DeSantis taking care of his peeps.

[TAMU, Knower of Ball]

82

You should cash out of some of your stocks and buy your daughter a home.

They wouldn't appreciate it. No skin in the game

[Lennys Tap]

With the new FL laws, we have to fully fund our reserve on an annual basis which now might be in the $300-500K range spread out over 35 units. It is a substantial change. We have done a good job keeping up on the building, so our engineering study came back in pretty good shape. I think the law goes into effect in 2025, maybe there will be a change in the final rules.

Do you think fully funding your reserves is a bad thing?

[dgies9156]

Do you think fully funding your reserves is a bad thing?

As a former appointed financial officer for an HOA, that's the direction I pushed our HOA to go. With Board approval, I ordered a replacement cost study and engineering analysis of our major infrastructure. We were underfunded but don't fall under the new law because we were a single-family residence community.

I'm a big believer in full funding of reserves and of an "emergency fund," that would cover clean-up from such things as hurricanes, other bad storms and unexpected calamities (like a meteor strike). Special assessments are really, really bad!

[Lennys Tap]

As a former appointed financial officer for an HOA, that's the direction I pushed our HOA to go. With Board approval, I ordered a replacement cost study and engineering analysis of our major infrastructure. We were underfunded but don't fall under the new law because we were a single-family residence community.

I'm a big believer in full funding of reserves and of an "emergency fund," that would cover clean-up from such things as hurricanes, other bad storms and unexpected calamities (like a meteor strike). Special assessments are really, really bad!

100% agree