Did Home Prices Bottom in Florida?
October 29, 2011I predicted it about 4 months ago and new sales are now tracking higher in Florida. The rebound in Florida home prices is a result of low interests rates, lower existing home inventory levels, and new bank incentives such as Bank of America's new modification outreach.
Banks are finally realizing that they are far better off to offer homeowners refinance options and modifications at low 4% rates then recast their mortgages which drives money into the economy, pushes real estate prices higher, and is a good balance sheet move by keeping the possibility of recovering lost principal.
As homeowners and banks reach out to one another, the result is inventory levels continue to drop and prices go higher. It is in the banks' best interest to do short sales and modifications because this makes a smooth transition to a normal market. The new BOA cash-to-move incentive of $5,000-20,000 is more evidence that the market has significantly improved. Finally through all the pain and chaos here is hope that better decisions are being made at the top.
Prices are firmer this quarter as buyers are willing to pay above comps (comparable properties). The downfall continues to be appraisals which are still caught in no-man's land. Appraisers want to help the deal and will make every attempt to bring an appraisal in line with the contract. But, this is the lagging factor that will be the main drag on the market over the next 16 months. New sales will start supporting the newly found aggressive buyers. Cash sales help the process and there are plenty of cash buyers.
Low balls are out. That's right! Investors that are flipping homes as well as high-end $600,000-$1,000,000 home owners can wait on the best buyer as prices aren't falling away as they have been the past 6 years. While over-pricing a home is not a good idea in any market (see my video on pricing a home in Florida), at least now it's not going to hurt you as long as you have time to wait.
That's the reason banks have slowed their push to foreclose or push out more “bank owned” properties as the market is finally coming their way. They are making money by keeping the inventory levels lower. They gain on what they own and their deficiency spreads are ever so slightly improving.
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