THIS MONTH

· Pg 2    Editorial - Disparate Impact-A Case to Watch.

· Pg 2    Coral Bay Sales Data-1st Half of 2008-Chart

· Pg 3    Coral Bay Home Models

· Pg 3    The Recall

· Pg 4    State Of The Market 2008

· Pg 4       Investors

· Pg 4       Property Taxes

· Pg 4       Insurance

· Pg 5       Population Migration

· Pg 5       Move-up Move-down Problems

· Pg 5       Lending Standards

· Pg 5       SE FL MLS Snapshot—Chart

· Pg 6       Foreclosures

· Pg 6       New Construction

· Pg 6       Public Confidence

· Pg 6       What It All Means

· Pg 6       Yearly Avg Sales-1990-2008

 

EDDIE VELIE,

Consultant, Realtor,

Mortgage Broker, CAM

EXIT United Realty

(954) 263-6287

VelieRealEstate@aol.com

http://VelieRealEstate.com

Copyright, 2008

Velie Real Estate Services, LLC

Articles and opinions here in do not necessarily reflect the opinions of EXIT Realty or any of my business, social, or voluntary affiliations or associations.

No One Knows Coral Bay Like Eddie Velie Consultant, Realtor, Mortgage Broker, CAM

At Home In Coral Bay — July-August, 2008

A Mortgage & Real Estate Newsletter By Eddie Velie Real Estate Services, LLC

IN THIS ISSUE

“The true numbers are much higher. Manually scanning all 68 active listings yields 51 Short sales or 77% of Active listings are short sales.” (in Coral Bay)

      “There were 104 (10.4%) of our Coral Bay homes in the foreclosure process, according to Broward public records, on July 27, 2008.”

         With only 13 home sales in the 1st HALF of 2008, every sale is critical. The policy is destroying our property values because it DECREASES demand. Demand is the number of people who want to buy into Coral Bay. This happens because the cars on the lawns destroy the grass and landscaping, owners put in ugly improvised driveways. Some people may not recommend their friends move into Coral Bay. Demand goes down by keeping immigrants from pooling their income to buy into Coral Bay. If you were selling today, would you rather have 3 incomes pooled together to buy your house, or one income that qualifies to offer you much less? 

         The ticket and tow policy INCREASES supply because our neighbors want to move after being harassed by having their cars towed.

         Here’s irony for you — While recently interviewing a client, they said they wanted to move because there were “too many people living in a house down the street” and they were all parking on the lawn making the neighborhood look bad. When I explained that they had no choice, because of the CDD’s ticket and tow policy, they changed their perspective.

         Having stupid policies is not illegal. Foolishly harassing your constituency is not illegal. But, violating the civil rights of your constituency is. And, punitive damages can be enormous.

         Perhaps it is only ignorance on the CDD boards part. Not any more —.

(Source: Daily Business Review, June 19, 2008, by Bud Newman)  Copyright: Eddie Velie Real Estate Services, LLC

No One Knows Coral Bay Like Eddie Velie Consultant, Realtor, Mortgage Broker, CAM

Page 2

At Home In Coral Bay — July-August, 2008

A Mortgage & Real Estate Newsletter By Eddie Velie Real Estate Services, LLC

CDD Editorial – Disparate

Impact & A Case To Watch

         Disparate Impact is a Human Resource Management (HRM) term coined early on in the Civil Rights movement. Corporations began affirmative action hiring in the upswing of an economic cycle. When the economy peaked and declined, they laid off the most recently hired people creating a disproportionate and unfair impact on minority new hires. The term “Disparate Treatment” was coined to refer to the unfair impact of executive policies on certain groups of protected classes.

         A Masters degree in HRM allows me to recognize the effect of the CDDs ticket and tow policy on protected groups including certain Nationalities, race, & familial status.

         I never brought this up before because there is no precedent (that I’m aware of) for this type of observed conditions. After reading an article in the June 19, 2008 edition of the Daily Business Review, I realized the precedent could be established soon.

         The article is entitled, “Reinstated Suit Claims Jupiter Drives Away Hispanics.”  A federal appeals court reinstated a lawsuit by an apartment complex against the City of Jupiter. There are several similarities between that case and the CDDs ticket and tow policy.

         The suit claims a City of Jupiter overcrowding ordinance, and the increased enforcement of it, discriminated against Hispanics.

         The Coral Bay parallel is the on-again, off-again enforcement of the ticket and tow policy and it’s impact on Nationalities that prefer to have several generations living together and familial status.

         “The court noted the town adopted the ordinance, ‘despite the warning of at least one advocate for the local immigrant population that an overcrowding measure enforced only against Hispanic residents  raised the specter of potential civil rights violations.”

         The parallel to Coral Bay is what I have stated repeatedly; The policy unfairly impacts certain groups: families with teens, and immigrants.

         In the Jupiter lawsuit, the plaintiff’s attorney commented, “The town tried to

pretend, as they have to, that this was a health and safety matter.”    The parallel to Coral Bay is, the CDD pretends the policy is for safety by keeping the roads clear for emergency services from 2—6 AM. The façade is evident  when you ask how emergency services might get thru the streets the rest of the time.

         Matthew Dietz, a Miami civil rights attorney, in an interview with the Daily Business Review said, “The appeals court imposed a strict scrutiny standard of review.” “The town will have to demonstrate the ordinance is the least restrictive means available to attain it’s goal.”

         The parallel to Coral Bay is the CDD board has alternative means by ordering parking on one side of the street with signs. Illegal parking could be enforced on the first offense because all drivers know they must obey traffic signs.

No One Knows Coral Bay Like Eddie Velie Consultant, Realtor, Mortgage Broker, CAM

At Home In Coral Bay — July-August, 2008

A Mortgage & Real Estate Newsletter By Eddie Velie Real Estate Services, LLC

CORAL BAY MODELS

       I know of 28 model names in Coral Bay Community Development District. The blanks in the chart on the left indicate the models for which I do not have the floor plan. When an original owner sells, all original developer and builder documentation goes with them and is gone forever so I started collecting them.

       You will most likely find these things stashed away with your mortgage and deed papers. If you have an original floor plan (or good copy), and wish to donate it, please donate them for preservation.

       If you have any old letters, news letters, pamphlets, flyers, ads, folders, postcards, newsletters, etc., please donate them for preservation. 

       To Donate Call Eddie Velie at 954-263-6287

THE RECALL

         The recall was not carried out as planned due to a lack of volunteers to collect signatures. The volunteers from the first  attempt ran out of steam and no one else came forward to help.

         This in no way means we did not have enough support for the recall. There are enough people who would sign but not enough people to collect the signatures.

         Based on my own signature gathering of over 40 signatures, it would take less than 40 hours to collect the 175 needed. Or, if your less aggressive you could even double that to 80 hours. But still, that is only 10 people working eight hours each or 80 divided by 15 people is only 5.3 hours each.

         Like an elected friend of mine said once, “it’s the people’s fault.” That’s not to say this person was laying blame on the constituency for some problem in the

community. It is to say that if they don’t like what the elected officials are doing, they should do something.

         We get what we deserve. If we, the registered voters living in Coral Bay, are not motivated to assist with the recall, then we are not annoyed enough by the arrogant behavior and denial about what the people want from the CDD board of directors. We are not annoyed enough by the refusal to maintain our amenities. We are not annoyed enough by the run-up in our assessments and the lack of repairs and maintenance while collecting the 1.3 million dollars per year, plus all the FEMA money they are so proud of procuring.

         The cost of the CDD to our individual home owners is enormous and nearly incalculable. While we pay them the extra $110 per month than our neighbors in the Carolinas, the Carolinas look better with their better paved roads, mail boxes, street signs.

         We will help pay for the bond issue to re-pave Margate but we will have to pay for our own roads ourselves. We will help pay for the Margate boat ramps, parks, canals, basketball courts, tennis courts, playgrounds, streets, community centers, libraries, public works, landscaping, and more.

         For our extra expense, we will top it off by getting $20,000 less when we sell our homes than most of the other single family homes in Margate.

         A recall can still be done. But, I cannot to do all the work (not withstanding those

that did help). It must be a team effort. Not an individual effort.

         For those that would sit and watch, ready to run for a seat on the board, but will not help collect signatures, too bad, it will be another two years for you.

         The Supervisor of Elections moved the qualifying period for candidates up to June and the only people registering and qualifying are already on the CDD board.

         Congratulations Tina Hagan and Sandra McCormick. Tina Hagan is currently the CDD Treasurer and is running for Seat 1 unopposed. Sandi is running against Tony the Taxman for seat 2. Good riddance Tony the Tax Man.

Copyright, Velie Real Estate Svcs, LLC

No One Knows Coral Bay Like Eddie Velie Consultant, Realtor, Mortgage Broker, CAM

At Home In Coral Bay — July-August, 2008

A Mortgage & Real Estate Newsletter By Eddie Velie Real Estate Services, LLC

State Of The Market Report 2008

         While the legislature continues to fight with the insurance companies to control insurance costs, and grapple with recommendations for tax reductions, there are many other things that are affecting our real estate market.

         The most direct affect on the values of our homes are the Principle required for a down payment, the interest rate, taxes, insurance, HOA & condo assessments, and mortgage Insurance. Why? Because these things make up the housing expense ratio that everyone has to qualify for when buying a home.

         The indirect things that affect the value of our homes are things like, unemployment or job creation, consumer confidence, outside investors, mortgage lender policy, government policy, the bond markets, the stock markets, mass media, and population shifts.

         This article attempts to summarize and put into perspective the direct and indirect influences affecting our housing market to derive a future outlook, if possible.

INVESTORS

         Last year I reported, “investors have fled the market” and noted some problems that it would cause. As predicted, the

number of homes affordable by the median family income rose from 27.7% to 46.5% as the median income went up and the median home price went down.

         The index will not and cannot get to 100% affordable. Investors love SE Florida for the tropical climate and the amazing cool and dry winters.

         The investors are back. Not the local flippers, but the International investors taking advantage of the weak Dollar and the NEW real estate investment trusts (REITs) not encumbered by properties bought at market peak. They buy only the lowest priced properties looking for a positive cash flow. The lowest priced properties in any given neighborhood go under contract in less than a week. These are the properties the banks are trying to dump from the books NOW so they can stop accumulating the taxes, insurance, and depreciation.

         Investors buy at a price low enough so their expenses are covered by the rent they can expect to get. The expenses on individual homes are the same as we use to qualify buyers plus maintenance and vacancy. When the (PITI) principle, interest, taxes and insurance, and HOA fees are lower than the rent, it’s time for

individuals to get off the fence and buy a home.

PROPERTY TAXES

         Property taxes are coming down. Not only because of the State Legislature changes, but because our property values are down. The benefits from the reduced property taxes are not yet felt in the real estate market. The will have little impact until the end of the year. Why?

         Mortgage brokers, banks, and lenders must use the previous owners taxes to calculate the “debt to income” ratio to qualify the buyer.  Even though everyone in the industry knows taxes are going down when the new 2008 tax bill arrives in October, we are powerless to use anything but the last owners 2007 taxes.

         Here is an actual example: A home last sold for $532,500 and had a 2007 tax bill of $13,219 with out the benefit of a homestead exemption. A buyer has to qualify using the that number even though the new sale price is $318,800 and the Broward County Web site (http://bcpa.net) says their taxes will be $4,610 with Homestead but without their homestead portability which they don’t calculate on the site. Subtract the two and you get an $8,609 tax savings partly from values dropping and partly from State tax cuts.

         The term, “all things being equal” means everything else not part of the immediate equation is frozen. This is necessary because there are so many variables involved in an economic analysis. When we qualify a buyer for a mortgage with all the variables in place and only change the monthly taxes in the above example, the result is income required to qualify for the  loan and the monthly payment. In the above example, to qualify at the higher $13,219 tax rate would require $1790 per month and $21,480 per year more to qualify than at the $4,610 tax rate.

INSURANCE

         Florida’s largest home insurer is the Florida Citizens, the state owned insurance company. As the Florida legislature keeps trying to force insurers to lower costs, more insurers withdraw service from the state. In the long run this Socialist tendency of

No One Knows Coral Bay Like Eddie Velie Consultant, Realtor, Mortgage Broker, CAM

At Home In Coral Bay — July-August, 2008

A Mortgage & Real Estate Newsletter By Eddie Velie Real Estate Services, LLC

government owned enterprises will cause rates to increase more than if the industry  were left alone in a purely competitive free enterprise environment. For now we have seen very little change and lots of headlines.

         A bright spot is the states free inspection program with its $5,000 grants to qualifying homeowners. The inspections indentify hurricane vulnerabilities then the grant provides money to assist with the needed upgrades. Most insurance companies grant discounts for these upgrades like, storm panels, hurricane impact glass.

POPULATION MIGRATION

         Broward County is losing population according to Robin Benedick’s (Sun-Sentinel, July 9, 2008) analysis of the US Census data. .”Twenty-six of the county's 31 municipalities lost population and three of them — Hollywood, Coral Springs and Pembroke Pines — made the Top 10 list of fastest-shrinking large cities from 2006 to 2007, according to U.S. census estimates released today,” writes Robin. “The percentage losses — the worst of any Florida county — are an amazing turnaround from the 1990s, when Coral Springs and Pembroke Pines regularly ranked near the top of the country's fastest-growing hot spots.”

         Sun-Sentinel’s online survey overwhelmingly shows that people think the population loss is due to the “cost of living” with 1971 responses of 2872 agreeing (68.6%).

         That’s not the only problem causing people to leave though. “Florida led the nation in lost jobs over the past year, with 78,100, according to figures released Friday by the U.S. Department of Labor.” “Texas, on the other hand, had a job-creation bonanza, adding a whopping 245,000.” (Scott Andron, Miami Herald, July 18, 2008, “Florida's job loss worst in nation”)

MOVE-UP  MOVE-DOWN PROBLEMS

         Fifty Three percent (53%) of American home buyers move less than 15 miles to their next home. Seventy one percent (71%) moved less than 50 miles from the previous home. (National Association of Realtors, “Profile of Buyers’ Home Feature Preferences, 2007).

         That is why it was so important that the

houses they sell. Allowing for another $100,000 loss each, then the bank owned listings equal $12,049,000,000 in losses.

         All this has made the lenders act like they are walking on “pins and needles.” They are afraid to make decisions. They continue to constrict their lending standards, and meticulously scrutinize every application.

         National, State, and regional governments are investigating the mortgage industry, looking for scape goats and criminals. This adds to the paranoia and the lenders get stricter. Good people who want mortgages are turned away. The lenders need the cash they would normally lend to stay afloat.

         Last year at this time the FHA began rolling out plans to fill the gap of the sub-prime void. The SISA, SIVA, and like acronyms are nearly extinct as most lenders are requiring full documentation (VIVA).

         This year it is the conventional lenders that must begin to wade back in and roll out products that the nation needs. It will still

portability provision passed in January. The savings will allow people to move, who previously could not or would not move, because now they get to take up to $500,000 in Homestead exemption savings with them.

LENDING STANDARDS

         Since the crash of the sub-prime market last August, lenders have been merging, closing divisions, laying off personnel, and going bankrupt. They are losing billions of dollars as prices continue to dive and people walk away from their homes.

         My research shows that 22% of all the listings in SE Florida are short sales. The chart below shows 24,971 of 113,197 active listings are short sales. An additional 12,249 are bank owned.

         To put the number in perspective, if every short sale loses $100,000 (some are much more) then the 24,197 represents a loss of $2,497,100,000.

         The bank owned listings represent a loss already, with more to come on each of the

INVENTORY IS UP WITH SHORT SALES & BANK OWNED DRIVING MARKET

         The table below was derived from searching the “remarks” and “broker remarks” of the SE Florida MLS on July 27, 2008. The MLS has no way of tracking such numbers but recently added the data field (Short Sale? Y/N). It is not up to date and may take a year to get up to date.

         Realtors adapted to this market by typing the phrases “short sale” & “third party approval required” in the remarks of their listings. By searching for all listing containing the word “short” or “bank” in remarks or broker remarks, I could extract them with a fair degree of accuracy. If the word was in both data fields, I subtracted.

         The true numbers are much higher. Manually scanning all 68 active listings yields 51 Short sales or 77% of Active listings are short sales.

         Realtors put “bank owned” in the remarks to make the reader aware it will be sold to the highest offer. Banks generally won’t let a property sit on the market too long because taxes, insurance, utilities, maintenance, HOA and depreciation expenses keep piling up.

(Copyright, July 2008, Eddie Velie Real Estate Services, LLC - Cell: 954-263-6287)

 

No One Knows Coral Bay Like Eddie Velie Consultant, Realtor, Mortgage Broker, CAM

At Home In Coral Bay — July-August, 2008

A Mortgage & Real Estate Newsletter By Eddie Velie Real Estate Services, LLC

be some time, if ever, before the mortgage market will be back the way it was. Trust in the formula for determining risk is gone.

FORECLOSURES

         There were 104 (10.4%) of our Coral Bay homes in the foreclosure process, according to Broward public records, on July 27, 2008). If we include the 20 properties already owned by banks (see the chart on pg 4), then 12.4% are in foreclosure process. A whopping 77% of the active listings in Coral Bay are short sales.

         The upside down problem (owing more than the property is worth) affects most owners in Coral Bay. Even many of those that have lived here for a decade or more are upside down. One reason for this is they kept refinancing and taking out 2nd mortgages for the easy cash and income tax benefits. Reduced equity combined with falling prices eventually put them upside down.  Now, if something happens like a job loss, major illness, etc., these long term upside down homeowners cannot sell and must  sell short.

NEW CONSTRUCTION

         “The supply of finished vacant single-family homes in Broward County subdivisions increased for the seventh consecutive quarter, from 1,131 during the first quarter to 1,229 during the second quarter – the highest number in at least a decade. This represents a 7.6-month supply of homes on the market.” (South FL Business Journal, Susan R. Miller, July 29, 2008)

PUBLIC CONFIDENCE

have to sell short or walk away. The trend continues.

         Buyers look at the lowest priced listings first, then work upward to see what the additional dollars will buy them. Investors are making extremely low bids. If a primary home buyer isn’t in the offer mix, the investor has a chance.

         When the new tax records arrive in October, more people will qualify to buy as you can see in a previous example on page 3. This will cause a surge in sales as thousands more people qualify with the same income they have today.

         We are at or very near the bottom. The  rent prices in Coral Bay range from $1,500 to $2400 per month. When your rent is higher than a monthly mortgage payment,  it no longer makes sense to rent. Remember, the bottom is where it no longer makes sense to rent?

         Ask your friends & family to call me and get prequalified now. Tell them they won’t know a good deal when they see it, if the don start looking now. Don’t let the investors buy your dream home and try to rent it back to you.

         The University of Florida produces the Florida Consumer Confidence Index that is widely quoted in publications State wide. The index has become a staple economic indicator. In June 2008 it hit an all time low at 59 points. Its up one point this month.

         When people don’t feel confident about the future, they don’t make major purchases like real estate, automobiles, cruises, etc.

WHAT IT ALL MEANS

         The real estate market in Coral Bay and South Florida is in a snowball effect of the self-fulfilling prophecy I wrote about last issue.

         No one has gone unaffected by the fallout. The sub-prime borrowers are not the only ones in trouble. People with great credit are walking away from homes because they are upside down. Homeowners are gambling the house will sell short and not leave them with a foreclosure on their credit report for ten years.

         Most of these problems are caused from the economic slow down or due to mergers, layoffs, closed businesses, etc. Sometimes the short sales  from people with great credit are caused by divorce, death, or major illness.

         The lenders themselves are driving the market downward by dumping their foreclosed houses at the bottom of the price range for any given neighborhood. As the sales close, a comparable is produced at even lower prices. The next foreclosure to be dumped uses that comparable. Offers

from buyers come in lower than the new market value, and the downward trend continues. As it continues, more people