House prices have been continuously falling for the first time in 70 years, and South Florida homeowners should expect the trend to continue.

A surplus inventory of houses caused by Florida foreclosures and short sales is the mortal enemy of home prices.  Lower prices are needed to sell off excess inventories of residential properties, and in turn lower prices encourage more inventories from anxious sellers.

So how big are excess inventories and how long will it take for the real estate market to absorb them?

According to Economic Consultant Gary Shilling, we are currently facing a surplus of up to 2.5 million excess house inventories in the United States, a number that is subject to rise with further foreclosures and falling home prices.

To forecast the length of time to work off this excess inventory and have the market return to more favorable inventory and price conditions, Shilling developed projections of supply and demand for residential units.

Household formation averaged about 900,000 per year over the past decade as measured by the Census Bureau.  Shilling uses this number as a reasonable estimate of yearly housing demand.  However, with many college students moving back with their parents after graduation, household formation is not happening as fast as it once did.

New construction of single family homes and apartment units is running about 700,000 per year, and about 300,000 U.S. homes are torn down, converted or removed from housing stock each year.  Based on these numbers, Shilling calculates new housing supply to be about 400,000.

So if demand is averaging 900,000 per year, while new housing supply is averaging 400,000, about 500,000 of the excess housing inventory will be absorbed per year.  This means it will take 4 or 5 years for the market to absorb the 2 million to 2.5 million excess inventories that Shilling believes exist at a minimum.

So what does this mean for South Florida homeowners?

• First, there is no quick fix to this mess.  No amount of federal mandates can make up for the enormous excess inventory of houses in this country.

• Second, homeowners should not be surprised if home prices continue to fall.  In fact, estimates still show that prices could fall at least another 20% to return to their long-run trends.

• Finally, the market will eventually correct itself.  Inevitably, supply and demand will even out.  As this happens, prices stabilize and in turn can begin to rise again.

Everyone wants to know if the end of the real estate crisis is coming soon. Based on these numbers, we still have a way to go. Whichever end of the real estate crisis you are on, the Offices of Oppenheim Law and Weston Title are here to help.

From The Trenches,
Roy Oppenheim

With the real estate market in recovery mode, owning a home is more affordable than renting in 72 percent of major U.S. cities. Miami, Las Vegas and Arlington, Texas round out the top three cities where buying is a safer bet.

Renting is more affordable than buying in only eight percent of America’s largest cities, including New York City, Seattle, and Kansas City.  The Offices of Weston Title and Oppenheim Law continue to help homeowners navigate through the waters (and under waters) of Florida real estate buying, selling and investing.

Weston is Number One! Zip codes with good schools, high paying jobs are topping list

Some areas of South Florida are finally seeing the first steps of a tentative recovery. As reported by the Sun-Sentinel, ten zip codes in Broward and six in Palm Beach County are seeing higher home prices.

33327, in Weston, saw the largest price increase from February 2010 with a 9.3% increase. The areas that have had a price recovery have generally been close to good schools or high paying jobs. While only a few zip codes are showing signs of recovery, the news is nevertheless good for all of South Florida. As an area that was one of the worst hit by the real estate crisis, we are now seeing a recovery before the rest of the country. Prices are still low in other areas because foreclosures and short sales make up the majority of sales.
Every recovery has to start somewhere and it seems to be starting in our own back yard here in Weston.

There is a large backlog of these “distressed” loans and the only way property values are going to go up in the rest of South Florida is if they are cleared out. This is what is happening right now and is the first step on a long road to recovery.

This news comes on the heels of reports that traffic to real estate websites increased 27 percent during the month of February – the largest jump since the first half of 2009. This combined with news that single family home sales across South Florida also went up in February and an encouraging job market leads Oppenheim Law and Weston Title to believe that the economy here in South Florida is showing signs of life after all.

For up-to-date real estate news in South Florida, Like us on Facebook or Follow @oplaw on Twitter!

With the major banks virtually halting all of their foreclosures due to the document mill scandals, the fees have dried up and now we can see the impact of the courts falling asleep at the switch. The tremendous irony in the matter is that the failure of the courts to properly scrutinize fraudulent foreclosures, leading to the halting of new foreclosures and the drying up of the courts’ fees, would have lead to new foreclosures. Only this time, court employees would have been processing their own foreclosures. According to the Sun-Sentinel, most of the hardship of the court furloughs would’ve been felt by low income employees who are already struggling to make ends meet.

Thankfully the state has stepped in to avoid this mess and hopefully the courts will learn not to be too reliant on foreclosure filing fees in the future. Maybe they will even make sure that foreclosures aren’t fraudulent before kicking people out of their homes and denying them their constitutional right to due process.

The Sun-Sentinel interviewed investor, Gus Armenakis. Armenakis bought what he thought was the only mortgage on a home for $102,600. The County had appraised the home at $325,800. After the sale, Armenakis found out that Wells Fargo had a first mortgage on the home for $386,593. This means that as soon as Wells Fargo forecloses on the house, the bank will be able to recoup as much of the value of the house as they can, up to the value of their mortgage, effectively leaving Armenakis out of the entire $102,600 he spent.

This problem is getting worse now that counties offer foreclosure auctions online. Online access opens up the bidding process to more people, most of whom are inexperienced. While the counties do disclose the risks of the bidding process, marketing ploys have effectively played down the risks involved. One such tactic suggested that bidding on real estate is as easy as eBay.

Take it from the experts: it’s not! In foreclosure auctions, there are no guarantees and you can’t return the goods. The foreclosure bidding process is a treacherous one and should not be undertaken by the faint of heart.

However, investors can safeguard against some of the pitfalls by performing a title search, often for as little as $100. Weston Title and Escrow has been performing title searches and issuing title policies for foreclosure investors since 1994. Title searches allow potential investors to find out who has a lien against a particular property, which then enables them to make sure that the foreclosures that they are bidding on are the primary liens. If you are an investor or potential investor in foreclosure properties, protect yourself by getting a title search before laying down big money on a foreclosed property.

While South Florida is #1 for mortgage fraud and foreclosure settlement talks between banks and the Obama administration appear futile at best, this week’s new was not all doom and gloom.

Check out Oppenheim Law’s and Weston Title’s picks in the week’s winners and losers for Florida foreclosure, real estate and the economy.

Winners

Pending home sales up 18% in Miami-Dade
Pending home sales rose 18 percent in Miami-Dade County over the course of the past month, according to new data released today by the Miami Association of Realtors.

Pending home sales, which include single-family home and condominium unit sales, were also up 3.24 percent month-over-month in March, the figures show.

“Increased pending sales reflect the existence of pent-up demand and should result in strengthening home values as distressed housing inventory continues to be absorbed,” said Jack Levine, chairman of the board of Miami Realtors.

Hiring Shows Growing Strength
The American job market is starting to show some muscle, according to The Wall Street Journal.

The jobless rate, our most politically salient measure of economic health, edged down to 8.8% in the fourth consecutive monthly decline despite the fact that more Americans entered the job market.
“It’s a very solid report that shows the labor market gaining momentum,” said David Greenlaw, an economist with Morgan Stanley in New York.

The public sector remained a weak point, as local governments shed 15,000 jobs last month in an effort to close budget gaps, but many other sectors showed strong growth, according to The Wall Street Journal.

Professional and business services gained 78,000 jobs. Factories added 17,000 jobs, while health care added 37,000. Over the past 12 months, health care has added an average of 24,000 jobs a month.

Losers

South Florida is #1 for Foreclosure Fraud
South Florida is first in the country for the number of mortgage fraud suspicious activity reports per capita, according to a new report from the Financial Crimes Enforcement Network and The South Florida Business Journal.

The region, which recorded 11,833 such reports last year, also leads the nation in Medicare fraud and auto insurance fraud.

Overall, mortgage fraud reports rose significantly in 2010, with 70,472 reports filed last year, up from 57,507 in 2009.

In Foreclosure Settlement Talks With Banks, Predictions of a Long Process
Little was settled in the first round of foreclosure settlement talks, according to The New York Times.

As negotiations begin over new rules for homeowners who are in default, experts all agree that progress is going to take time.

But lengthy negotiations work to the banks’ advantage, according to The Times.

“The banks’ strategy is to run the clock,” a Georgetown University law professor, Adam Levitin, said. “The chances of a settlement that meaningfully reforms mortgage servicing and makes the banks pay an appropriate price for illegal conduct are rapidly slipping away.”

Draw

Subprime Bonds Are Back

As the economy recovers, long-term investors are willing to take on more risks and subprime and other residential mortgage bonds that helped trigger the financial crisis are back in vogue, according to The Wall Street Journal.

The stock market ended its best first quarter since 1999 last week, with the Dow Jones Industrial Average closing up 6.41% on the quarter.

The willingness to take on risk is helping ordinary borrowers, too, by leading banks to make more nontraditional loans, such as jumbo mortgages, and to charge lower interest rates for them.

While it is encouraging that the markets are continuing on an upward swing, cautious optimism is needed any time subprime bonds are involved.

So, while it looks like housing values keep dropping around the country and new construction is also off, South Florida real estate may have hit rock bottom or close to it.

It seems that South Florida’s position as an international location is encouraging foreigners to swoop in and purchase homes and condos that based on an international standard are outright cheap.  Of course; a strong stock market, a dollar that is fairly weak and the prospect of huge government defecits that forshadows inflation, only helps.

Consumers are definitely shopping—and they are buying even if it is for good deals.

On the shopping front, an Experian Hitwise webinar reveals traffic to real estate web sites is up 27 percent in February. That’s the highest gain since the first half of 2009. Although rentals are the key beneficiary, it still bodes well for investors trying to rent property and hold on until property values rise.

But consumers are also buying single-family homes and condos across Florida, and specifically in Miami and Fort Lauderdale. Seems that confidence is starting to slowly come back even if prices are not moving much.

Home and condo sales rose in Florida rose during February, according to the Florida Realtors. Existing home sales increased 13 percent in February with a total of 13,701 homes sold statewide compared to 12,164 homes sold in February 2010. And February’s statewide sales of existing condos rose 29 percent compared to the previous year’s sales figure. Meanwhile, Florida’s median sales price for existing homes last month was $121,900. A year ago, it was $124,500 for a 2 percent decrease.

The Miami Association of Realtors and the Southeast Florida Multiple Listing Service is also reporting good news. Single-family homes and condominiums sales in Miami-Dade County increased 22 percent in February compared to a year earlier. One stand out on the condo front is Canyon Ranch in Miami Beach, where 46 units have sold since October 2010. Ft. Lauderdale posted an 8 percent month-over-month gain in February even as housing inventory declined.

“The housing market is healing with sales fluctuating at times, depending on the flow of distressed properties coming on the market,” says National Association of Realtors Chief Economist Lawrence Yun. “The broad fundamentals for a housing recovery are developing. Job growth, high housing affordability and rising apartment rent are conducive to bringing more buyers into the market.”

I  want to agree with Yun. Although there are still areas of South Florida where the housing market is raw, the massive bleeding has eased. Distressed properties are getting worked out, albeit slowly. With the economy showing signs of improvement and the job market seeing an uptick in South Florida, there is hope for investors and homeowners alike that the worst of the torrential storms may have blown past us.

Looking for timely, strategic, and educated guidance in Florida real estate transactions? Check out our sister site Weston Title!

Why isn’t Wall Street in Jail? Is our government a giant Ponzi scheme?

These are the questions Roy Oppenheim asked during Wednesday night’s Short Sale and Foreclosure Defense seminar.

During the webcast, Oppenheim discusses how with the departure of Fannie Mae and Freddie Mac also goes the traditional 30-year mortgage, paving the way for a new 20-year mortgage, higher interest rates and larger down payments. In other words, buying a house just got harder.

Roy also touched on recent news headlines, including the 60 Minutes piece titled Homeless Children: The Hard Times Generation, New York Magazine’s jailhouse interview with master manipulator Bernie Madoff, and scathing commentary by Rolling Stone Magazine’s Matt Taibbi on Wall Street’s modus operandi.

If you missed this hour of economic insight from a leading industry expert, the replay will be available on Oppenheim Law TV and the Oppenheim Law YouTube channel for the next 30  days! We want to remind you that as the short sale market heats up, Oppenheimlaw and Weston Title are here to service all your legal and title insurance  related needs.

The Wall Street Journal is reporting a sluggish start to selling season, typically kicked off by Super Bowl Sunday.  Given the volatile international headlines this week, this news hardly comes as a surprise. From revolutionary tremors spreading throughout the Middle East to the actual tremors of Christchurch, New Zealand’s 6.3-magnitude earthquake, the global outlook seems bleak at best.

Here on the home front, rising gas prices fuel unemployment as every 2.5 cent increase in gas prices translate into 25,000 more Americans out of work. To make matters worse, the housing crash may have been even worse than initial estimates have shown.

Economists are discounting the possibility that recent buying momentum will propel GDP growth to the necessary 5-plus percent necessary to sustain job growth. Latest figures are predicting unemployment to stubbornly remain above 9% nationwide until well into 2012 as well as a continued surplus in housing inventory.

Are we seeing the beginning of a double dip recession? Join Oppenheim Law and Weston Title on March 9 to discuss the latest headlines and economic predictions as we navigate month three of the year of the short sale.

February started with a continued roar as events continue to unfold. Super Bowl Sunday is notable for two reasons: it is a social escape and also typically marks a turning point in real estate activity.

So what should we expect? For starters, a parade of new foreclosures will flood the market in the coming months as banks get their documents in order. Next, it is safe to say the global “tweet goes on”, as political unrest in the Middle East might just be the new normal as social networking sites like Twitter and Facebook play even bigger roles on the internal stage.

At Oppenheim Law, we are watching the situation closely and sharing new strategies for buying, selling, investing or even walking away from real estate in 2011. Join us for yet another black-swan themed event on Wednesday February 9^th at 6:00 pm for the monthly Short Sale and Foreclosure Real Estate Workshop sponsored by Oppenheim Law and Weston Title via webcast or come in person.