What an amazing year for Southwest Florida real estate in 2014! A new record was set for the number of closed sales in a year, and volume was just slightly lower than the high set in 2005. The good news for buyers is that median sales price remains almost 30% below the peak of 2007 ($378,500), and appreciation appears to be occurring at a more normal and sustainable rate. Be aware that some neighborhoods have appreciated at a rate much higher than the market average, and inventory in these areas is down significantly more than the market at large. This report should be used as intended – as a broad view of general trends in the combined Naples, Bonita springs and Estero markets. When marketing or selling property in a specific area, be sure your customers receive accurate information on that area.
Market Report December 2014
Neighborhood Snapshot December 2014
According to the annual market report just released by the Naples Area Board of REALTORS (NABOR), overall closed sales for homes in every price category above $300,000 saw double-digit increases in 2014. As a result, broker analysts contend that 2014 was one of the best years in Naples real estate history for closed sales.
Inventory also increased 16 percent for homes in the $2 million and above price category from 394 in 2013 to 457 in 2014. Closed sales in this luxury market price category increased 33 percent from 299 homes in 2013 to 399 homes in 2014, yet the overall median home price in this price category held steady year over year at $2.95 million. Overall, there was a 3 percent increase in inventory of single-family homes from 2,260 in 2013 to 2,321 in 2014.
Millions of Americans have loved the drastic drop in oil prices. More money in their pockets and cheaper travel has resulted in the price drop! The lower gas prices could also relieve some of the pressure of mortgage rates.
The U.S. Energy Information Administration (EIA) reported that the price of regular gasoline was $2.13 per gallon. The lowest it has been since May 2011 when it rose to $4 dollars per gallon. The EIA estimated that savings could be $550 per household. Amazing!
“Lower oil prices mean a lower inflation rate, which pushes down mortgage rates,” economists note at the National Association of Realtors®‘ (NAR) Economists’ Outlook blog. Indeed, the 30-year fixed-rate mortgage averaged 3.66 percent last week – the lowest average in 20 months – according to Freddie Mac’s weekly mortgage market survey. Taking into account the median home price of $205,300, a 0.75 percentage point drop in mortgage rates could yield a savings of about $1,000 annually, according to NAR researchers.
How this affect real estate: The decline in oil prices is a positive effect to households with the savings in gas and potentially lower mortgage payments. With these savings, it will increase consumer spending in some areas.
For anyone who has purchased in the last year or who is ready to declare Homestead for a reduction in their real estate tax, here is some background information and please contact me for the form you will require.
Nan Dietrich | 239.564.2906 | firstname.lastname@example.org
HOMESTEAD FILING:The deadline for filing for the homestead exemption is March 1, 2015.
All legal Florida residents are eligible for a Homestead Exemption on their homes, condominiums, co-op apartments, and certain mobile home lots if they qualify. The Florida Constitution provides this tax-saving exemption on the first and third $25,000 of the assessed value of an owner/occupied residence.
There are many people out there who debated purchasing a home over the course of the last year, but ultimately did not. Whatever their reasons were for delaying, let’s look at whether the decision to wait to buy made sense.
What happened in 2014?
The 30 year fixed rate on January 2, 2014 was 4.53% as reported by Freddie Mac. Looking at the chart below, your monthly mortgage payment with principal and interest for a $250,000 home would have been $1,271.17.
Even though interest rates have dropped below 4% and ended 2014 at 3.87%, home prices appreciated by 4.8 percent over the same time according to the Home Price Expectation Survey.
So that same home appreciated by $12,000 and now costs $262,000. The most recent report by Freddie Mac reports the average 30-year fixed rate is currently 3.73%.
Many may say, “See waiting a year made total sense, I’m saving $60 a month.” And they’d be right, over the course of the year they saved $729.36.
But what they haven’t realized, is that as the price of the home they purchased went up by $12,000, even if they just put a down payment of 5%, they had to come up with an additional $600 at the start of the process. So really they’ve only saved $129.36 in a year.
Is a savings of $11 a month really worth holding off on pursuing a home to call your own after you weigh all the benefits that come along with that?
- Building equity you can borrow against in the future
- Having a safe, comfortable environment that fits your family’s needs
- Having control over your space
- Tax benefits
- And so many more…
The experts are predicting that homes will appreciate by another 4% and interest rates will increase by a full percentage point by the end of 2015. If you are in a position to be able to buy a home now before these predictions become reality, contact a local real estate professional and start the process.
In a report recently released by the National Association of REALTORS (NAR), it was noted that existing home sales slid a bit in November 2014 as housing supply tightened. Total existing-home sales1, which are completed transactions that include single-family homes, town homes, condominiums and co-ops, fell 6.1 percent to a seasonally adjusted annual rate of 4.93 million in November from a downwardly-revised 5.25 million in October. Sales dropped to their lowest annual pace since May (4.91 million) but are above year-over-year levels (up 2.1 percent from last November) for the second straight month. Existing-home sales in the South decreased 3.2 percent to an annual rate of 2.09 million in November, but remain 5.0 percent above November 2013. The median price in the South was $176,500, up 5.2 percent from a year ago. Overall, sales are up and the days on market was less than 30 days for 32 percent of homes for sale. The folks at KCMblog also chimed in with another one of their fabulous infographics that really break it down.
According to the National Association of REALTORS (NAR), economists and hosing analysts have high hopes for 2015. The national real estate market is expected to build momentum due to a strengthening economy.
Here’s a recap of some of the real estate forecasts for 2015:
- Millennial force: Younger professionals are having more luck in the job market, which is expected to help more of them jump into home ownership in the new year. Overall, employment is on the rise, but jobs for Millennials — particularly those aged 25 to 29 — has risen by 3 percent. That’s one percentage point above the nationwide rate. According to some forecasts, Millennials are expected to drive two-thirds of household formations over the next five years. The forecasted addition of 2.5 million jobs next year, as well as an increase in household formation, will likely drive more first-time home buyers into home ownership, according to realtor.com® projections.
- Home prices stabilize: The double-digit price increases seen in 2013 have slowed, and more stable growth was the trend in 2014. As investors have retreated from the market, so have the rapid home prices in many markets. Home prices are expected to continue to edge up in 2015, with realtor.com® predicting a 4.5 percent gain.
- Mortgage rates rising: Interest rates the last few months have been dipping below 4 percent, lowering the borrowing costs of home buyers and refinancing home owners. However, don’t expect the low rates to stick around much longer. Mortgage rates are expected to rise next year. Freddie Mac projects mortgage rates will likely average 4.6 percent but inch up to 5 percent by the end of 2015.
- Return of the 3 percent down payment: In early December, Freddie Mac and Fannie Mae announced conventional loan down-payment programs that will allow qualified first-time buyers to secure a fixed-rate mortgage with a 3 percent down payment. Prior to that, they needed at least 5 percent.
- Housing affordability declines: Affordability for homes, based on home-price appreciation and rising mortgage interest rates, will likely fall by 5 percent to 10 percent in 2015, according to realtor.com® forecasts. However, the decline in affordability could be offset by an increase in salaries next year for many households. “When considering historical norms, housing affordability will continue to remain strong next year,” realtor.com® notes in its report.
- New-home sales rebound: Single-family new-home starts barely budged in 2014 compared to 2013, and new-home sales remain far from normal levels. But that could finally turn around in 2015. Sales of new homes are expected to rise 25 percent as single-family construction picks up traction in 2015.
- Foreclosures recede to pre-recession levels: The number of foreclosures is expected to continue to fall in 2015, but expect them to still be elevated in some pockets across the country — particularly in judicial states where foreclosures must wind through the courts. Foreclosure filings have been on the decline for most of this year. From January through November, foreclosure filings fell about 172 percent compared to the same period one year prior, according to RealtyTrac data.
- Drop in oil prices will boost housing: Oil prices have plunged 45 percent since June, which could inadvertently provide a lift to the housing market. “Households in the U.S. spend more than $1,800 on energy-related costs annually, and 22 percent of that energy consumption is due to residential real estate,” according to CoreLogic’s 2015 Housing Outlook. “So while the drop in oil prices typically has been linked to a reduction in driving-related expenses, it clearly also reduced energy-related expenses for residential real estate.”
- Rent rises to outpace home-value growth: Rents likely will continue to rise in the new year, and an increase in rental costs in 2015 could outpace annual home-price gains. Expect the rental market to remain a “landlord’s market” in 2015, with vacancy rates expected to stay below 5 percent in the new year, according to the National Association of REALTORS®. That should lead to demand pushing rents up even higher and keeping them above inflation, notes NAR Chief Economist Lawrence Yun. Apartment rents are projected to increase 4 percent in 2014 and 4.1 percent in 2015.
- Stronger economy leads to greater confidence: A stronger economy will likely lead to more demand for housing in 2015. “Overall, the economy finally appears to be gaining enough momentum to help provide the support that the housing market has needed for stronger recovery,” Sam Khater, deputy chief economist at CoreLogic, notes in the company’s 2015 Housing Outlook. “The combination of stronger employment growth and especially Millennial job growth makes for solid footing for the real estate market. “
There were so many sights to see this past weekend on Fifth Avenue S Downtown Naples during the New Year’s Art Fair! The two day event attracted more than 15,000 artsy lovers and lookers. More than 400 artists applied for a booth reservation, but only 250 were featured and displayed their work to the public – from oils and watercolors to ceramics and jewelry.
If you missed this show, then you’re in luck! This is only the first of three planned shows for the year by the Naples Art Association.
Another show is scheduled to take place on Fifth Avenue S for March 21-22 and the renowned Naples National opens February 21-22 in Cambier Park.
We are about to ring in the New Year which is very exciting! Here are a few interesting 2015 real estate predictions! Keep reading for the latest set of predictions coming from Freddie Mac…
“The good news for 2015 is that the U.S. economy appears well-poised to sustain about a 3 percent growth rate in 2015 — only the second year in the past decade with growth at that pace or better,” says Frank Nothaft, Freddie Mac’s chief economist.
“Governmental fiscal drag has turned into fiscal stimulus; lower energy costs support consumer spending and business investment; further easing of credit conditions for business and real estate lending support commerce and development; and consumers are more upbeat and businesses are more confident, all of which portend faster economic growth in 2015. And with that, the economy will produce more and better-paying jobs, providing the financial wherewithal to support household formations and housing activity.”
Here are Freddie Mac’s predictions for 2015:
- Mortgage Rates: Interest rates will likely be on the rise next year. In recent weeks, the 30-year fixed-rate mortgage has dipped below 4 percent. But by next year, Freddie projects mortgage rates to average 4.6 percent and inch up to 5 percent by the end of the year.
- Home Prices: By the time 2014 wraps up, home appreciation will likely have slowed to 4.5 percent this year from 9.3 percent last year. Appreciation is expected to drop further to an average 3 percent in 2015. “Continued house-price appreciation and rising mortgage rates will dampen affordability for home buyers,” according to Freddie economists. “Historically speaking, that’s moving from ‘very high’ levels of affordability to ‘high’ levels of affordability.”
- Housing Starts: Homebuilding is expected to ramp up in the new year, projected to rise by 20 percent from this year. That will likely help total home sales to climb by about 5 percent, reaching the best sales pace in eight years.
- Single-Family Originations: Mortgage originations of single-family homes will likely slip by an additional 8 percent, which can be attributed to a steep drop in refinancing volume. Refinancing is expected to make up only 23 percent of originations in 2015; they had been making up more than half in recent years.
- Multi-Family Mortgage Originations: Mortgage originations for the multi-family sector have surged about 60 percent between 2011 and 2014. Increases are expected to continue in 2015, projected to rise about 14 percent.
Both Fannie Mae and Freddie Mac just officially announced their 97 percent loan-to-value products, which is aiming to expand credit to first-time home buyers.
FHFA Director Mel Watt said:
“The new lending guidelines released by Fannie Mae and Freddie Mac will enable creditworthy borrowers who can afford a mortgage, but lack the resources to pay a substantial down payment plus closing costs, to get a mortgage with 3% down. These underwriting guidelines provide a responsible approach to improving access to credit while ensuring safe and sound lending practices.”
To mitigate risk, Fannie Mae and Freddie Mac will use their automated underwriting systems, which include compensating factors to evaluate a borrower’s creditworthiness. In addition, the new products will also include homeownership counseling FHFA will monitor the ongoing performance of these loans.
These products came just when economists have predicted 2015 to be a significant year for millennials. Economists say that households headed by millennials will see significant growth as a reflection of economic gains. Millennials will also drive two-thirds of household formations over the next five years. Next year’s addition of 2.75 million jobs and increased household formation will be the two key factors driving first-time buyer sales.
Regarding Fannie and Freddie’s products, there are notable differences between the two. Unlike Fannie, Freddie is not limiting its product to first-time homebuyers. But if they are first-time homebuyers, they must participate in an acceptable borrower education program, like Freddie Mac’s CreditSmart, to qualify for the program.