WASHINGTON – March 23, 2007 – Existing-home sales rose strongly in February following a healthy gain in January, reaching the highest level since last April, according to the National Association of Realtors® (NAR).
Total existing home sales –including single-family, townhomes, condominiums and co-ops – rose 3.9 percent to a seasonally adjusted annual rate of 6.69 million units in February from a downwardly revised level of 6.44 million in January, but are 3.6 percent below the 6.94 million-unit pace in February 2006. Last month’s increase was the biggest monthly rise in three years – sales also rose 3.9 percent in March 2004.
David Lereah, NAR’s chief economist, says the strong gain is a bit of a surprise. “Some of the rise in home sales may be from mild weather that brought out shoppers in December, but fundamentals have improved in the housing market and buyers see a window now with historically-low mortgage interest rates and competitive pricing by sellers,” he says. “Even so, winter storms last month discouraged shopping, and buyers were chilled with the third coldest February on record. These unusual weather patterns mean home sales that close in March may decline before rebounding later this spring.”
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 6.16 percent in the last week, down from an average of 6.29 percent in February. The 30-year fixed was 6.22 percent in January, and 6.25 percent in February 2006.
The national median existing-home price for all housing types was $212,800 in February, down 1.3 percent from February 2006 when the median was $215,700. The median is a typical market price where half of the homes sold for more and half sold for less.
NAR President Pat Vredevoogd Combs says the median home price currently is distorted. “Over the last year, we’ve seen declining sales in many high-cost areas but rising activity in lower cost markets,” she says. “This change in the geographic composition of sales means we aren’t getting apples-to-apples comparisons in median home prices from a year ago.”
Other indices examining sales of the same properties over time, such as the OFHEO House Price Index, have been showing price gains; however, the OFHEO index is limited to conventional financing.
“What’s really happening is probably somewhere in between the different measures, but home prices are soft – a year ago we were still seeing bidding pressures and double-digit price growth,” Combs says. “Overall, home prices should rise slowly this year, and many buyers have an opportunity now that was only a dream during the five-year boom.”
Total housing inventory levels rose 5.9 percent at the end of February to 3.75 million existing homes available for sale, which represents a 6.7-month supply at the current sales pace compared with a 6.6-month supply in January. Raw inventories peaked last July at 3.86 million, and supplies topped at 7.4 months in October.
Single-family home sales increased 3.7 percent to a seasonally adjusted annual rate of 5.88 million in February from 5.67 million in January, but are 3.4 percent below the 6.09 million-unit pace in February 2006. The median existing single-family home price was $211,100 in February, down 1.5 percent from a year ago.
Existing condominium and co-op sales jumped 5.3 percent to a seasonally adjusted annual rate of 810,000 units in February from a level of 769,000 in January, but are 5.2 percent below the 854,000-unit pace in February 2006. The median existing condo price was $225,400 in February, up 0.5 percent from a year earlier.
Regionally, existing-home sales in the Northeast surged 14.2 percent to a level of 1.21 million in February, and are 3.4 percent higher than February 2006. The median existing-home price in the Northeast was $265,900, down 1.4 percent from a year earlier.
In the Midwest, existing-home sales rose 3.9 percent in February to a level of 1.58 million, but are 1.9 percent below a year ago. The median price in the Midwest was $157,000, down 1.3 percent from February 2006.
Existing-home sales in the South increased 1.6 percent to an annual sales rate of 2.58 million in February, but are 4.4 percent below February 2006. The median price in the South was $175,900, down 2.9 percent from a year ago.
Existing-home sales in the West were unchanged in February, holding at an annual pace of 1.32 million, and are 9.6 percent lower than a year ago. The median price in the West was $337,100, up 2.2 percent from February 2006.
© 2007 FLORIDA ASSOCIATION OF REALTORS
Questions, comments or suggestions on this article? Have a news tip? Contact Eddie La Rosa 305-968-8397
TALLAHASSEE, Fla. (AP) – March 27, 2007 – The bipartisan spirit that took hold of the Florida Legislature earlier this year in the effort to lower homeowner insurance rates is showing signs of cracking in the House over property tax relief.
A divide has developed over a proposal by House GOP leaders to swap less property tax for more sales tax. Democrats are unified in opposition, questioning the wisdom of asking Floridians, in the words of one Democratic leader, to “swallow the largest sales tax hike in our state’s history.”
The House majority leader, Marty Bowen, R-Haines City, responded by accusing Democratic leaders of “backhanded partisan sniping” in a written statement last week.
House Democratic Leader Dan Gelber of Miami Beach said Monday he’s trying to stay on the high road, and directed his spokesman not to respond in kind to Bowen’s statement.
“I actually went over there and said, ‘What are you guys thinking?”’ Gelber said in an interview. “I was perplexed by their response because I had actually thought I had not said many of the things I could have said about their plan.”
Bowen did not immediately return a call Monday seeking comment. Her spokesman, Alberto Martinez, denied that property tax reform has become partisan, citing House Speaker Marco Rubio, R-West Miami, as saying bipartisanship doesn’t mean sacrificing principles.
Gelber said all legislators, Democrats and Republicans alike, are seeking meaningful property tax relief and that it shouldn’t be a partisan issue.
“I’m trying very hard not to get into the blame game with the Republicans on anything,” Gelber said.
Martinez insisted House Republicans’ working relationship with Democrats “is about as good as it gets.”
Although Republicans control the House, they will need some Democratic support to pass the sales-for-property tax swap. It will take a three-fourths vote, or 90 of the 120-seat chamber, to pass the proposed amendment to the Florida Constitution. The GOP holds 78 seats.
House Democrats have developed their own property tax reform proposal that would limit increases to inflation plus 3 percent annually. It also includes an increased homestead exemption for primary homes and adds new exemptions for other residential and commercial property.
The Senate’s Republican leaders, meanwhile, have not yet announced a comprehensive tax reform-relief plan, but senators of both parties have been cool to the sales-for-property tax trade.
“If the Republican Senate isn’t adopting the plan either, you can’t really call it partisan,” said Senate Democratic Leader Steve Geller of Cooper City.
Senate Democrats are set to unveil their own proposal Tuesday. Geller said he has consulted with Republican leaders and Gov. Charlie Crist and while he doesn’t expect their endorsements, he isn’t anticipating criticism from them, either.
Crist also has offered a tax reform proposal but is taking the same approach to the issue that he did with property insurance during a special legislative session in January – laying out a broad theme and letting lawmakers work out the details.
The Legislature responded then by passing bipartisan measures designed to reduce insurance rates that skyrocketed after a series of destructive hurricanes in 2004-05. Property taxes also have climbed rapidly in the past few years due mainly to escalating property values.
Lawmakers also are trying to do something about inequities from the Save Our Homes Amendment, which has shifted much of the tax burden from existing primary homeowners to recent home buyers, second homes, businesses and other non-homestead properties.
“We got lucky on property insurance,” Geller said. “We’ll see where (Crist) is on property taxes.”
Copyright 2007 The Associated Press, Bill Kaczor, Associated Press Writer. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Questions, comments or suggestions on this article? Have a news tip? Contact Eddie La Rosa 305-968-8397.
NEW YORK (AP) – March 27, 2007 – Prices of single-family homes across the nation depreciated in January compared to a year ago, the worst results in more than 13 years, a housing index released Tuesday by Standard & Poor’s showed.
The data underscored disappointing sales data released by the government on Monday.
The S&P/Case-Shiller composite index showed a drop of 0.7 percent from a year ago in the price of a single-family home based on existing homes tracked over time in 10 metropolitan markets. Growth has not been that slow since January 1994 when it dropped by 0.9 percent compared to January 1993, S&P said.
For its 20-city composite index, prices fell 0.2 percent. That data has been collected since 2001.
Government sales figures reported Monday showed that the number of home sales in February fell to the lowest level in seven years, and followed an even larger drop of nearly 16 percent in January.
On a year-over-year basis, eleven of the 20 cities in the S&P index show negative annual returns in their prices.
All cities in the survey, except for Charlotte, N.C., showed either flat or negative returns in January when compared to December.
MacroMarkets LLC Chief Economist Robert Shiller said the composites clearly show the “dire” state of the real estate market across the nation.
“The dismal growth in the 10-city composite is now at rates not seen since January 1994,” Shiller said in a statement.
The downward trend is reflected in data across the United States while certain cities such as San Diego, Detroit, Boston, Phoenix and Tampa, Florida, have done worse. Seattle and Portland, Oregon, meanwhile, show some resistance to the downturn.
Federal Reserve governors watch housing as one of the most important indicators of the health of the overall economy. Economists fret that the slump in housing will drag down growth as the slowdown affects consumer spending and the construction industry.
Last Wednesday, Fed governors held the benchmark interest rate in place at 5.25 percent, meaning that the prime interest rate used by commercial banks will stay at 8.25 percent. It was the sixth meeting in a row the Fed has held steady.
On Monday, the Commerce Department reported that sales of new single-family homes fell 3.9 percent in February to a seasonally adjusted annual rate of 848,000, the slowest sales pace in nearly seven years. The February decline followed an even larger 15.8 percent drop in sales in January, which had been the largest one-month plunge in 13 years, another sign the market has not yet found a bottom.
Copyright 2007 The Associated Press, Vinnee Tong, AP Business Writer. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
MIAMI-DADE – March 26, 2007 – Large or small, rich or poor, South Florida’s cities and counties embarked on a multibillion-dollar spending spree fueled by seven years of property-tax collections that grew disproportionately compared to inflation, population, citizens’ salaries and even the budgets of the governments themselves.
Only government-paid insurance and retirement benefits spiraled upward at comparable rates. Yet they yet couldn’t match the sheer scale of property-tax growth everywhere, according to a Miami Herald review of 14 local-government budgets for the past seven years.
The property-tax revenue increases since 2000 have been immense: 178 percent for Miami-Dade County, 123 percent for Fort Lauderdale, 82 percent for Broward County and 108 percent for Miami.
Government income from other sources – building permits, fees for such day-to-day services as solid-waste and wastewater departments – grew with far more moderation.
The loads of property-tax money allowed governments to buy nearly everything: more emergency and parks workers everywhere. Faster hurricane recovery and landscaping for Davie. Financial stability in once-struggling Homestead as its population grew 57 percent. Bigger salaries in Miami-Dade, where the county’s 30,000 employees received an average salary increase of 29 percent between 2000 and last year – while the inflation rate rose about 18 percent.
Was any of the spending wasteful? And if so, who was responsible? There are no easy answers. But almost everyone bears some responsibility for local governments spending lots more.
Cities and counties beefed up pensions, salaries and expenses that will cost them for years to come. State lawmakers cut major state taxes and slashed aid to local governments. Hurricanes drove up fuel and insurance costs. The Sept. 11, 2001, attacks forced every government to spend much more on security. And citizens demanded more parks and libraries, and nicer roads.
Heeding the cries of heavily taxed businesses and owners of second homes, Florida House Speaker Marco Rubio and other state lawmakers are pressing ahead in this legislative session with plans to cut and cap property taxes for everyone and even eliminate a portion of them for homestead owners. Also, voters could opt to hike sales taxes to help local government gain back some – but not all – of the lost tax money.
“We have never looked at this from government’s perspective. This is about what people can afford to pay for government,” said Rubio, a West Miami Republican. “The frustration is people feel we’re paying a lot more in taxes, but we’re not getting it back in service. We don’t feel like we’re getting $13,000 in services for $13,000 in taxes.”
Doom and gloom
Outraged and nervous local politicians predict doom and gloom. Property taxes account for the lion’s share of their so-called “general funds” that pay for many government services.
Cut property taxes and you cut emergency help, parks or libraries, said Broward County Commissioner Kristin Jacobs, a Democrat.
“It is a fallacy, a lie, that counties have reaped huge windfalls through property taxes,” said Jacobs, who blames the Republican-run Legislature for shifting $63 million in state costs to Broward County even as the county shoulders high fuel, insurance and pension costs.
Although the cost-shift numbers are disputable, no one can deny the cost of pensions and health benefits, workers’ compensation and property insurance. If added together, they gobble up 19 percent of Aventura’s general-fund budget. Miramar’s hit: 24 percent.
Miramar doesn’t participate in the state’s large, well-managed retirement system, so it has been hit hard by pension cost increases: 403 percent since 2000. Hialeah is at the extreme end: a 13-fold jump in seven years.
Miami Beach also reeled from pension increases, yet reaped enough in property taxes to authorize $200 checks for homesteaded property owners in 2005 and $300 checks last year.
Disparities
Governments’ overall tax increases went largely unnoticed by homeowners, chiefly because state law caps increases in the assessed value of homes, for tax purposes, at 3 percent a year. But the owners of other kinds of real estate that have no tax cap – rentals, second homes, commercial property – were hit with large assessments as property values soared during the state’s dramatic real-estate boom.
The tax disparities became clear when homeowners – particularly in South Florida – wanted to cash in. They found that if they moved to another home, they lost their tax savings and faced far higher tax bills, even for smaller homes.
Soon, lawmakers everywhere heard the slogan that people were “trapped in their own homes.” Local officials’ response: We’ve repeatedly trimmed the tax rate. True. But not the tax amount or tax revenue.
All the talk of cutting property taxes has gotten to Miami-Dade County’s government. Mayor Carlos Alvarez is readying a plan to cut some of the county’s $6.97 billion budget, of which $2.27 billion comes from property taxes.
Last week, four of the 13 county commissioners balked at spending $131 million on new furniture over the next five years. The expense normally wouldn’t have produced an eye blink.
“We’ve been fiscally conservative,” said Bruno Barreiro, chairman of the Miami-Dade County Commission. “We’ve put a lot of money away. We’ve built our reserves in three years to over $100 million for a rainy day.”
Barreiro said the debate over local taxation and spending is a matter of perspective. “It’s how you see it,” he said, pointing out that Miami-Dade is a unique, mini nation-state that meets the needs of people of 150 nationalities while running its own airport, seaport, election office and police department.
The county also has a high poverty rate and a large number of residents who have no health insurance – more than a quarter of its 2.3 million people. Since 2000, county government has increased health and human services spending by 68 percent – a bigger increase than for public safety, which remains the top expenditure.
Add to that unexpected costs: $1 billion more for Miami International Airport renovations, and 2½ times more to build the Carnival Center for the Performing Arts than its original $178 million estimate.
With a total bottom-line budget of $3.16 billion, Broward County government is smaller, has fewer departments, is more affluent and has more cities that tax citizens for services than Miami-Dade. Its staffing has increased about 9 percent, while department spending increased 16 percent. The costs of departments that get their money from the general fund, though, have increased 88 percent.
Monroe County, which lost population because of the high cost of living and housing, saw property-tax collections grow 64 percent, to $83.8 million, since 2001. Key West’s property-tax collections grew 51 percent in that span, as some longtime homeowners saw their real tax bills decline.
For governments, handing out big raises and generous benefits to their workers can make politicians popular. But they cause long-term pain to taxpayers.
Unions win
Political leaders frequently appease the popular and politically powerful police and fire unions. The unions, with years of bargaining experience and persuasive arguments about the danger and importance of their jobs, often lead the way in salary and benefit increases.
But raises mean future cost-of-living increases will cost taxpayers more in salaries and retirement benefits.
North Miami Mayor Kevin Burns said his city is now paying for past decisions. Pension payments have soared as property-tax collections grew 46 percent.
Burns, elected two years ago, said the city had a few employees who were allowed to bank so much vacation time that they could take 75 percent of the year off and collect a paycheck. And city rules gave workers an extra 5 percent of vacation hours every year.
“I ended that,” Burns said. “I can’t say I’m the most popular guy.”
In Davie, the council cut its budget 5 percent since last year, although its general fund has increased 115 percent since 2000. Mayor Tom Truex, a Republican, described the House plan to cut property taxes as “crazy talk.” “We have obligations we have to pay for, and it seems that every time you go to contract negotiations, you start where you left off,” Truex said. “And where you left off, you thought it was a time that you were about to go bankrupt.”
Hialeah Mayor Julio Robaina said his city “has a very attractive retirement system,” which went from costing taxpayers $117,000 in 2000 to $1.7 million the following year – and $15.8 million this year.
Robaina blames stock-market troubles as well as the lushness of the city’s retirement plan.
Groups benefit
Local politicians say the state Legislature has shifted many costs to local property-tax payers rather than use more of the state’s main revenue source, sales taxes. For example, in 1999, local property taxes accounted for 39 percent of the school-funding formula. Now it’s 46 percent.
Broward commissioners bristle at the fact that state law requires them to pay for some newly trained law-enforcement officers, new early-voting sites, health costs and some operating costs for state-controlled courthouses – all things that state lawmakers say locals should help pay for as well.
Broward County also calculates that a state change to the workers’ compensation claims favoring emergency workers cost the county $1.5 million.
In Miramar, property-tax revenues have soared since 2000. But city Commissioner John Moore said most of the money went to police, and that there is little fat to cut. “I’ve found some things that would have amounted to nickels and dimes,” Moore said.
House Speaker Rubio said the complaints from local governments are a good thing.
“The argument assumes someone has to make a sacrifice – either government or the taxpayer,” Rubio said. “That’s an easy choice.”
Copyright © 2007 Miami Herald. Marc Caputo and Breanne Gilpatrick. All rights reserved.
NORTH PALM BEACH, Fla. – March 26, 2007 – More than three in 10 homeowners (34 percent) do not know what type of mortgage they own, according to a new poll released by Bankrate.com. Furthermore, 28 percent of those surveyed worry about how they will afford their payments. The national poll reveals the confusion and anxiety that homeowners are experiencing today.
Another notable finding is that 34 percent of homeowners with adjustable rate mortgages (ARM) do not know what they will do when their loan readjusts. Bankrate calls that a “staggering statistic” since the adjustment could tack several hundred dollars onto their monthly mortgage payment.
Other key findings of the poll that studied homeowners include:
• 36 percent of homeowners surveyed with an Adjustable Rate Mortgage (ARM) plan to refinance to a fixed-rate loan when their ARM changes
• 28 percent worry either “regularly” or “sometimes” about how they will afford their payments next year
• 57 percent of homeowners have a fixed-rate mortgage
Key findings of the poll that studied homeowners include:
• 40 percent of renters consider affordability the biggest obstacle in buying a house
• Just under 12 percent are concerned their credit rating is not high enough to purchase a home
• 38 percent would avoid an ARM when they’re ready to purchase a home
To view the complete results, go to http://www.bankrate.com/mortgagepoll.
The study was conducted by the polling firm GfK Roper via telephone among a nationally representative sample of 1,004 adults, aged 18 or older. The sample was collected March 16-18, 2007, using a Random Digit Dialing Methodology. The data is weighted by age, sex, education, rate and geographic region. The study has a 95 percent confidence level and a plus or minus 3 percent margin of error.
© 2007 FLORIDA ASSOCIATION OF REALTORS®
ORLANDO, Fla. – March 23, 2007 – Florida's housing sector continued to show a more sustainable pace of sales in February, while still-low mortgage rates sparked buyer interest, according to the Florida Association of Realtors (FAR). Statewide, sales of single-family existing homes totaled 10,779 last month compared to 14,080 homes sold in February 2006 for a 23 percent decrease.
Real estate industry experts across the state think the outlook for Florida’s single-family residential housing market has brightened, according to a quarterly survey conducted by the University of Florida. The survey shows that a growing number of those polled find home prices are staying even with inflation.
“If you’re thinking of buying a house, there’s probably not much to be gained by holding out at this point,” says Wayne Archer, director of UF’s Bergstrom Center for Real Estate Studies. “It doesn’t look like prices are going to fall anymore. We see that as a benchmark. When prices maintain the same level as inflation, then we’re probably in some kind of equilibrium. It indicates the market is stabilizing.”
Florida’s median sales price for existing single-family homes in February was $235,500; a year ago, it was $242,500 for a 3 percent decrease. The median is the midpoint; half the homes sold for more, half for less. In February 2002, the statewide median sales price for single-family homes was $131,800, for an increase of about 78.7 percent over the five-year-period, according to FAR records.
In January 2007, the national median sales price for existing single-family homes was $209,200, down 3.5 percent from the previous year, according to the National Association of Realtors® (NAR). In California, the statewide median resales price was $559,640 in January; in Massachusetts, it was $340,000; in Maryland, it was $303,842; and in New York, it was $300,000.
Existing home sales likely will gradually rise this year and into 2008, according to NAR’s latest housing outlook. “Underlying trends point to a housing recovery in 2007, but it will take a couple months for us to get a better handle on it,” says NAR Chief Economist David Lereah. “Existing-home sales are expected to slowly improve from what appears to be the cyclical low last fall.”
Sales of existing condominiums in Florida also decreased last month, with a total of 3,172 condos sold statewide compared to 4,397 in February 2006 for a 28 percent decline, according to FAR. The statewide median sales price for condos last month remained flat at $212,200; a year ago, it was $213,000. NAR reported the national median existing condo price was $222,200 in January 2007.
Last month, interest rates for a 30-year fixed-rate mortgage averaged 6.29 percent, up slightly from the average rate of 6.25 percent in February 2006. FAR’s sales figures reflect closings, which typically occur 30 to 90 days after sales contracts are written.
Among the state’s larger markets, the Sarasota-Bradenton Metropolitan Statistical Area (MSA) reported more sales of existing homes and condos in February. A total of 598 existing homes sold last month compared to 568 homes sold a year ago for a 5 percent increase. The market's median sales price for homes was $294,500; it was $324,200 in February 2006 for a 9 percent decrease. A total of 278 existing condos changed hands in the MSA last month, a 31 percent increase over the 212 condos sold the previous year. The existing condo median sales price in February was $357,500; a year ago, it was $255,200 for an increase of 40 percent.
“People who were simply looking (at homes) before are now starting to make offers,” says May Aston, president of the Manatee County Association of Realtors and a founding Realtor with RE/MAX Gulfstream Realty in Bradenton. “Why wouldn’t you buy now? Mortgage rates are still incredibly low and buyers are able to consider a range of inventory. People are drawn to Manatee County for a number of reasons, including our relaxed lifestyle, yet we’re conveniently located near the hustle and bustle of Sarasota and Tampa.”
Among the state’s smaller markets, the Melbourne-Titusville-Palm Bay MSA reported a total of 474 homes sold in February compared to 484 homes a year ago for a 2 percent decrease. The existing home median sales price was $201,100; a year ago, it was $232,700 for a 14 percent decline. A total of 103 existing condos sold in the MSA last month compared to 156 condos the previous February for a 34 percent decline. The market’s existing condo median price was $168,800; a year ago, it was $206,300 for a decrease of 18 percent.
Lance VandeBerg, president of the Spacecoast Association of Realtors and broker-owner of VandeBerg Real Estate & Investment Inc. in Merritt Island, agrees the pace of home sales is starting to pick up as buyers show renewed interest in the housing market. “The Space Coast has a strong high-tech business climate and offers great values for housing opportunities, especially for coastal properties,” he says. “And, with mortgage rates continuing to be so favorable, right now is a great time to buy.”
WASHINGTON – March 23, 2007 – Rates on 30-year mortgages edged up slightly this week but still remained near the lowest level for the year.
Mortgage giant Freddie Mac reported Thursday that 30-year, fixed-rate mortgages averaged 6.16 percent this week.
That was the second-lowest level for the year, up only slightly from the low for this year of 6.14 percent, where 30-year rates had been for the two previous weeks.
That was the lowest for 30-year mortgages since they averaged 6.13 percent the week of Dec. 21.
Analysts said financial markets received conflicting news over the past week with worse-than-expected readings on inflation, which could cause interest rates to rise, followed by Wednesday’s decision by the Federal Reserve to signal that rate cuts were possible later this year if the economy remains sluggish.
Frank Nothaft, chief economist at Freddie Mac, said the bond market had basically taken the inflation readings “in stride.”
Rates on 15-year, fixed-rate mortgages, a popular choice for refinancing, edged up slightly this week as well, rising to 5.90 percent, up from 5.88 percent.
Five-year adjustable rate mortgages averaged 5.91 percent, up from 5.90 percent last week.
One-year adjustable mortgages dipped to 5.40 percent, down from 5.42 percent last week.
The mortgage rates do not include add-on fees known as points. Thirty-year and 15-year mortgages both carried a nationwide average fee of 0.4 point. The five-year mortgage had an average fee of 0.6 point while the one-year mortgage carried a 0.7 point average fee.
A year ago, rates on 30-year mortgages stood at 6.32 percent while 15-year mortgages were at 5.97 percent, five-year adjustable rate mortgages averaged 5.96 percent and one-year ARMs were at 5.41 percent.
On the Net: Freddie Mac: http://www.freddiemac.com
Copyright 2007 The Associated Press, Martin Crutsinger (AP Economics Writer). All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
TALLAHASSEE, Fla. – March 22, 2007 – Gov. Charlie Crist reassured Floridians yesterday that the state would not accept the smaller-than-expected insurance rate cuts announced by most carriers. He made the comments at a Tallahassee political gathering of South Florida political and business leaders.
“You need relief, and we know it and we feel it,” Crist says. “Don’t believe your rates aren’t going to go down as much as we would like. They are. I guarantee it. They’re going to keep going down.”
Florida Insurance Commissioner Kevin McCarty had earlier estimated an average 24 percent drop in insurance rates statewide, but most carriers, notably the larger ones, requested rate drops in the single digits. Florida’s largest, State Farm Florida Insurance Co., requested 7 percent; Allstate Floridian Insurance Co., 14 percent, Nationwide Insurance Co. of Florida, 4.6 percent; and USAA, 3.1 percent.
According to Crist, he met with Insurance Commissioner Kevin McCarty after the insurers filed their rate change requests. “What’s up with the filings? Some of them are minuscule, some of them are 34 percent – which we like – in reductions.” Crist says. “McCarty’s response was, ‘Well, that doesn’t mean we have to accept their nominal reduction, Governor.’ I said, ‘God I love you.’”
Source: 2007 Orlando Sentinel, Anthony Man, March 22, 2007
WASHINGTON – March 22, 2007 – Congress will press federal regulators on whether they were lax as high-risk mortgages proliferated during the housing boom and even contributed to the spike in delinquent payments and foreclosures.
Some of the biggest companies in the so-called subprime mortgage market also are being called to account by lawmakers as turbulence swirls in the subprime mortgage market, recently roiling Wall Street and helping push the Dow Jones average to its lowest levels in more than four years.
There has been anxiety in the financial markets that the distress could spill over into the broader economy.
Executives from major lenders, along with officials from the Federal Reserve and several other federal agencies that regulate banks and thrifts, were to testify at a hearing today of the Senate Banking Committee.
On Wednesday, the committee’s chairman blamed the Fed and other regulators for setting off the crisis in subprime loans, which are higher-priced home loans for people with tarnished credit or low incomes who are considered at greater risk of default.
Sen. Christopher Dodd, D-Conn., accused the regulatory agencies of a “pattern of neglect” as banks and other lenders loosened their standards for making subprime mortgage loans during the housing market boom in late 2003 and early 2004.
The regulators’ conduct, including encouraging the development of unconventional mortgages that afford low initial payments but balloon later on, “precipitated the subprime mortgage crisis that could cause 2.2 million homeowners to lose their homes in the next few years,” said Dodd, who is a candidate for the Democratic presidential nomination in 2008.
Foreclosures have accelerated in recent months, especially among homeowners who took out subprime loans. In recent weeks, lawmakers and regulators have voiced concern that many people could lose their homes as mortgage delinquencies mount and distress grows in the market for subprime mortgages.
Senior Democrats are drafting legislation intended to curb predatory lending, which occurs, for example, when lenders pressure home borrowers into high-interest loans that they may not be able to repay.
Mortgage industry executives are warning against what they say could be a harmful overreaction by Congress that would upset the markets and dry up home-loan credit for the people who need it most.
New legislative or regulatory restrictions “could actually harm the consumer by restricting the choices of loan products, terms and (lenders) available in the market,” Harry Dinham, president of the National Association of Mortgage Brokers, testified at a House hearing on Wednesday.
Earlier this month, the Fed and the other four federal agencies that regulate banks, thrifts and credit unions called on lenders to exercise caution in making subprime mortgage loans and strictly evaluate borrowers’ ability to repay them. The regulators said the guidelines, if formally adopted by the agencies and followed by lending institutions, could result in fewer borrowers qualifying for subprime loans.
Dodd said Wednesday he wanted to know why it took the regulators more than three years to act “despite evidence that they themselves identified problems in the subprime market.”
On the Net: Senate Banking Committee: http://banking.senate.gov
Copyright 2007 The Associated Press, Marcy Gordon (AP Business Writer). All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
GAINESVILLE, Fla. — Hurricanes failed to dampen Florida’s growth, as the number of year-round households in the Sunshine State grew an estimated 15 percent between 2000 and 2006 to more than 7 million residences, a new University of Florida study shows.
“At this point we haven’t seen any real drop in growth from the hurricanes – the sky hasn’t fallen,” says Scott Cody, a demographer at UF’s Bureau of Economic and Business Research, who prepared the report with Stan Smith, an economics professor and the bureau’s director.
Florida was struck by four hurricanes in 2004 and two in 2005.
The number of housing units in Florida occupied by permanent residents increased by 952,938 in 2000 to an estimated 7,291,013 on April 1, Cody said.
The 2006 household estimates were based on 2000 census data and changes in electric customer and building permit information since 2000. Households are defined as housing units occupied by permanent residents and do not include those for seasonal residents.
Flagler County had the largest growth rate, experiencing a whopping 76 percent increase in its number of households over the six-year period, from 21,294 to 37,522. It was followed by Sumter, Osceola, Walton, St. Johns, St. Lucie, Lee and Lake counties.
“These places have cheaper land and space to grow compared to larger counties like Broward, where it’s harder to build single-family homes because they’re running out of space,” Cody says. “And as the baby boomers get older, they’re not tied as much to commuting to work in metropolitan areas and can live in communities like the Villages in Central Florida that are farther away.”
In sheer numbers, Miami-Dade had the largest increase, growing by 69,844 households between 2000 and 2006. It was followed by Hillsborough, 65,800; Orange, 64,006; Palm Beach, 63,959; Lee, 61,751; and Broward, 43,694.
Some of the rural counties had the smallest increases. Fewer than 300 households were added in DeSoto, Hamilton, Lafayette, Liberty and Glades counties. Hardee actually experienced a net loss, losing 82 households between 2000 and 2006.
“These smaller counties, many of them in the Panhandle, do not have as many people and typically do not experience the kind of growth that some of the counties in coastal areas do,” Cody says.
The study also found that Florida’s average household size since the 1990s has remained steady at 2.46 people, after falling rapidly in the 1960s, 1970s and 1980s. The average household size in the United States is slightly higher at 2.59, falling from 2.63 between 1990 and 2000 after several decades of substantial declines.
“It may be that Florida not mirroring the U.S. decline relates to more families moving here permanently with the availability of greater numbers of jobs in places like Tampa and Orlando,” Cody says. “We still have many retirees but they are balanced out by the large influx of Hispanics who tend to have bigger families.”
The study found that counties with the largest average household sizes tended to have low proportions of older residents and high proportions of black or Hispanic residents, Cody said. “Fertility rates are higher for these groups, which is one factor in household size,” he said.
Between 2000 and 2006, average household size declined slightly in 43 Florida counties, rose slightly in 10 counties and remained constant in 14 counties, the study found.
In 2006, average household size was largest in Hendry, Hardee, Baker, Miami-Dade, Osceola, Union and Clay counties. It was smallest in Sarasota, Charlotte, Pinellas, Monroe, Sumter and Citrus counties.
Estimates of average household size were based on each area’s average household size in 2000, the national change in average household size since 2000, the local change in the mix of housing units, and factors such as birth, school enrollment and Medicare. The Medicare data picks up changes in the older population, which tends to have fewer persons per household than younger populations.
NORTH PALM BEACH, Fla. – March 21, 2007 – Before applying for a mortgage, get your credit in shape. Any of these five moves could sabotage your mortgage approval: ignoring credit reports; closing credit card accounts; getting rid of HELOC; getting in over your head; and switching jobs.
Switching jobs
Lenders like to see a steady history of employment and frown on job changes while your application is pending, unless the new job is in the same field and at the same or greater pay. If you do take a new job, experts suggest getting a letter stating you’ve completed the probation period for a new job to allay lender concerns.
Getting in over your head
There is a difference between the maximum payment a borrower can qualify for (which can sometimes be surprisingly high) and the amount you can comfortably afford, says Combs. “Each person has to know the difference in his own mind,” she says. “If you’re just getting by with your current rent payment, and the lender says you can qualify for more, give it some thought.”
Getting rid of HELOC
If you already own a home and have an existing home equity line of credit, or HELOC, Combs recommends that you not get rid of it in preparation for a new home purchase. “I think you ought to leave it alone. Sometimes buyers are going to need it; they can use it as an easy bridge loan (to cover the downpayment temporarily until you sell the old home) so they don’t have to go through the trouble of getting one.”
Closing credit card accounts
While paying down your credit card balances will improve your financial picture, this is not the time to close credit accounts because reducing the amount of credit available to you can actually lower your credit score. “Don’t assume you should just get rid of it,” says Pat Vredevoogd Combs, a practicing residential broker in Grand Rapids, Mich., and president of the National Association of Realtors.
Ignoring your credit reports
The key to getting the best mortgage rate is good credit. A 2004 study by the U.S. PIRG, the federation of state Public Interest Research Groups, found that one in four adults have serious errors on their credit reports. Not small errors either. The Fair Credit Reporting Act requires credit-reporting agencies to fix these mistakes, but it’s up to you to find the problems and to ask for the errors to be corrected.
© 2007 Bankrate.com, Bankrate Inc. All rights reserved.
HOLLYWOOD, Fla. – March 20, 2007 – Financial institutions must pay close attention to mortgage fraud, or risk their reputations and increased scrutiny from federal regulators, a panel of experts said Monday at the start of a three-day conference in Hollywood on preventing money laundering and other financial fraud.
Instances of mortgage fraud have exploded in recent years, with investigators seeing a rise in bogus real estate appraisals, misrepresentations on loan applications, false income verification statements and a host of other attempts to cheat lenders out of money, said Phillip Hull, special agent with the Internal Revenue Service’s investigation division in Jackson, Mississippi.
And law enforcement agencies are finding that mortgage fraud is a popular tool for money laundering, said Andrew Sandler, a Washington, D.C., attorney whose work focuses on financial services enforcement and litigation.
“Law enforcement is finding increasingly it involves drug cartels, organized crime” and even terrorist groups, Sandler said.
One scheme that prosecutors are seeing: Fraud perpetrators buying a house and selling it the same day for thousands of dollars above the sales price, making it easier for them to secure a loan for the difference and divvy the profits among the parties involved, said Assistant U.S. Attorney Cynthia Eldridge, who is based in Jackson, Mississippi.
Anyone involved in a real estate transaction could be participating in the fraud -- mortgage brokers, closing attorneys, real estate agents, buyers and sellers, even lenders who aren’t requiring certain documents that they should, Eldridge said.
“As prosecutors we are looking at everybody across the spectrum,” she said.
While the fraud hurts lenders, it can also hurt consumers, who could be hit with higher fees for loans, said conference organizer Charles Intriago, founder and publisher of Money Laundering Alert. “This is going to be an evolving problem,” he said.
More than 1,500 people from 64 countries are registered for the conference, which runs through Wednesday at the Westin Diplomat Resort & Spa in Hollywood. The conference’s attendees range from bank officials who specialize in complying with anti-money laundering laws to law enforcement officers who investigate the crimes.
For more information about the 12th annual conference, www.moneylaundering.com.
Copyright © 2007 South Florida Sun-Sentinel, Kathy Bushouse. Distributed by McClatchy-Tribune Business News.
ORLANDO, Fla. – March 20, 2007 – Keep an eye on the young-with-money set — 18-to-35-year-olds with household incomes of $100,000 or more. They’ll be good prospects, particularly for upscale homes, says Bob Jordan, president of International Demographics.
The demographic represents 26.6 percent (6.2 million) of the 23.2 million adults with household incomes over $100,000 in the 87 metros regularly surveyed by The Media Audit, part of International Demographics.
The number of young with money also eclipses the age 55 and over bracket. “There are more — by both percent and actual number — adults with six-figure incomes under the age of 35 than there are over the age of 54,” says Jordan.
An analysis of Federal Reserve data by the National Association of Home builders bears this out: Median income for 55-plus households is somewhat lower than it is for younger households.
Better educated women, wealthier men
Fifty-six percent of the women in the young-with-money group have one or more degrees, compared with 46 percent of the men. Although younger women tend to have more degrees, more younger men, 60.9 percent, have six-figure incomes compared with 39.1 percent of women. And men get to the $100,000 income level more quickly, with 19.4 percent of 18- to 20-year-old men at or above this income compared with 15.6 percent of women.
Still, education level is key to wealth for this group, and Jordan anticipates that young adults with money, particularly those with an education, will continue to be a growing part of the marketplace.
Homeownership trends
Younger women aren’t only more likely to buy a house, but they’re also more likely to own a larger or more expensive home compared with men in the same demographic.
• 46.5 percent of women age 18 to 35 have homes valued at $300,000 or more.
• 42.2 percent of men have homes valued at $300,000 or more.
• 80.7 percent of women in this group own their home, compared with 74.3 percent of men.
Other young-with-money stats
• 63.2 percent of the “young with money” are 25-34
• 58.3 percent are Caucasian
• 9.7 percent are African-American
• 15.3 percent are Hispanic
• 12.7 percent are Asian
Source: Camilla McLaughlin for REALTOR® Magazine Online
TALLAHASSEE, Fla. – March 19, 2007 – For thousands of frustrated Floridians, the big homeowners insurance rate reductions promised by state lawmakers and Gov. Charlie Crist may never materialize, judging by the companies’ own filings.
The state’s homeowners insurers were required to file proposed reductions in premium rates by Thursday, according to the reform hammered out by lawmakers in a weeklong special session in January.
State Farm Florida Insurance Co., USAA, Liberty Mutual Fire Insurance Co. and First Floridian Auto and Home Insurance Co. on Thursday became the latest major insurers to propose rate decreases far less than the average 25 percent to 30 percent that state legislators and the governor led policyholders to believe were on the way.
State Farm, the state’s second-largest homeowners insurer, is offering policyholders an average cut of 7 percent statewide. USAA, the fifth-largest, has proposed a 3.1 percent reduction, the lowest among the state’s major insurers.
Liberty Mutual and First Floridian, the ninth- and 10th-largest, respectively, offered average cuts of 8.7 percent and 8.2 percent statewide.
Bob Lotane, a spokesman for the state Office of Insurance Regulation, said the filings would get a full review by insurance officials. If they don’t meet specifications set by regulators, he said, they will be rejected.
The less-than-expected decreases, which take effect starting June 1, are not likely to be greeted with much fanfare by shell-shocked homeowners who were looking forward to major relief following years of double-digit increases in insurance rates. It was essentially homeowners’ outcries from being squeezed by higher rates – especially after the 2004 and 2005 hurricane seasons – that finally forced lawmakers into a special session to deal with the issue.
Nowhere is the sting of higher insurance rates felt more than in Palm Beach County, where homeowners also have been hit with nonrenewal notices. But in Palm Beach County and the Treasure Coast, State Farm is proposing to reduce rates between 8 percent and 10.7 percent, slightly above the insurer’s statewide average.
County breakdowns were not available for other insurers late Thursday.
“I’m a little perplexed,” Sen. Bill Posey, R-Rockledge, chairman of the Senate Banking and Insurance Committee, said after hearing of the reduction plans filed by insurers Thursday.
Posey, a key player in the reform debate during the special session, said insurers had told lawmakers an average 25 percent rate reduction was realistic if the state expanded the Florida Hurricane Catastrophe Fund. The fund was more than doubled to offer insurers as much as $28 billion in coverage.
Posey said insurers paid an average of 49 cents for each dollar of reinsurance – insurance for insurers – in 2006-07, and the catastrophe fund has reduced costs to as little as 6 cents for each dollar of coverage. He said it would be up to state Insurance Commissioner Kevin McCarty to determine whether the insurers’ filings were accurate.
William Stander, a regional vice president for the Property Casualty Insurers Association of America, said lawmakers were warned that a “one size fits all” solution would not work because insurers had varying reinsurance needs.
Chris Neal, a spokesman for State Farm, said the company already was buying reinsurance at rates cheaper than the state reinsurance fund offers, so the company could not pass along major savings to policyholders.
Bob Hartwig, an economist with the Washington-based Insurance Information Institute, said smaller insurers will receive the most benefit from the expansion of the state catastrophe fund because they did not have the clout to get the best reinsurance rates.
Some insurers did offer substantial rate reductions Thursday. Gainesville-based Tower Hill Preferred, the 23rd-largest insurer, said it would cut rates by 22.4 percent statewide. Some smaller companies offered rate reductions in excess of 30 percent.
But for the bigger companies that control more than 60 percent of the market, the savings were smaller. Allstate Floridian announced a 14 percent rate decrease this week, and Nationwide offered a 4.6 percent decrease.
On March 1, McCarty said regulators concluded that rates should go down an average of 24 percent and required insurers to develop new rates by March 15.
No matter what happens with the rate reduction plans, it’s likely that some homeowners may end up with rate increases because of previous rate hikes already granted by regulators. State Farm started putting into effect a 52.9 percent rate hike in November, but policyholders learn their new rate only at renewal time. In parts of Palm Beach County, that rate increase exceeds 100 percent.
The biggest increase in the works, however, could be from Nationwide. The company is appealing regulators’ rejection last year of its proposed 73 percent rate hike to an arbitration panel, which has the power to grant the increase.
Copyright © 2007 The Palm Beach Post, Fla.,Randy Diamond. Distributed by McClatchy-Tribune Business News.
TALLAHASSEE, Fla. – March 19, 2007 – Home and condominium customers with state-backed Citizens Property Insurance Corp. should expect lower rates – or even a refund check in the mail – thanks to cheaper reinsurance the company will buy from the Florida Hurricane Catastrophe Fund.
The state’s largest home insurer on Friday requested statewide average decreases between 12 percent and 14.5 percent for its home and condo policy holders who get only their hurricane coverage from Citizens. For home and condo policy holders who have complete homeowner policies from the company, the requested statewide average cuts range from 3.2 percent to 6.7 percent.
The biggest savings will come for Citizens’ coastal customers, who will see cuts as high as 16.9 percent in Broward County and 15.5 percent in Palm Beach County. Coastal condo associations insured by Citizens also will see money back, with as much as 16.2 percent in Broward County and 14.9 percent in Palm Beach County. Homeowners living west of Interstate 95 will see decreases as high as 8.1 percent in Broward and 8 percent in Palm Beach County.
Citizens was able to get more reinsurance – insurance for insurance companies – from the catastrophe fund because of changes the Legislature made during January’s special session on property insurance. The ability to buy more coverage from the state fund “allows us to buy cheaper reinsurance for more severe loss, and that’s what caused the rate reduction,” said Citizens spokesman Rocky Scott.
This will be the second round of refunds Citizens issued this year. The company announced last month it was sending out checks to customers who paid rate increases that were scheduled to go into effect this year but rolled back by the Legislature during the emergency session.
Whether you’ll get a check in the mail or simply pay less on your policy depends on when you renew your policy with Citizens, Scott said. Anyone whose policy renews between Jan. 1 and April 15 will get a refund check. Customers whose policies renew after April 15 will see a decrease in their premium.
Citizens’ refunds come the day after the deadline for private insurance companies to make their proposals to the state for cuts they’ll pass along to their customers. The state’s four largest private insurance companies – State Farm Florida Insurance Co., Allstate Floridian Insurance Co., Nationwide Insurance Co. of Florida, and USAA – all requested cuts far below the estimated average of 24 percent projected by the state.
Smaller companies asked for larger decreases for their customers, most likely because they benefited more from the cheaper catastrophe fund coverage, said Robert Hunter, director of insurance for the Consumer Federation of America.
“I thought the bigger the company was, the lower the number would be,” said Hunter, who helped the state come up with its presumed savings for private insurance companies.
Bigger companies have more leverage than smaller companies when it comes to buying reinsurance from private firms, Hunter said, who said in his research he found smaller insurers paying 10 times what he considered a fair rate for reinsurance coverage.
“There’s a lot of opportunity for savings for the smaller companies,” he said.
Insurance Commissioner Kevin McCarty said Friday that he would have liked to see more insurers seeking cuts that matched his estimated savings. But he said he was surprised by Citizens’ requested cuts because they were much larger than he expected.
All of the companies’ requests are going to face scrutiny from his office, he said. Insurers whose rate-cut requests are rejected could find themselves forced to return more money to customers if the state finds the decreases should have been higher.
“We are going to be very thorough in reviewing any requests in the future to ensure that all the savings that were anticipated, were realized,” McCarty said.
Copyright © 2007, South Florida Sun-Sentinel, Kathy Bushouse. Distributed by McClatchy-Tribune Business News.
BOCA RATON, Fla. – March 19, 2007 – The meltdown in the subprime mortgage market is an inevitable result of falling home prices, former Federal Reserve Chairman Alan Greenspan said Thursday during a question-and-answer session here.
“What we’re dealing with is something that’s more an issue of home prices than it is of mortgage credit quality,” Greenspan told about 500 people attending the Futures Industry Association’s conference at the Boca Raton Resort and Club.
During the housing boom that cooled in 2005, soaring home prices and looser lending standards made it possible for buyers with spotty credit to buy homes, often with little money down. But now that prices are flat or falling and adjustable-rate mortgage payments are rising, so-called subprime borrowers cannot refinance their way out of trouble.
Subprime borrowers “come in late in the game, after most of the rise in the market has taken place,” Greenspan said. “When prices flatten out and go down, all of a sudden you see the thing caving in.” He stressed that there’s little trouble in the “prime” mortgage market, in which borrowers with good credit get the lowest mortgage rates.
“If we somehow could wave a wand and home prices would go up 10 percent, the subprime mortgage problem would disappear,” he said.
But, he added, “If home prices go down from here, I think we’ll have problems.” Wearing a dark suit and oversize glasses, Greenspan seemed relaxed as he fielded questions from futures traders. He reminisced about his days as a professional musician and his early forays into cotton trading.
He begged off a request to predict the direction of interest rates, and he showed a sense of humor that did not come out in the purposely confusing pronouncements he made during his long tenure as Fed chairman.
When one attendee asked him to comment on his reputation for striking fear into markets, Greenspan demurred.
“I know my wife doesn’t quake in her boots,” he joked. But Greenspan was not joking about what he sees as a “significant” problem for the nation’s Medicare program, which provides health coverage for the elderly. Retiring Baby Boomers will burden the Medicare system, he warned.
“The problem is that we really cannot tell if we’ll have enough in the way of hospitals, physicians, nurses and the like,” he said. “We may find that we’ve promised more than we can deliver.”
By contrast, the Social Security squeeze is a simple problem to fix because Uncle Sam knows what it has promised to pay retirees, he said.
Copyright © 2007 The Palm Beach Post, Fla., Jeff Ostrowski. Distributed by McClatchy-Tribune Business News.
NEW YORK – March 19, 2007 – The stock market proved again last week that it’s vulnerable to bad news relating to U.S. subprime mortgage lenders. This week should give investors a clearer view of the housing market’s health, and whether it’s stable enough to stave off an overflow of that sector’s troubles into the wider economy.
In addition to housing data, investors will be digesting the Federal Reserve’s take on inflation and trying to figure out if the central bank is leaning toward a rate hike – a move that could put even more of a drag on the housing market and consumer spending.
Last Tuesday, the Dow Jones industrials dropped more than 240 points when the New York Stock Exchange said it was moving to delist New Century Financial Corp., Accredited Home Lenders Holding Co. said it was low on cash, and the home loan units of GMAC Financial Services and H&R Block indicated they’re struggling. The subprime mortgage industry isn’t a huge portion of the U.S. economy, but some market sages (including former Fed Chairman Alan Greenspan) are saying troubles could escalate and spill into other sectors if home prices drop off significantly, making mortgages impossible to refinance.
On Friday, the markets will find out if homes lost value in February, when the National Association of Realtors reports last month’s median home price. January’s report – which came out Feb. 27, when the Dow Jones industrials plummeted more than 400 points – showed that the median home price fell for the sixth straight month. The data will also include existing home sales and inventories; economists are expecting February sales to slip to 6.35 million, after jumping to 6.46 million in January.
Investors this week should also get a better idea of how the sluggish housing market is affecting the industries that depend on it. On Monday, the National Association of Home Builders will release its index on builders’ perceptions of new single-family home sales and near-term sales prospects. And Tuesday, the Commerce Department reports on February housing starts and building permits; the market is expecting housing starts to have risen to 1.450 million from 1.408 million in January, and building permits to have slipped to 1.56 million from 1.57 million.
Also Tuesday, Fed policy makers begin their two-day meeting to discuss whether to adjust short-term interest rates. Market watchers are forecasting that the central bank will leave rates unchanged for the sixth straight time, but the statement it releases Wednesday could provide some insight into whether it sees rising inflation as a bigger threat than the flagging economy.
Disappointing news related to the housing market or lenders, as well as a harsh warning from the Fed or signs of weakness in overseas markets, could convince Wall Street that the market’s downturn isn’t over yet.
The Dow finished down 0.41 percent last week; the Standard & Poor’s 500 index declined 0.38 percent; and the Nasdaq Composite Index fell 0.25 percent.
More economic data
On Monday, the Chicago Fed is expected to report that its manufacturing index rose 0.3 percent in February.
On Thursday, the Conference Board will release its index of leading indicators, a widely followed economic forecast gauge, for February. The market expects a decline of 0.5 percent, compared to an increase of 0.1 percent the previous month.
Friday will bring speeches from Philadelphia Fed President Charles Plosser and New York Fed President Timothy Geithner.
Earnings
On Tuesday, investors will be watching for Oracle Corp.’s fiscal third-quarter earnings, which are expected to come in at 23 cents per share. The database and software maker closed last Friday at $16.70, in the middle of its 52-week range of $13.07 to $19.75.
Also Tuesday, the next big financial company to report first-quarter financial results will be Morgan Stanley, which closed at $74.41 last Friday, in the middle of its 52-week range of $54.52 to $84.66. It’s expected to post earnings of $1.88 a share.
On Thursday, KB Home will report its first-quarter earnings, which are forecast to come in at 27 cents a share. The homebuilder closed Friday at $45.38, in the lower end of its 52-week range of $37.89 to $69.10.
On Friday, one of the biggest U.S. mortgage lenders, Freddie Mac, is expected to post fiscal fourth-quarter earnings of $1.33 a share. It closed at $59.52 last Friday, at the lower end of its 52-week range of $55.64 to $71.92.
Copyright © 2007 The Associated Press, Madlen Read (AP Business Writer). All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
TALLAHASSEE, Fla. – March 16, 2007 – Despite recent Florida state regulatory changes reducing the cost of reinsurance for primary carriers, primary homeowners’ insurers have not passed on decreases near the 24 percent lawmakers predicted in January 2007. Yesterday, State Farm reported that most policyholders would only see a 7 percent decline, though homeowners in Broward and Miami-Dade counties could see declines up to 9.5 percent. State Farm Florida Insurance Corp. is the state’s largest private insurer and has more than 1 million customers.The Office of Insurance Regulation must first approve the rate request. Office Spokesman Bob Lotane says that the request “doesn’t mean we’re going to be accepting their numbers.” The department will review the rates to “see that they’re justified.”Some lawmakers who worked on insurance reform believe the rate reduction should be greater. “No insurance company sells reinsurance cheaper than the state of Florida – and even if you need more than we offer, the cost of additional reinsurance has dropped 10 percent, 15 percent or more – so I can’t understand why (State Farm’s) rates aren’t lower,” says Sen. Bill Posey (R-Rockledge)” However, the Property Casualty Insurers Association of America warns that not all primary carriers purchase the same amount of reinsurance coverage, meaning that rate reductions are going to vary.Gov. Crist also did not seem happy about the 7 percent. “The lower the rate filing the better, as far as I’m concerned,” Crist says. “And I know that’s how the people of our state feel. I’m hopeful that we can have them lower, and that’s what I look forward to.”Source: Miami Herald (03/16/07) Garcia, Beatrice© Copyright 2007 INFORMATION, INC. Bethesda, MD
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TALLAHASSEE, Fla. – March 14, 2007 – State officials approved a new business plan for Citizens Property Insurance, allowing the state-run insurer to be more competitive with private insurers and offer some savings to policyholders.
The plan, required by the new insurance law passed in January, calls for Citizens to offer a complete policy covering windstorm damage as well as fire, theft and liability in the state’s designated windpool area.
Bruce Douglas, chairman of Citizens’ board of governors, told the Cabinet that 900,000 policyholders, out of its total 1.3 million, already have multiperil coverage with the company.
"This plan is a natural extension of what Citizens already does," said Douglas. It would make Citizens more efficient because it would have to service just one policy. Also, the company estimates that policyholders who opt to buy a single, complete policy from Citizens will see a 10 percent reduction in rates.
Mixed policies
Out of its 400,000 windstorm-only policies, some 118,000 homeowners have their fire and theft coverage with a private insurer. The remainder already have all their coverage with Citizens, but in two separate policies.
The insurer is hoping those 118,000 opt for Citizens’ single policy. But Douglas said the company realizes these homeowners might have multiline discounts with their current private carrier, such as for autos and home. That discount could be greater than the savings Citizens is offering. Douglas also noted that with expansion Citizens can “compete with the voluntary market.”
Both Citizens officials and state lawmakers are hopeful that element of competition could bring about some lower rates from the private insurers, possibly fearful of losing business to the state-run pool. Gov. Charlie Crist endorsed that approach in comments before Tuesday’s meeting.
“The more rate reductions that we have, the more competition Citizens is able to present, the greater empowerment there will be of the people,” he said.
Tough questions
Chief Financial Officer Alex Sink grilled Douglas on Citizen’s marketing and customer service plans. He assured her that Citizens will be conducting meetings statewide with policyholders to get feedback – the first will be in Fort Lauderdale in May – and its meetings with agents will “get input on our level of service and where we’re falling down.”
Crist jokingly asked Douglas whether Citizens’ marketing plan would involve a little green lizard – alluding to the green gecko in Geico’s auto insurance commercials that tells consumers, “I’m going to save you lots of money and I love my job.”
Douglas promised no lizard. Instead, he said Citizens is educating agents to understand the company’s expanded coverage and inform consumers: “Here’s what we’re offering. Here’s how to do it. Now go out and do it.”
The plan still needs to be approved by the Legislative Budget Commission later this month before Citizens implements it.
Copyright © 2007 The Miami Herald. Distributed by McClatchy-Tribune Business News.
WASHINGTON – March 14, 2007 – Oil- and gas-drilling advocates have barely waited for the ink to dry on last year’s legislation before proposing a new bill that would allow energy exploration 45 miles from Florida’s coast.
Last year’s compromise measure opened up new areas in the Eastern Gulf of Mexico to drilling. Wednesday, business leaders and a bipartisan Senate team will propose allowing drilling much closer than the 125-mile buffer along Florida’s coast.
Sen. Larry Craig, R-Idaho, and Sen. Byron Dorgan, D-N.D., will propose a broad measure that includes tougher standards for automobile fuel economy, incentives for conservation and alternative fuels and more offshore drilling. The bill would allow U.S. companies to drill in waters close to Cuba by lifting the embargo for them on doing business with that nation. And it would sanction an inventory off Virginia, Georgia and North and South Carolina that could lead to drilling there.
Both of Florida’s senators, Democrat Bill Nelson and Republican Mel Martinez, vowed to fight the drilling off Florida.
“This is bad policy,” Martinez said. “It attacks Florida’s protections, it violates the embargo with Cuba, and it would put drilling rigs in the Gulf military training area. This proposal goes back on everything the Congress dealt with last year – everything we did to create a long-term buffer for Florida.
“I will fight this proposal every step of the way.”
The 45-mile buffer is enough to move drilling rigs out of sight of Florida’s shores, the sponsors said.
Dan McLaughlin, spokesman for Nelson, said the measure has important provisions such as promoting alternative fuels but the bill should not include the Florida drilling provisions.
“Sen. Nelson feels this issue was fully explored and debated last year and was decided and that should be the end of it.”
But Barry Piatt, spokesman for Dorgan, said last year’s law didn’t solve the country’s energy problems. The bill, he said, is a “major breakthrough” by knitting together conservation and production at a time the world and the country needs more energy.
“The price of gasoline is going up every day. This is a problem that’s been with us a long time and it’s clearly not going away.”
Mark Ferrulo, an anti-drilling advocate with Environment Florida, said he expects Florida lawmakers will block the bill.
“Looks like some senators are so in the pocket of ‘big oil’ that they want another bite at the apple when the first bite hasn’t even been swallowed yet.”
Copyright © 2007 The Orlando Sentinel. Distributed by Knight Ridder/Tribune News Service. All rights reserved.
TALLAHASSEE, Fla. – March 13, 2007 – Allstate Floridian Insurance Co., the state’s third-largest home insurer, wants to cut its property insurance rates by an average of 14 percent statewide. But Allstate Floridian’s proposed premium cuts are far less than the estimated reduction of 24 percent Insurance Commissioner Kevin McCarty said recently that the state’s property insurers should be able to shave rates.
Allstate Floridian will have to justify why the decrease it plans – and the proposed 13 percent decrease by its subsidiary, Allstate Floridian Indemnity Co. – is lower than the state’s estimate. Company spokesman Adam Shores said Monday the figures are based on Allstate Floridian’s risk exposure, and “given the state of the overall [insurance] market, we feel that this is the appropriate rate which will help us move forward.”
County estimates of Allstate Floridian’s rate decrease weren’t available Monday. With its rate request filed, Allstate Floridian – the state’s third-largest insurance company – is now free to proceed with plans to drop 106,000 home and condo customers and offer them coverage with a new insurer, Ormond Beach-based Royal Palm Insurance Co.
Allstate Floridian is the second of the state’s five largest insurance companies to cut its rates based on Florida’s new insurance law. Nationwide Insurance Co. of Florida, the state’s fourth-largest insurer, last week requested a statewide average decrease of 4.6 percent on its premiums. Under the new law, all of the state’s property insurers have until Thursday to submit rate reduction plans to insurance regulators.
The company was temporarily prohibited from shedding policies under a Jan. 31 emergency order from Gov. Charlie Crist and the Florida Cabinet. But now that Allstate Floridian has asked to lower its rates, it is free to conduct business as usual, and that includes not renewing customers’ policies.
Shores said any customers who already have received notices from the company that their policies won’t be renewed would be issued new letters, telling them they have 100 days until their policies expire. He wasn’t sure Monday when those letters would start hitting customers’ mailboxes.
If approved by the state, the revised Allstate Floridian rates will show up in policies issued on or after June 1. The Office of Insurance Regulation is still reviewing Allstate Floridian’s request, department spokesman Bob Lotane said. Since neither Allstate Floridian nor Nationwide’s requests match the state’s estimated savings, the companies will have to show why they’re different.
“Are these numbers going to stand up to review? We don’t know that,” Lotane said.
Gov. Charlie Crist also wasn’t worried that the companies’ savings didn’t match state estimates. Of Allstate Floridian’s proposed 14 percent cut, Crist said, “When was that ever heard of?”
“It’s a new day. It may not be 20 percent or 15 percent, but a 14 percent reduction? ... I’m delighted. I’m not going to complain about rates going down.”
Copyright © 2007 South Florida Sun-Sentinel, Kathy Bushouse; with Jason Garcia, Orlando Sentinel, contributing. Distributed by McClatchy-Tribune Business News.
WASHINGTON – March 13, 2007 – How long will a home improvement actually remain an improvement? How long do new wood floors last? New stoves? A new countertop?
A study sponsored by Bank of America Home Equity and conducted by the National Association of Home Builders (NAHB) attempts to quantify lifespan, with a nod to the fact that many factors – use, maintenance, climate, advances in technology and simple consumer preferences – can have a dramatic effect on product longevity. The National Association of Home Builders/Bank of America Home Equity Study of the Life Expectancies of Home Components was conducted in the summer of 2006.
“By polling experts in a wide range of fields, we learned that many home components are expected to last for the life of the house,” says Gopal Ahluwalia, staff vice president for research and surveys in NAHB’s Economics Group. “Among them are toilets, wood floors, all types of insulation, and fiberglass, steel and wood exterior doors. On the other hand, some components have a much shorter life expectancy. Wood decks should last about 20 years, depending on climate, and kitchen faucets should last about 15 years. Linoleum floors have a life expectancy of about 25 years, and furnaces can be expected to last 15 to 20 years.”
“It’s important to remember that the life expectancies for materials included in this study are averages,” says Ahluwalia. A number of other factors can influence it. “For example, the practical life expectancy of kitchen cabinets is about 50 years. However, many people buying a 15- or 20-year-old house would make installing new, updated kitchen cabinets a priority. Likewise, some home owners paint their homes every year or two, even though interior paint has a practical life expectancy of about 15 years.”
According to the study, the life expectancy of a typical appliance varies. Of the major appliances in a home, gas ranges have the longest life expectancy: 15 years. Dryers and refrigerators last about 13 years. Some of the appliances with the shortest lifespan are: compactors (6 years), dishwashers (9 years) and microwave ovens (9 years).
Kitchen cabinets are expected to last up to 50 years, medicine cabinets for 20-plus years, and garage/laundry cabinets for 100-plus years. Closet shelves are expected to last a lifetime.
Natural stone countertops, which are less expensive than a few years ago, are gaining in popularity and are expected to last a lifetime. Cultured marble countertops have a life expectancy of about 20 years.
Exterior fiberglass, steel and wood doors will last as long as the house exists, while vinyl and screen doors have a life expectancy of 20 and 40 years, respectively. Closet doors are expected to last a lifetime, and French doors have an average life of 30 to 50 years.
Copper plated wiring, copper clad aluminum, and bare copper wiring are expected to last a lifetime, whereas electrical accessories and lighting controls are expected to last 10+ years.
Kitchen sinks made of modified acrylic will last 50 years, while kitchen faucets will work properly for about 15 years. The average life of bathroom shower enclosures is 50 years. Showerheads last a lifetime, while shower doors will last about 20 years. Bath cabinets and toilets have an unlimited lifespan, but the components inside the toilet tank do require some maintenance. Whirlpool tubs will function properly for 20 to 50 years, depending on use.
All natural wood floorings have a life expectancy of 100 years or more. Marble, slate, and granite are also expected to last for about 100 years, but can last less due to a lack of maintenance. Vinyl floors last up to 50 years, linoleum about 25 years, and carpet between 8 and 10 years (with appropriate maintenance and normal traffic).
The complete study is free and available in PDF format at http://www.nahb.org/components.
WASHINGTON – March 12, 2007 – Anyone selling a home in the past year has likely suffered through some pretty stormy markets, but economists say a break in the clouds may be on the way.
That’s because since the highly anticipated “real estate bubble” began deflating in mid-2005, has been losing air for the past year and a half and may finally be out of air. And while some markets suffered through some deep slumps, forecasters are now predicting the worst may be over.
“It appears we are getting very close to bottom,” says David Lereah, chief economist for the National Association of Realtors.
Lereah is one of several economists who agree that sales data show the national existing home sales market is on the verge of regaining ground.
“Sales have hovered for the last four months, scratching bottom and then coming up, scratching bottom and coming up again. We are comfortable this is now the bottom,” he says.
But before you put away that umbrella, it might be best to check your local forecast; scattered showers may persist in certain markets for at least another year.
Over the past few months, Lereah says 75 percent of the nation’s housing markets have expanded. Unfortunately the ones that are still falling are posting losses large enough to bring the national numbers down with them.
“So, you can’t generalize. You can’t say ‘We are in this sharp recession,’ when it is only 25 percent of the markets that are losing ground,” Lereah says.
What makes the current housing slump so hard to forecast is that the factors driving the contraction are different than those driving past slowdowns, says Dave Seiders, chief economist for the National Association of Home Builders.
“You have to put this in context,” he says. “This is not a downswing connected to a recession. This one is special because the drivers are unusual.”
In previous contractions, the entire economy hit a bumpy patch, and mortgage rates were in double digits, Lereah says.
“This is not the case now,” he says.
The primary problem now plaguing the housing market is one of oversupply, rather than a general economic malaise. In general, the markets that are suffering the most now are the ones that benefited the most during the run-up in prices.
“Markets that boomed in the last five years boomed too much, and now they are coming down,” Lereah says.
Prices were high, and builders responded by adding a flood of new homes to the market. When prices continued to rise, investors saw potential and bankrolled even more homes. When buyers stopped buying, the markets that flew the highest had the farthest to fall. Molly R. Boesel, a Fannie Mae economist, wrote in a February commentary that sales will likely post another negative year in 2007, but that most of the decline is expected from a reduction in investor demand. Consumers, on the other hand, will likely jump back into the market.
The Federal Open Market Committee of the Federal Reserve agreed when it issued its Jan. 31 statement. In that statement, governors said they were encouraged by “tentative signs of stabilization” in the housing market.
“These are the first stages to getting the markets back into balance,” Seiders says.
But even as consumers get back in a buying mood, housing markets won’t necessarily spring back to previous heights. Part of the reason is because there is still a large inventory on the market, Lereah says.
One way economists rate homes sales is by calculating how many months it would take to sell all the homes listed for sale at the current buying rate. At last count, Lereah says it looked like there were between 6.8 months and 7 months worth of homes sitting on the market right now. He says that number will likely fall to between 6.6 months and 6.5 months worth by year end. But that is still above the 5.5- to 6-month inventory that signals a balanced market.
Looking foreword, Lereah says 2007 will likely see an additional 1 percent fall in sales compared with 2006 numbers, meaning sales will have hit bottom and begun to rebound by year-end. “We are not looking for a big expansion, but it will be an expansion – a sluggish expansion,” he says.
GAINESVILLE, Fla. – March 9, 2007 – Hopeful homebuyers in Florida should act now: The price is right as the state’s single-family residential housing market bottoms out, according to a University of Florida study released today.
“If you’re thinking of buying a house, there’s probably not much to be gained by holding out at this point,” says Wayne Archer, director of UF’s Bergstrom Center for Real Estate Studies. “It doesn’t look like prices are going to fall anymore.”
The quarterly survey of experts in the real estate industry completed in January shows that the share of respondents observing a drop in single-family housing prices has dipped, while a growing number find prices staying even with inflation, Archer says.
“We see that as a benchmark,” he says. “When prices maintain the same level as inflation, then we’re probably in some kind of equilibrium. It indicates the market is stabilizing.”
The exception is condominiums, which are overbuilt and prone to speculative and naïve investors, he says.
This is the first time in the UF survey’s five-quarter history that the buyers’ investment outlook for residential development has brightened. It declined for the first three surveys and remained flat for the fourth survey at the end of October, starting to rise only in this latest survey.
Because of the dominance of single-family housing, the findings have far-reaching and potentially optimistic implications for the state’s real estate industry, Archer says.
“You can’t get away from the fact that the single-family housing market is the single largest driver of the real estate market,” he says. “Most brokers and real estate agents are dealing with single-family housing. Most lending is for single-family housing. And single-family housing drives home furnishings. So when it stabilizes, that’s important.”
One possible explanation for the housing market turning the corner is a restricted supply of land for residential development, Archer says. The shortage meant there was less overbuilding than there might otherwise have been, he says.
Condos did not have this land restraint, which is one reason they are overbuilt, Archer says. At the same time, condos are prone to strong speculative swings because they are considered a relatively easy commodity to exchange; it’s not difficult to acquire them in multiple units or to buy contracts on them, he says.
The stabilization of the single-family housing market came earlier than anticipated and is not expected to affect all parts of the state equally, Archer says. The quieter markets likely will take longer to rebound than those in Central and South Florida, where growth has been explosive.
Jacksonville typically has been a slower and steadier market than Orlando, Tampa-St. Petersburg, Miami and other cities in South Florida, but that is changing, Archer says. Recently, the Jacksonville housing market has picked up momentum.
Even with a turnaround, Archer says he does not believe Florida’s real estate market is likely to reach the same level that it did at its peak in 2005-06. “I don’t think any thoughtful person would expect sales to go back to where they were a year or so ago,” he says. “That was probably an overheated condition and it was extraordinary.”
On a positive note, nearly all other markets, including apartments and commercial rental markets, appear to be remaining steady or even experiencing robust growth. “They did not experience a downturn in the same sense that the single-family development market did and they’re continuing to be strong,” Archer says.
Optimism about Florida real estate seems to be particularly apparent among foreign investors. Many respondents commented that foreign investors and lenders are aggressively trying to invest more capital in the state’s rental markets.
“They apparently have no fears about the future of these markets, despite what we perceive as our problems with hurricanes, taxes and other concerns,” Archer says.
For the survey, UF’s Survey Research Center asked a series of questions of 318 industry executives, real estate lawyers, market analysts, title insurers, financial advisers, market research economists, real estate scholars and other experts in the field, an increase over the 183 respondents in the last survey.
WASHINGTON – March 9, 2007 – Rates on 30-year mortgages fell to the lowest level since mid-December as investors scrambled to the safety of bonds following last week’s stock market turmoil.
Mortgage giant Freddie Mac reported Thursday that 30-year, fixed-rate mortgages averaged 6.14 percent this week, down from 6.18 percent last week.
The decline pushed 30-year rates down to the lowest point since they averaged 6.13 percent the week of Dec. 21. Other rates dropped as well.
Analysts said the declines reflected the big 416-point plunge in the Dow Jones industrial average last week. The stock market turbulence sent investors fleeing to the safety of bonds, which meant the yields on those bonds – which determine mortgage rates – fell.
“Mortgage rates slid further in the past week to the lowest level this year as volatility in overseas stock markets led to questions about implications for the U.S. economy,” said Frank Nothaft, chief economist at Freddie Mac.
Nothaft said he believed the economy would strengthen as the year moves forward and this would leave 30-year mortgages moving in a narrow range of between 6.3 percent and 6.4 percent.
The Freddie Mac survey showed that other types of mortgage rates hit their lowest points for the year as well.
Rates on 15-year, fixed-rate mortgages, a popular choice for refinancing, fell to 5.86 percent, down from 5.92 percent last week.
Five-year adjustable rate mortgages edged down to 5.90 percent, compared to 5.93 percent last week.
One-year ARMs dipped to 5.47 percent, down from 5.49 percent last week.
The mortgage rates do not include add-on fees known as points. Thirty-year mortgages, 15-year and five-year mortgages all carried a nationwide average fee of 0.5 point while one-year mortgages carried an average fee of 0.6 point.
A year ago, rates on 30-year mortgages stood at 6.37 percent while 15-year mortgages were at 6.00 percent, five-year adjustable rate mortgages averaged 6.03 percent and one-year ARMs were at 5.45 percent.
WASHINGTON – March 8, 2007 – The number of mortgage fraud cases investigated by the FBI almost doubled the past three years, reflecting a problem that is “pervasive and growing,” the bureau said Wednesday in its annual report on financial crimes.
The bureau said its mortgage fraud cases increased from 436 in 2003 to 818 in 2006, and acknowledged that its case load likely represents a small piece of the problem.
The FBI said mortgage fraud is difficult to track for a variety of reasons. For starters, the industry is not required to report fraud. Moreover, the sale of mortgage loans on secondary markets can “conceal or distort the fraud,” thereby reducing the number of cases reported.
“The true level of mortgage fraud is largely unknown,” the agency’s report said.
The bureau said fighting mortgage fraud is a priority due to the impact of mortgage lending and housing on the broader economy.
Recently, shares of companies that lend to subprime borrowers - people with blemished credit histories – have been battered as delinquencies and foreclosures increase in the subprime mortgage market. Britain’s HSBC Holdings PLC, the world’s third-largest bank, said earlier this week that its bad-debt charges increased 36 percent in 2006.
The bureau’s report said mortgage fraud comes in two broad varieties: “fraud for profit,” which is largely committed by industry insiders and involves practices such as falsely inflating property values, and “fraud for housing,” which is committed by borrowers and involves actions such as acquiring a house under false pretenses.
The bureau said it is cooperating with trade associations representing mortgage bankers and the government-sponsored companies that purchase mortgages, Fannie Mae and Freddie Mac, to raise awareness of mortgage fraud.
The mortgage fraud statistics were contained in the bureau’s 2006 “Financial Crimes Report to the Public,” which also summarizes the FBI’s actions against other types of financial frauds, such as corporate, securities, health care, insurance and mass marketing fraud.
Copyright 2007 The Associated Press, Christopher S. Rugaber (AP Business Writer). All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Questions, comments or suggestions on this article? Have a news tip? Call Eddie La Rosa 305-968-8397
TALLAHASSEE, Fla. – March 8, 2007 – In a rush to show that lawmakers are serious about cutting property taxes, a House council passed a controversial bill Wednesday to sharply roll back local taxes, which would save property owners statewide as much as $5.8 billion.
The House Efficiency and Accountability Council ignored repeated calls from Democrats to slow down the debate and voted 10-5 along party lines for a measure to force counties to roll back local taxes to where they were in fiscal year 2000-01, plus an additional amount to account for population growth and inflation.
As Florida’s counties warned of “Draconian choices” they would have to make and Democrats complained of being railroaded, the discord put a quick end to the bipartisan harmony that House leaders said would mark the 60-day session that began Tuesday.
None of that mattered to House Republicans, who have adopted House Speaker Marco Rubio’s urging to “be a little impatient” about moving ahead on a plan, which has just one more committee stop before the full House votes on it.
The tax rollback would be the first step in a two-phase approach House leaders are touting; the second is a constitutional amendment to do away with all taxes on homesteaded property and replace them with a 2 1/2-cent hike in the statewide sales tax.
The proposed rollback would save taxpayers in Miami-Dade an estimated 35 percent on their county taxes. The hit to the county: between $613 million and $725 million. The savings to taxpayers in Broward: 22 percent. The hit to Broward coffers: at least $198 million.
“Counties must decide with this bill whether we’re going to fund libraries, the softball player at the recreational park, the child in the burning attic, the grandfather who has a heart attack, or the woman who has a burglar at her door,” Sarah Bleakley, a lobbyist for the Florida Association of Counties, told lawmakers. “Which one of those programs do you all think are frills?”
In Miami-Dade, county officials say $5.2 billion of their $7 billion budget is spending required by state and federal law, airport or port services contracts, or is being used to pay back debt. An additional $1.3 billion goes to county medical examiners, police patrols, jails and juvenile justice, the county health trust and elections offices.
“That leaves $500 million of expenses that someone says you don’t have to do,” said Jennifer Glazer-Moon, the county budget director. “But that includes the administration of the county, the parks department, human services department and cultural programs.”
Broward County Commissioner Ilene Lieberman told the House committee that county officials agree Florida’s “archaic” tax structure needs an overhaul, “but we disagree this is the right fix.”
“You want to be careful as you’re pushing on one side you’re not creating a bigger bulge on the other side,” she said. She warned that Broward and other counties could be forced to start charging user fees for, say, borrowing books at the library.
Rep. Julio Robaina, a Miami Republican, said he felt no sympathy for county governments, blasting Miami-Dade County for squandering millions over the years. He predicted the rollback will “make the county commissioners more than ever vigilant over every dollar.”
Council Chairman Rep. Andy Gardiner of Orlando noted that the proposal allows counties to get around the rollback by a two-thirds vote of the county commission.
“So if there are concerns about ‘Draconian cuts’ or cutting police departments or softball players, can’t they go out, discuss that in a community and by a two-thirds vote override essentially what we’re asking them to do?” he said.
Who benefits
Owners of homesteaded property would see the smallest decline in their property taxes – $433 million across the state. Owners of second homes and other residential real estate, who have shouldered a larger share of the tax burden in recent years, would reap $767 million in savings, while business properties would see the greatest savings – $3.35 billion.
But Democrats complained that the fast pace of the bill’s progress, coupled by the short notice they were given to prepare for the vote, has forced lawmakers to vote on a measure even though they have no clear idea how their local governments will handle it.
By contrast, the Senate is taking its time on property taxes. As of Wednesday, senators had not yet come up with their own plan.
Criticism
Rep. Dan Gelber, the House Democratic leader from Miami Beach, noted that his city would be among the hardest hit in the state – a 51 percent cut in its tax rolls and budget. Because the city has paid for its growth, rather than resorted to issuing bonds, the House scheme blindly penalizes the city for being responsible, he said.
“We are about to make the biggest decision we’ve ever made in the dark,” he said. “One thing we will not do is cede this incredibly important issue to rank politics.”
The discord on the session’s second day wasn’t the first sign that party differences would dominate the debate.
The Florida GOP has launched a website touting the House’s tax plan and promoting the constitutional amendment. Rubio and his top deputies have sent out e-mails urging Republicans across the state to click on www.nomoreproperty tax.com.
Among the information on the site, it calls the governor’s proposed solution – doubling the homestead exemption – a “band-aid” approach to the problem.
Republican Party spokesman Jeff Sadosky defended the website, even though Senate Republicans have not endorsed the House proposal.
“What the party is endorsing is getting the issue out there,” he said.
Copyright © 2007 The Miami Herald, Distributed by McClatchy-Tribune Business News. Miami Herald staff writer Beth Reinhard contributed to this report.
Questions, comments or suggestions on this article? Have a news tip? Contact Eddie La Rosa at 305-968-8397
ORLANDO, Fla. – Feb. 27, 2007 – The pace for Florida’s existing home sales remained slow in January, though the inventory of homes began to drop in many markets across the state, according to the Florida Association of Realtors® (FAR). Statewide, sales of single-family existing homes totaled 9,382 last month compared to 12,906 homes sold in January 2006 for a 27 percent decrease.
Existing home sales likely will gradually rise this year and into 2008, according to the latest housing outlook from the National Association of Realtors® (NAR). “Home sales may appear weak in comparison with the record surge in 2005, but they will be sustained at historically high levels that are in line with long-term demand,” says NAR Chief Economist David Lereah. As inventory levels become more balanced over the next few months, analysts also expect to see some modest price gains.
Florida’s median sales price for existing single-family homes in January was $239,300; a year ago, it was $243,200 for a 2 percent decrease. The median is the midpoint; half the homes sold for more, half for less. In January 2002, the statewide median sales price for single-family homes was $128,900, which represents an increase of about 85.6 percent over the five-year-period, according to FAR records.In December 2006, the national median sales price for existing single-family homes was $221,600, unchanged from the previous year, according to NAR. In California, the statewide median resales price was $567,690 in December; in Massachusetts, it was $335,000; and in Maryland, it was $304,789.
Sales of existing condominiums in Florida also decreased last month, with a total of 3,007 condos sold statewide compared to 4,279 in January 2006 for a 30 percent decline, according to FAR. The statewide median sales price for condos last month remained stable at $209,000; a year ago, it was $212,000 for a 1 percent dip. NAR reported the national median existing condo price was $227,000 in December 2006.
Last month, interest rates for a 30-year fixed-rate mortgage averaged 6.22 percent, up slightly from the average rate of 6.15 percent in January 2006. FAR’s sales figures reflect closings, which typically occur 30 to 90 days after sales contracts are written.
Among the state’s larger markets, the Jacksonville Metropolitan Statistical Area (MSA) reported slower sales of single-family homes in January, though more existing condos changed hands. A total of 783 existing homes sold last month compared to 938 homes sold a year ago for a 17 percent decrease. The market's median sales price for homes was $185,000; it was $194,100 in January 2006 for a 5 percent decline. A total of 152 existing condos changed hands in Jacksonville last month, a 10 percent increase over the 138 condos sold the previous year. The existing condo median sales price in January was $147,600; a year ago, it was $170,000 for a 13 percent decrease.
“The Jacksonville area continues to offer some of the best values in the state for housing opportunities – what buyers can get for their dollar is a strong draw for our market,” says Hank Oltmanns, president of the Northeast Florida Association of Realtors and broker-owner of A Broker’s Choice Realty. “We’re the largest geographic city in the lower 48 states, the land prices here are better than in many other areas and we still have room to grow; all of these factors give us a depth of market variety. Plus, our strong diversified labor market and business base is a definite asset.”
Among the state’s smaller markets, the Pensacola MSA reported a total of 279 homes sold in January compared to 317 homes a year ago for a decrease of 12 percent. The existing home median sales price rose 1 percent to $159,200; a year ago, it was $158,100. A total of 27 existing condos sold in Pensacola last month compared to 43 condos the previous January for a 37 percent decline. The market’s existing condo median price rose 13 percent to $195,000; a year ago, it was $172,500.
Doug Gooch, president of the Pensacola Association of Realtors and office manager for Palm Realty of Pensacola, says people are drawn to the area's scenic beauty and more relaxed lifestyle. “We have some of the most beautiful and pristine beaches in the state," he says. “Plus, we offer buyers a variety of housing options in different price ranges to suit their budgets. It’s a great place to live, and with mortgage rates continuing to be so favorable, right now is a great time to buy.”
Questions, comments or suggestions on this article? Have a news tip? Contact 305-968-8397
WASHINGTON (AP) – March 2, 2007 – Rates on 30-year mortgages fell for a second straight week to the lowest level since the beginning of the year.
Mortgage giant Freddie Mac reported Thursday that 30-year, fixed-rate mortgages averaged 6.18 percent this week, down from 6.22 percent last week.
The decline pushed rates down to the lowest point since the 30-year mortgage was at the same 6.18 percent the week of Jan. 4.
Analysts said this week’s drop reflected weak economic data and the huge 416-point plunge in the stock market on Tuesday, which pushed investors to seek the safety of bonds.
Frank Nothaft, chief economist for Freddie Mac, pointed to “new economic information suggesting a slower economy and lower inflation.”
The government on Wednesday revised its estimate for overall economic growth to an annual rate of just 2.2 percent in the fourth quarter of 2006, sharply lower than an initial estimate of 3.5 percent growth during that period.
The Freddie Mac survey showed that other types of mortgage rates edged down this week as well.
Rates on 15-year, fixed-rate mortgages, a popular choice for refinancing, fell to 5.92 percent, down from 5.97 percent last week.
Five-year adjustable rate mortgages edged down to 5.93 percent, compared with 5.96 percent last week.
One-year ARMs were unchanged at 5.49 percent, the same as last week.
The mortgage rates do not include add-on fees known as points. Thirty-year mortgages carried a nationwide average fee of 0.4 point while 15-year mortgages had an average fee of 0.5 point.
Five-year adjustable rate mortgages and one-year ARMs both carried a fee of 0.6 point.A year ago, rates on 30-year mortgages stood at 6.24 percent while 15-year mortgages were at 5.89 percent, five-year adjustable rate mortgages averaged 5.97 percent and one-year ARMs were at 5.34 percent.
Copyright © 2007 The Associated Press, Martin Crutsinger (AP Economics Writer). All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
NEW YORK – March 2, 2007 – The mortgage market has been roiled by a sharp increase in bad loans made to borrowers with weak credit. Now there are signs that the pain is spreading upward.
At issue are mortgages made to people who fall in the gray area between “prime” (borrowers considered the best credit risks) and “subprime” (borrowers considered the greatest credit risks). A record $400 billion of these midlevel loans – which are known in the industry as “Alt-A” mortgages – were originated last year, up from $85 billion in 2003, according to Inside Mortgage Finance, a trade publication. Alt-A loans accounted for roughly 16 percent of mortgage originations last year and subprime loans an additional 24 percent.
The catch-all Alt-A category includes many of the innovative products that helped fuel the housing boom, such as mortgages that carry little, if any, documentation of income or assets, and so-called option adjustable-rate mortgages, which give borrowers multiple payment choices but can lead to a rising loan balance. Loans taken by investors buying homes they don’t plan to occupy themselves can also fall into the Alt-A category.
Borrowers who take out Alt-A mortgages are considered less risky than subprime borrowers because of their higher credit scores. But as the housing market cooled and loan volume declined, some lenders lowered their standards for Alt-As. Now a rising number of borrowers who took out these loans are running into trouble.
Data from UBS AG show that the default rate for Alt-A mortgages has doubled in the past 14 months. “The credit deterioration has been almost parallel to what’s been happening in the subprime market,” says UBS mortgage analyst David Liu. The UBS report contrasts with testimony Federal Reserve Board Chairman Ben Bernanke gave to Congress Wednesday. “Our assessment is that there’s not much indication that subprime issues have spread into the broader mortgage market,” Mr. Bernanke said.
To be sure, defaults have remained very low in the prime market – and despite the uptick in bad loans, the problems in the Alt-A sector aren’t as severe as those that have roiled the subprime market. Some 2.4 percent of Alt-A loans are at least 60 days past due, according to UBS, which looked at mortgages that were packaged into securities and sold to investors. That is well below the 10.5 percent delinquency rate for subprime mortgages. (During the housing boom, delinquencies were low for all types of loans because borrowers who wound up in trouble could refinance or sell.)
Some borrowers who took out Alt-A loans in recent years are starting to feel the strain. Johnny and Shirley Johnson, retirees in Cleveland, took out an option ARM when they refinanced their $92,700 mortgage in July 2005. The loan carried a 3.5 percent introductory rate that began moving upward a few months later. The couple, who live on a fixed income, are currently making the minimum payment on their loan. But they are afraid they won’t be able to keep up with their loan and other debts once their monthly mortgage payment adjusts upward later this year.
“We don’t want to lose our home,” says Ms. Johnson. The couple is working with Acorn Housing Corp., a nonprofit group that provides housing counseling, in an effort to refinance into a 30-year fixed-rate mortgage. Though the monthly payment would be higher, the new loan would protect them against future increases.
Housing counselors and bankruptcy attorneys say they are seeing an increase in troubled borrowers who previously had good credit. “We have clients with 720-plus credit scores, and they are in awful products,” says Jennifer Harris, executive director of the Home Loan Counseling Center in Sacramento, Calif. Some of these borrowers took out option ARMs with low introductory rates and are likely to fall behind when their monthly payment resets at a higher level, she says.
Thomas Gorman, a bankruptcy attorney in Alexandria, Va., says he is seeing more financially strapped borrowers who “probably bought more house than they could afford and then took on more credit-card debt” to furnish the house and pay for the move. When the housing market cooled, they were “caught in the middle,” unable to sell their home or refinance and make their debt load more manageable.
Lenders are also tightening their standards. At a meeting with investors last week, IndyMac Bancorp Inc., the nation’s largest Alt-A lender, said it had raised the minimum credit score at which borrowers could finance 100 percent of a home’s value and took a number of other steps to tighten lending guidelines.
This week Lehman Brothers Holdings Inc.’s Aurora Loan Services unit raised the minimum credit score and reduced the maximum amount homeowners could borrower without documenting their income and assets.
Impac Mortgage Holdings Inc., which specializes in Alt-A loans, said recently that it had tightened its lending standards 17 times last year. The company cut back on riskier loans and began relying more on analytical tools to verify a borrower’s income and creditworthiness. Other lenders were quick to scoop up many of those loans, but now they are also pulling back, says Impac President Bill Ashmore.
Lou Barnes, a mortgage banker in Boulder, Colo., says a client with a good credit score was turned down this week for a mortgage to buy an investment property with a small down payment and no documentation. That same borrower was approved for a “nearly identical” loan in August and November, he says. Still, Mr. Barnes calls the tightening “modest.” Alt-A lenders are “nibbling at the edges,” he says.
The UBS study found that the problems are greatest for Alt-A borrowers who took out interest-only adjustable-rate mortgages, which allow borrowers to pay interest and no principal in the loan’s early years, with 3.71 percent of interest-only ARMs originated in 2006 at least 60 days past due. As in the subprime sector, the riskiest loans are those made to home buyers who put little, if any, money down and don’t document their income or assets.
As delinquencies rise, some investors who bought lower-rated securities backed by these mortgages are likely to face losses, according to Mr. Liu of UBS. While defaults are expected to be lower than in the subprime sector, so are the reserves set aside to cushion bond investors against such losses.
Defaults are much lower for option ARMs. But the problems with these loans could be “backloaded,” says Mr. Liu, because borrowers with these loans are still making the minimum payment.
Glenn Costello, a managing director at Fitch Ratings Inc. in New York, expects the foreclosure rate for Alt-A loans to ultimately be only 10 percent to 20 percent of the rate for subprime borrowers.
Yet investor concerns about Alt-A loans are rising, according to Walter N. Schmidt, a mortgage investment strategist at FTN Financial Capital Markets in Chicago. A report from mortgage analysts at Barclays Capital in New York this week pointed to fraud as one reason for early defaults on Alt-A loans. The mortgage industry is battling a rash of cases in which borrowers, loan officers and appraisers collude in providing false information to induce lenders to advance more money than homes are worth.
Copyright © 2007 The Associated Press, Ruth Simon. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
