David Welch

Active listings in Orlando remain basically unchanged with 16,045 homes on the market. There are 1,292 REO's or about 8% of the total active listings, and 5,385 short sales or about 34%. Pending sales continue to climb with 8,968 properties under contract. Over half are short sales with 4,972 or 55% being identified as being in a short sale situation and another 19% or 1,723 are bank owned. Closed sales so far indicate another good month with 490 closed with a median sales price of $131,500. Exactly 40% or 196 of these sales were bank owned with another 22% or 109 being short sales. The 109 closed short sales only accounts for about 2% of all the pending short sale contracts.

Orlando Real Estate, David Welch Real Estate Optimist

"I feel a blog coming on." That is what I told a customer of mine a couple of days ago as she and I went out again to look at some new listings that had come on the market. She put an offer on a Fannie Mae property on September 7th, Labor Day and today is October 12, Columbus Day. We have no answer, just that they are really busy and have not had a chance to get around to looking at the multiple offers on the property. Just in case you don't have your calendars out that is five weeks with no response from Fannie Mae. On top of the wait, is my concern that they may not accept her offer because it is contingent on Neighborhood Stabilization Program down payment assistance. She has already qualified for this assitance and the property is in the target area, so it is a done deal. Unfortunately, nobody seems to know what the NSP is. It is a part of the stimulus package that nobody seems to know about. In Orange county this money is being used for down payment assistance in specific target zip codes. If you have a question about it contact David Holbrook at Waterstone Mortgage at 321-945-1434.

Then I see this article in the Orlando Sentinel yesterday http://www.orlandosentinel.com/business/orl-first-time-home-tax-credit-101109,0,3568996.story. This reminded me to blog about what we are seeing here in Orlando. Since April we have been writing more than 3,400 contracts a month, not offers but contracts, but the most we have been able to close in a month is around 2,200. Demand for homes is fantastic, but actually being able to negotiate a contract is a challenge and closing the deal is almost as tough. If my experience is typical in the market, I would say the average buyer is writing a minimum of five to six offers and I have heard of people making more than a dozen to finally get a property under contract. That is just a result of the demand for properties. The greater frustration is that you wait for days and even weeks to find out that your offer has not been accepted by the bank. It is much easier to put a contract on a short sale, because they tend to be the last resort for some buyers. With only 10% of the pending short sales closing in any given month there is a lengthy wait and uncertainty if the deal will close at all.

Once you clear the hurdle of going from offer to contract there is still the financing contingency to clear. I have read that up to 1/3 of mortgages are being denied. A year after the financial meltdown and it is still difficult to obtain financing for a lot of potential buyers. The government has responded with appraisal guidelines that have made the process more convoluded and lengthy and new disclosure requirements that help nobody. In stead of changing the rules every month why not just return to basic lending principles, and make loans for borrowers who qualify.

I really do not believe we need an extension of the tax credit from a fiscal perspective or as a demand stimulus. I feel badly for the people who will not get to take advantage of this program. I feel even more badly for the people who have tried, but were unsucessful because the banks and Feds just do not have their acts together. Most first time buyers in our market are looking forward to the tax credit, but the low prices and super low interest rates are the big factors in making the homes affordable and driving demand. There are fantastic buying opportunities, great prices and low interest rates. Keep a stiff upper lip, and keep writing offers.

Orlando Real Estate, David Welch Real Estate Optimist

I mentioned the other day that one of the great things about the internet is that you can measure everything. Realtor.com looked in searches by city and here are the top year over year increases http://www.realtor.com/realestate-news/Year-Over-Year-Home-Search-Increase-August2009.aspx

Florida dominated the top 20 with 10 cities and one regional search having some of the biggest year over year increases in searches. Orlando came in at number eleven with a 67.7% increase over last year. Central Florida as a regional search came in at number ten with a 67.8% increase. These numbers are definitely true to the sales numbers we have been seeing. Our sales in Orlando are up around 50% compared to last year, and could be much higher than that. New contracts are up around 100% from last year, but the banks have created such a log jam with short sales and REO's and making loans. Last month there were around 3,700 new contracts but fewer than 2,200 actually closed. I read recently that banks are only approving about 2/3 of loans. Of course the only thing slower than the banks is the government. I have a customer that made an offer on a Fannie Mae foreclosure over three weeks ago, and all they can say is that they are too busy to give us an answer.

The surge in interest and demand for homes here is definitely great news. If the banks can just get up to speed, we will see tremendous improvements.

Orlando Real Estate, David Welch Real Estate Optimist

Short sales undeniably make up a considerable portion of our market here in Orlando. They account for about 5,500 of our 16,000 active listings and about 4,400 of our 8,700 pending contracts. They only accounted for about 450 of our 2,100 closed sales last month, and that was a big increase over August's 350. I believe this might be the start of a trend. The Fed is continuing to purchase mortgage backed securities through the first quarter of 2010 but at a slower pace. When this practice ends, banks I believe will be forced to begin addressing short sales seriously. Right now though only about 10% of the pending short sales are closing each month. This made me start thinking about what it would take to make a business out of short sales.

Let's assume you want to make $100,000 per year selling short sales, and also assume a commission split with the broker of 50%. That means you have to generate $200,000 in commissions selling short sale listings. Assume for this example you only work short sales from the listing side. This would require selling $8 million in real estate with a commission of 5% split with another broker. The average selling price of the short sales in our market in Orlando is about $160,000, so you would need to sell 50 homes. Let's just call that four houses per month. With only about 10% of the short sales closing in any given month, you would need to have 40 pending sales to see four closed. If you look at the market averages, you would need to carry about 90 listings to have 40 pending. If you have a one year listing agreement, then you will probably lose about seven listings a month between expireds and foreclosures. You will need to replace the four that close. Typically about 1/3 of deals fall apart, so you are likely to lose some of those listings. If you lose half of the deals that don't close that adds another six new listings you need to replace your inventory. By my count, you need to list 17 homes a month to keep up the pace.

You will definitely need at least a couple of assistants to help with this kind of volume. There goes the profit margin. Of course with that kind of listing inventory, you should be able to keep a couple of buyer's agents very busy. That should help with the profitability of your business.

Best of luck.

Orlando Real Estate, David Welch Real Estate Optimist

It feels like Fall outside with high temperatures today only reaching the mid 80's and very little humidity. This morning almost felt crisp and cool. My wife told me she saw it snowing somewhere on the news the other day, and I really feel sorry for people that are already facing old man winter. We usually don't see a real cooling trend until about the end of October, but today's weather is a nice reminder of how fantastic Fall and Spring are here in Orlando. Even though the weather may be succumb to the season, our sales seem to be continuing the Summer trend. As of this morning there have been 1,706 sales posted for September, and I suspect that number will continue go up and pass the 2,000 mark by the time all the sales are recorded. I also can see October shaping up to be a pretty good month for sales as well. Frankly, October is typically has a bit of a surge before the holiday slow down. With the first time home buyer tax credit expiring at the end of November, I expect the surge to continue through November.

Our pending sales continue to rise with over 8,900 homes under contract as of this morning and more than 3,700 new contracts written this month. It appears we are continue to outsell the banks' ability to keep up with short sale, REO and loan approvals. I personally could close eight more transactions in October that require bank cooperation. I expect I will close one of those deals in October, maybe two. Talk about a boost to my own personal economy and the personal economies of the title agents, loan officers, appraisers, surveyors, and inspectors involved in these potential sales. I have read that up to 60 people "touch" each real estate transaction that closes, so let's keep the summer time sales rolling in.

Orlando Real Estate, David Welch Real Estate Optimist