David Welch

I am writing this to anyone who will listen at "the Bank". Currently there are 10,192 distressed properties listed by Orlando area real estate agents that are not REO properties. In other words these are short sales. I did not comb through all of these listings nor did I conduct any sophisticated statistical method. These are probably somewhat exaggerated numbers to prove a point. Let's just say there is a high likelihood that "the Bank" is not getting paid on these properties. Of that total 5,770 are active with an average price of $168,437 worth almost $972 million. The other 4,422 properties have contracts on them and have an average list price of $155,940 worth about $690 million.

More than likely the banks are not only not receiving mortgage payments, but they are probably not pursuing foreclosure at least not on the pending sales. The consensus is that the average short sale is taking about eight months to approve and another month to close. That is nine months of payments on the pendings that "the Bank" is not receiving. In the Orlando market alone, I figure nine months of interest at 6% on $690 million is about $31 million that the banks are losing while they are busy not approving the short sale. If these numbers continue, the total amount of annual interest income at 6% for the $1.66 billion is almost $100 million. These numbers are all based upon the list price, not the amount the banks are actually owed. If you consider prices are off by nearly 50% from the highs of 2005/2006 all these numbers could be double.

If "the Bank" is concerned that approving short sales will lead to more short sales, that argument just does not hold. There are already over 10,000 active and pending in Orlando right now. About a third of our active inventory is in a short sale status. People do not want to short sale their home. It is an alternative that is pretty much the last choice for many. There are people out there trying to use a short sale to cut their losses and move on. If "the Bank" does not want to approve a short sale for someone who can afford to make their payments, then foreclose on them. My point is make a decision, and let's keep this market moving in the right direction. The fundamental business decision is to divest your portfolio of under-performing or non-performing assets. Modify the loan, approve the short sale or foreclose. The faster "the Bank" gets past the short sale crisis, the sooner they can get back to doing what they do best - making loans.

Orlando Real Estate, David Welch Real Estate Optimist

I read about two sentences of an article yesterday and stopped. I cannot remember where I read it, or who the author was. He lost all credibility with me when he said nobody is investing in real estate these days. Maybe I stumbled across an old article, or it was an article about some other specific market. I just don't know because I clicked it off and went on. I try to mention in all my blog posts that when I am writing, I am speaking of the Orlando real estate market. I do try to read about other markets and of course the national perspective on real estate and the economy overall, but I recognize that the area I know best is Orlando. In my opinion the national real estate market and even the national economy, while interdependent, are both a summation of the individual markets around the country.

Now that I have that out of the way, I have to say people are investing in Orlando real estate. If we could close all the contracts that are being written, we would be making national news. Last month (July) we wrote 3,696 new contracts, and that was the fourth month in a row that we had over 3,400 contracts in a month. I personally have a number of investors actively purchasing (or trying to purchase) real estate in the Orlando area. The two biggest obstacles they have had to acquiring properties have been short sales and other investors. I have short sales under contract, but the banks are extremely slow to approve if they approve them at all. The bank owned properties get multiple offers, and more frequently they are selling for over the asking price. In the past week, I have written very aggressive offers on two bank owned properties the day they came on the market and still did not get them. I have heard of properties getting 25 offers on them, and the banks are cutting them off after one day on the market. In the case of condos, investors are pretty much crowding out owner purchases simply because of financing. Condo financing options are limted at best, and investors with cash in hand are picking up units dirt cheap to use as rentals. My point is that people are most definitely investing in Orlando real estate.

We still have plenty to choose from, but at these prices they won't last.

Orlando Real Estate, David Welch Real Estate Optimist

With the heat index, we had several days in July that felt like it was more than 100 degrees. That was about as hot as our real estate market here in Orlando. For the second month in a row, we closed more than 2,100 sales with 2,141. That is about a 45% increase over July 2008. Even more impressive is the number of new contracts written last month. In July 3,696 properties went pending in our MLS. That was the fourth month in a row with more than 3,400 new contracts. We would be on fire here, if the banks would start approving short sales, contracts on their REO's, and loans for qualified buyers. The best indicator of the log jam that banks have become to the real estate closing process is the rapidly growing number of pending sales here in Orlando. Currently there are 7,713 contracts pending. That represents a 3.6 month supply of homes at last month's sales pace waiting to close. That is 108 days worth of sales, and it is only taking 103 days on average to get a home under contract.

The other two items of note in last month's official sales numbers are the inventory at 17,231, which is down from 24,742 in July of 2008. That is better than a 30% drop in the number of active listings in a year. The months supply of homes available is 50% lower. Last July, with a sales pace of 1,472 properties we were looking at a 16.8 month supply of homes for sale. This July the months supply of inventory is less than half at 8.05. The other key number is the median price, which rose for the second month in a row. The $135,000 sales figure marks the fourth month in a row of stable or rising prices. August and September usually have a drop off compared to June and July, so I don't expect sales numbers quite as rosy over the next couple of months. However, with the deadline for the first time home buyer tax credit looming, I suspect we will continue to see strong sales through November. I am watching for October to be a very good month.

Orlando Real Estate, David Welch Real Estate Optimist

Do you remember Underdog? Underdog's girlfriend was Sweet Polly Purebred, but that actually has nothing to do with this post. I am actually writing about polybutylene plumbing. While this is not nearly as interesting as Underdog's secret super energy pill, it can definitely make a real estate transaction more interesting. I cannot speak for other areas of the country, but here in the sunshine state property insurance has become a bit more difficult to come by over the last few years. We can thank Charley, Frances and Jean for this real estate revelation.

As a result, it seems insurance companies will find almost any reason not to write a property policy. Since the class action law suit involving polybutylene expired recently, some insurance carriers are electing not to insure homes with this type of plumbing. I am not here to support or condemn this decision, only to bring it to your attention if you are buying or selling a home.

Owners, if your home was plumbed or re-plumbed prior to 1996 you may have polybutylene. You can usually see your plumbing where it comes into your water heater in the garage. Google polybutylene and look at the pictures, it is gray and flexible piping. If you are not selling, I would not worry about it. If you get a leak, then re-plumb. If you are selling and you have an older home (over 25 years old), your buyer's insurance company may require a four point inspection. This inspection includes a report on the roof, A/C, electrical, and plumbing in your home. Be prepared for the buyer to ask you to re-plumb so they can get insurance. If you have a newer home this probably won't even come up.

Buyers, it is not the end of the world if the homes you are looking at have polybutylene piping. If the home is newer, your insurance company will probably not require a four point inspection. Check with your inspector to see if they include this report as part of their inspection agreement with you. Some may charge extra. If you see on the seller's disclosure that the home was re-plumbed prior to 1996, look for the gray piping where it runs into the water heater. Check with your insurance company to see if this is going to be an issue with them. If it is, you can shop other insurance carriers, ask the seller's to re-plumb their home as part of your offer, or keep on looking. Personally, I would not be concerned with polybutylene as long as the fittings are brass. You need to get your own information on the product and decide for yourself though, before going forward. The class action lawsuit has concluded, so if you get a leak you are on your own.

Orlando Real Estate, David Welch Real Estate Optimist

If you don't usually read my blog, you may be wondering why I am writing about the first day (ever) of the UCF College of Medicine. First, I am a UCF alumnus and extremely proud of my hometown university. I have to say that President John Hitt is a fantastic example of a leader with a vision putting a plan into action. When he came to the University of Central Florida, he stated that he wanted UCF to be the greatest metropolitan university in the country. If you don't know that much about UCF, then you just have not been paying attention. UCF is now the fifth largest university in the country. It is the only place in the country where you can earn a PhD in racing car engine design, you can earn a PhD in human factors from a faculty that all have PhD's in human factors. They have one of the largest, if not the largest School Psychology program in the state. They have a new stadium, and a new convocation center, on the most beautiful campus I have ever seen. The whole athletics department has improved exponentially, while admissions standards are some of the toughest among the state universities. Today, UCF is adding to this portfolio of outstanding achievements with a brand new College of Medicine, and gaining nation attention, by offering each of the 41 students a completely free medical education.

The second reason I am writing about this is more important than the pride I have in my alma mater. The new medical school is another step in the direction toward greater economic diversity in Orlando. While tourism remains our primary economic engine, Orlando has become one of the top wired cities in America. High tech industry, from gaming to defense, has grown significantly making Orlando a rising star in many different fields. Innovation Way is a high tech corridor that will connect UCF and Research Park with the new medical school. The medical school is just one part of a new Medical City growing on the southeast side of Orlando near Lake Nona. The Burnham Institute for Biomedical Research is already open for business. Work has begun on a new VA Hospital and Nemours new children's hospital. The medical students will be on the main campus of the university this year, but their state of the art facility in Lake Nona will be ready when classes start in 2010. Economists estimate that the overall effect on the Orlando economy could rival that of Disney in the next several years.

If you are still wondering why a Realtor is writing about a medical school, keep in mind that jobs equals rooftops. Job creation is the single most important factor in real estate construction and sales. The development of a more diverse economic base is huge for our local economy going forward. Nothing may be recession proof, but healthcare is definitely recession resistant. To me that makes our new medical city a great addition to the neighborhood. So, congratulations UCF, congratulations to the first class of the UCF medical school (I am so jealous), and congratulations Orlando for taking another step in the right direction.

Orlando Real Estate, David Welch Real Estate Optimist