Orlando Real Estate

As far as transactions are concerned August is turning out to be another solid month for sales of Orlando real estate. As of yesterday there were 2,287 sales posted. Of those 1,136 were bank owned with a median sales price of $66,900, 498 were short sales with a median price of $98,500, and 654 (less than 29%) were equity sales with a median price of $165,000. The two things that stand out to me about these sales is the drop in the percentage of equity sales and the drop in the median prices. The median price overall has dropped to $96,000.

Active listings were down to 16,544 with 2,222 bank owned and 6,152 short sales making up just over 50.6% of all the homes for sale. Pending sales also continue to be overwhelmingly made up of distressed properties. There are 9,063 contracts pending with 2,150 bank owned and 5,678 short sales for a total of almost 86.4% of all pending sales. Cash also remains king with nearly 54.7% of the closed sales posted as cash transactions with a median sales price of $57,000. Financed transactions closed with a median sales price of $149,200.

David Welch Real Estate Optimist, Orlando Real Estate

What does it take to have success in a short sale? The lawyers advertising on television would tell you that you need a lawyer. Frankly, I recommend the counsel of an attorney to every short seller. Having a lawyer does not insure success. There are many agents in our market who specialize in short sales, and they would tell you that you need to work with them to be successful. You do need a competent agent with experience in short sales to help you, but that does not guarantee a successful closing either. Unfortunately, there is no silver bullet or magic potion that can guarantee success for your short sale. However, there are two things that can greatly improve your chances at closing your short sale.

The first requirement of a successful short sale is a motivated seller. If you are really determined to make the short sale work and at least provide all the documentation required by your lender, your odds improve. If you take an active role in working through the approval process your odds go up even more. Even though you are pursuing a short sale, you also must offer a home that is a good value. It is not enough to have a lower price. The value to the buyer must make your home worth waiting for. The short sale process will take months, and your buyer must continue to feel like they are getting a good value or they will not wait. That brings me to the second requirement to improve your odds of closing your short sale.

You need to find a buyer that is as determined as you are to close the deal. There are other homes for sale, and sometimes the short sale buyer is unwilling to extend contracts or negotiate with your lender on price. The best case is when you find a buyer that loves your home, and can see the value in your property. If they truly love your home and feel like they are getting a great value, they are more likely to stick it out when your bank drags their feet to give you an answer. Unfortunately, your lender the mortgage insurance company and the investor that owns your loan are the key to approval. If any one of them is unwilling to approve the deal, it does not make any difference how motivated the seller and buyer are. With a determined seller and buyer and a bank willing to work with you, the chances of success are greatly improved.

David Welch Real Estate Optimist, Orlando Real Estate

I posted in my Orlando real estate blog earlier this month about an article regarding house sizes. It was prompted by an article I read on Yahoo quoting a survey conducted by Trulia. The folks at Trulia liked that I liked it on my Facebook page. One of the questions that I had about the numbers is what effect investors have on mix of smaller vs larger homes. I expected they would be buying up smaller homes, because they could probably get a better return on their investment. I think my reasoning was pretty sound from the information I found when I pulled out the investors. By the way, I define investors by looking at cash deals. I recognize that is not perfect, but expect it is probably a pretty good proxy.

Sq Ft	Active	Mkt Share	All Sold 6mo 2010	Mkt Share	No Investors Sold 6mo 2010	Mkt Share
<1000	1505	9.0%	1954	12.7%	188	2.4%
1001-1500	4599	27.5%	5250	34.2%	1946	25.2%
1501-2000	4479	26.8%	3897	25.4%	2528	32.7%
2001-2500	2399	14.4%	1952	12.7%	1379	17.9%
2501-3000	1468	8.8%	1133	7.4%	858	11.1%
3001-3500	797	4.8%	578	3.8%	422	5.5%
>3500	1466	8.8%	593	3.9%	404	5.2%
Total	16713		15357		7725

I added the last two columns to the table above to show the purchases of homes by "non-investors" for the first six months of this year. The first thing you notice is the investors accounted for the vast majority of the smallest two size categories. Many of these account for condo sales in our market. In the original article a survey by Trulia found only 9% of people wanted a home over 3,200 square feet while a third were looking for a home under 2,000. Our market sales seem to illustrate a similar trend. The inventory of those larger homes about 13.6% of the total inventory, which is about 2.75 times what it should be. Way over a third are buying homes under 2,000 square feet though. Here in Orlando it is over 60% of the number of sales transactions. I don't know if the McMansion is dead, but it appears overstocked right now. Without the investor purchases all the size categories are overstocked.

David Welch Real Estate Optimist, Orlando Real Estate

Come on down to Showalter Stadium tonight and watch the Winter Park High School Wildcats take on Olympia High School in this pre-season match up. Kick off is set for 7:30, but get there early for a good seat. The state champion Winter Park High School "Sound of the Wildcats" Marching band will be performing in the stands. The team is ready to play, and is looking to improve on last years run at a state championship. Don't miss it.

David Welch Real Estate Optimist, Orlando Real Estate

Believe it or not home prices in Orlando have actually been pretty stable over the last six months, although the median price declined last month and will take another drop this month. How can I say that prices are stable when the median price appears to be dropping? It is not the prices that are unstable but the mix of buyers in the market that has changed. I have written a few posts this year that I believe the market is getting back to normal in terms of sales trends. In other words, there are busier times of the year and slower times of the year for real estate sales. Here in Orlando these seasonal changes are not terribly dramatic, but there is a slow down around the holidays and in August and September when school is starting back up. Conversely, we see the market pick up after the first of the year. The busiest time is usually from March through July with a peak in June.

Investors do not really care about the time of year, so they just keep on buying even when "home" buyers slow down here in August and September. This causes the investor purchases to weigh more heavily on the median sales prices. I went back to March and found that the median sales price for "home" buyers has ranged from $147,700 to $154,000 and the median sales price for investors has ranged from $56,500 to $62,000. See the table below (suggested by Amy Holobyn at Remax 200 - thanks Amy). If you take a look at the numbers you don't really see a trend of prices going down, but the mix of investors to "home" buyers shifting with seasonal trends. In March investors median sales price was $59,900 and so far in August it is $56,500 which is a bit of a drop, but "home" buyers in March paid $152,000 and $154,000 so far this month. The shift from more "home" buyers to more investors is the culprit in the recent drops in median sales price. So the prices have been stable, but the types of buyers have not.

Month	Total Sales	Median Price	Investor	Investor $	% Investors	Non-Investor	Non-Investor $
March	2702	$110,000	1364	$59,900	50.5%	1338	$152,000
April	2746	$108,700	1340	$60,000	48.8%	1406	$147,700
May	2877	$113,000	1434	$60,750	49.8%	1443	$155,000
June	3174	$116,000	1455	$62,000	45.8%	1719	$150,000
July	2426	$109,000	1280	$61,250	52.8%	1146	$155,000
Aug 24th	1443	$91,500	815	$56,500	56.5%	628	$154,000

With a week to go in August I would expect close to another 800 sales to close, but I don't know that the mix will change that much. Although, a lot of "home" sales close at the end of the month.

David Welch Real Estate Optimist, Orlando Real Estate

Here in Orlando there some key elections today in addition to the primary. We are voting for a new county mayor as well as county commission and school board seats. I have always heard if you do not vote then you do not have the right to complain. There is certainly no excuse not to vote here since you can always sign up for absentee voting and there are polls for early voting. I ran into a neighbor of mine this morning who was excited to be voting for the first time. He just became a citizen this year, and he was at the polls bright and early to exercise his right to select his representatives. Voting is not only a right but a responsibility, so go vote!

David Welch Real Estate Optimist, Orlando Real Estate

Today is the first day of the school year here in Orange County, and that means early hectic mornings followed by almost complete silence. Hopefully, that will translate into more coherent blog posts. There is always something exciting about the first day of school, even when you are not the one going back. I guess as long as you have children in school, you keep that feeling alive. There is certainly an impact on sales trends in our real estate market in Orlando. Historically, August and September are marked with a bit of a slow down. The shift in the school calendar has pushed the slow down back a little though, since the students are going back so much later.

From what I can see with 1,276 closed sales so far in August, there has not been much, if any, slow down this year. Of course, as I wrote the other day investors are having a bit more of an impact this month with 56% of the sales closing as all cash. This is also driving the median price down this month. As of this morning the median sales price of the closed sales is just over $94,000. This late into the month, it is unlikely that number is going to suddenly rocket back up the $110,000 mark we have been hovering around this year. I anticipated a bit of a drop off this time of year, and it will come back around to the $110,000 mark by October. Chicken Little will probably declare the sky is falling, and the "double dip" is here. I think things may be getting ready to turn around, after all it is a new school year and full of promise.

David Welch Real Estate Optimist, Orlando Real Estate

There was an article on Yahoo today declaring the McMansion dead. I don't think I would quite agree that the large home is completely dead based upon the real estate sales data I found here in Orlando. There is definitely a strong preference for smaller homes with nearly 60% of the sales in the first six months of this year falling in the 1001 to 2000 square foot range. By the way, these numbers include all housing types, and also include distressed sales. When I look at the makeup of the active listings compared to that of the sold homes there are not enough homes for sale under 1500 square feet and a few too many for sale from 1501 to 3000. There are way too many for sale over 3500, but that is such a small percentage of the total market here.

The McMansion, or at least very large homes are still selling here in Orlando just not like they used to. I suspect if I look just at single family home buyers, excluding investors the numbers may look a bit different. Investors definitely have a bias toward smaller homes. In my experience a 1400 3/2 rents for about the same as a 1700 3/2 but costs less. With over 50% of our sales here going for cash, I believe there is a very heavy influence from investors skewing the sales data. By the way, we generally consider a six month supply of homes to be a balanced market. As you can see from the data above, we are pretty close.

David Welch Real Estate Optimist, Orlando Real Estate

It should be obvious, but I find that sometimes the obvious is not. You can forget about reading about the real estate market until jobs begin to return. At its core it is really quite simple; you need a job to afford to buy a home. Where it gets more confusing is when you consider that you need a job to rent a home too. I cannot speak for other markets, but here in Orlando rentals are quite strong. This is where some of the psychology of economics comes into play in my opinion. Economics is based upon the mathematical relationships of supply and demand. There is a human component to this equation though, especially when it comes to real estate.

Many potential buyers are still concerned about their job situation, even if their company has not announced any layoffs. When unemployment is almost in the double digits people worry a lot more about their job situation. The supply side of the equation is effected by psychology too. Most sellers still believe their home is worth more than their neighbors homes, and many do not think that the foreclosures or the short sales in their neighborhoods impact the value of their homes. Appraisers do account for the condition of distressed properties, but many are in good condition and reflect the true market value of the neighborhood. The concern about employment, warranted or not, limits the demand for homes. The persistent denial that values have gone down is creating the excess supply of homes available for sale.

New jobs will not change the minds of sellers that place too high a value on their home, but they will ease the minds of potential buyers. Right now employers are also wary about hiring as economic numbers teeter back and forth. It is also an election year that could be critical to the balance of political power in Washington. I am sure there are employers waiting to see what happens in November before they begin to make hiring decisions. Either way, added jobs will equal added home sales.

David Welch Real Estate Optimist, Orlando Real Estate