It is a buyer's market

There seems to be a general sentiment in real estate of putting 2009 in the past and looking forward to a brighter 2010 – and Ocala, Florida is no different.  Looking at where we are and where we are headed as far as real estate goes will take us from the present into the future.  Taking a look at the market, home values are currently affordable, prices being at an uncommon low and interest rates bottoming out have made more homes available for more families than years before the real estate boom.  Both of these low levels add up to the fact that it is a great time to be a buyer when it comes to real estate – the deals are out there!

One trend that will only be available for a limited time is that interest rates have been hovering at 5% or lower for the better part of the past year, which cannot be expected to continue.  As the market stabilizes more and the economy gets better, interest rates will rise just as they have in the past.  While home prices still may drop in many areas of the country (including some areas in Marion County, FL), they will not drop much more.  Areas that are less affected by foreclosures, short sales and REO properties are likely to level out faster than other areas due to the lack of distressed sales in their inventories.  A rise in interest rates may bring real estate prices down to sell but the days of 20% and 30% decreases appear to be unlikely.  It is mostly hinged on distressed properties in an area which are competing with sellers who cannot compete with such low prices.  Some homeowners may not be able to sell until the market shows this stabilization.

The low down is that now is a great time to buy if you have been waiting for the right time to plunge into the market.  Take advantage of low interest rates, tax breaks and seller/bank incentives while they are here.  Just as it was a seller’s market a few years ago – it is a buyer’s market now, but just like the seller’s market, it won’t last forever.

For an interesting analysis of the real estate conditions and a forecast of 2010, feel free to contact The Shultz Team.

If you are thinking about selling your home, or would just like to know what a buyer would be willing to pay for it in today’s market, feel free to get in touch with us to request a free market analysis, we are more than happy to assist you.

You can email us at Info@TheShultzTeam.com or call us direct at 352-291-1276.

Art & Brigitte Shultz
The Shultz Team
#1 Team at Re/Max Premier Realty
Ocala, FL
Toll Free: 800-243-4087
Direct: 352-291-1276
Info@OcalaVisualTours.com
www.OcalaVisualTours.com
* FREE OCALA MOVING TRUCK WHEN YOU BUY OR SELL THROUGH THE SHULTZ TEAM! *

Buyer's Keys To Success

One of the biggest issues in the great real estate bubble bursting was the lack of realization that you should only own a home in which you can reasonably afford.  If there is one thing we can take from the mess of the real estate meltdown it is the importance that there is a vast difference in purchasing the home you want and purchasing a home you can afford.  It is the great American dream of owning your home and of course we aspire to “move up” in life, but to get a grasp on your current finances is vital. The days of no-doc loans (short for “no document loans” where you merely had stated income and were approved, now loans must be verified to a lender before they will consider you as a potential borrower) and leveraging your assets to the hilt are gone (mortgage companies will only allow a certain percentage of equity to be used on the home – not all of it, so there is no more 100% financing or maxed out home equity loans).  In today’s real estate market it is more important than ever to borrow what you can afford.  Emergencies pop up such as temporarily being unemployed, injury, death in the family – your finances should still be able to float you during these times, not be a means to an end on you being able to afford your mortgage payments.  Keeping a reasonable cushion is key.

According to an article at Yahoo Real Estate, “Mortgage lenders generally use a ratio of 36 percent as the guideline for how high your debt-to-income ratio should be. A ratio above 36 percent is seen as risky, and the lender will likely either deny the loan or charge a higher interest rate. Another good guideline is that no more than 28 percent of your gross monthly income goes to housing expenses.”

Keeping the percentage at 28% or lower can only improve your financial situation.  Take a good hard look at your finances, look at your income and look at your expenses, both fixed and other spending habits.  This is what locks you into place when you get pre-approved for a mortgage.  A lender will not justifiably give you a loan if your debt is higher than your income or you have poor credit (unpaid or delinquent debts, bankruptcy, foreclosure, etc).  The most important thing is to be honest with yourself, and be educated about the local economy.  One of the biggest problems with homes in the central Florida area was that buyers were purchasing properties that they really did not have the ability to pay once the adjustable rate mortgages kicked in.  In Marion County in particular there is not a large pool of executive positions to be placed in – so understanding what is available in the local job market is also very important.  In the long run you and your bank account will be better off for being realistic.

What can you afford?

If you are a First-time home buyer and qualify for the $8,000 tax credit, but don’t have the money for a down payment or closing costs, you may now be able to get a loan to help with those upfront costs.

On May 29 the U.S. Department of Housing and Urban Development (HUD) announced that FHA (Federal Housing Administration allows state housing finance agencies to “monetize” (provide second mortgage) the tax credit so that home buyers are able to use the funds towards closing costs and down payments for the purchase of an FHA-insured mortgage.

Previously home buyers were only able to use the tax credit after filing their federal tax returns and had to come up with the upfront costs on their own.

The U.S. Department of Housing and Urban Development announced that FHA-approved lenders may purchase the tax credit from the borrower in advance, so that the home buyer can use the tax credit for closing costs or to make an additional down payment, over and above the required 3.5% minimum down payment that is a requirement for an FHA-insured loan.

For families who would like to take advantage of today’s low interest rates, rock bottom prices, huge selection, this is really great news. Since this tax credit is only available until November 30, 2009, this could help a lot of families who cannot save enough money for a down payment and closing costs.

In addition to the 160,000 sales expected as a result of the tax credit,  the NAHB (National Association of Home Builders) estimates that 40,000 more homes will be purchased due to the FHA monetization program.

Visit the website of the National Council of State Housing Agencies (www.ncsha.org) for a list of states offering First-time home buyer tax credit loan programs.

For more information on the First-time home buyer tax credit go to Tax Credit.

Feel free to review the Ocala Florida Real Estate Statistics for May of 2009.

To see what Ocala Real Estate is selling for visit our website www.OcalaVisualTours.com

Art & Brigitte Shultz

The Shultz Team
#1 Team at Re/Max Premier Realty
Ocala, FL
Toll Free: 800-243-4087
Direct: 352-291-1276
Info@OcalaVisualTours.com
www.OcalaVisualTours.com
* FREE OCALA MOVING TRUCK WHEN YOU BUY OR SELL THROUGH THE SHULTZ TEAM! *

Bargains, Bargains Everywhere! Is it time to buy?

Uncertainty in the market place is at an all time high.  Everywhere I go folks are talking about the economy, gas prices, real estate, the Wall Street mortgage debacle, the election, and the overall state of affairs in general.  With regard to Real Estate I am constantly being asked, “When are things going to turn around?  Have we hit bottom yet?  Is there light at the end of the tunnel?”  My standard response is that “I don’t know anything.  If I did, I would have bought two or three hundred lots in 2003 and sold them all by August of 2005.” However, I do have an opinion and my opinion is……

I would now like to share that opinion with you – our clients, friends, and neighbors, and I apologize in advance for being a bit wordy, but as most of you know, that’s my nature. First, a little historical recap. Brigitte and I have been selling Marion County real estate since 1993. She began in 93- myself in 99. From that time to about 2003, inventory levels of homes for sale, county-wide, ranged generally from 3500 to 5000. That began to change in 2004 and drastically changed in 2005. During that red hot market inventory declined to a multi-year low of approximately 1188 homes by June of 2005 and then began to climb; increasing every single week to it’s peak of 7967 homes in November of 2007. On the demand side there are 40% fewer buyers today than a year ago and 60% fewer buyers than 2 years ago. That’s a 650% increase in inventory with half the buyers. You do the math.

Now let’s talk lots. Marion County lots sat dormant in several major subdivisions such as Marion Oaks, Silver Springs Shores, and Rainbow Lakes Estates in Dunnellon for 30 years. Up until about mid 2003, you could have bought every lot in those locals for $1,000 to $5000; $8,000 Tops would have bought them all. Then the market began it’s move and the price of lots escalated to the $30,000 to $50,000 range ($75,000 to $125,000 for an acre) before topping out in late 2005. This was a price advance, in many cases, of 10 fold. There were 9300 lots sold via our MLS in 2005, 3300 in 2006, approximately 1200 in 2007 and today you can hardly give them away.

What Happened?

After the stock market and dot.com melt down in 2000, a short recession post 9/11 in 2001 coupled with the fed’s continued interest rate reductions beginning in 2002, and subsequent record 40 year mortgage rate lows, real estate emerged as the investment of choice for the professional and layman alike on a predominately national basis through roughly 2006. The hottest areas during that time were California, Arizona, Nevada, and Florida. Those one time hot spots are the hardest hit markets today. By late 2005 virtually everyone had become a “real estate expert and/or wealth building advisor.” Folks were buying anything and everything of real value without fear or judgment. Banks were making zero down/no doc loans to people that couldn’t qualify for a loan at a buy here/pay here car lot. There was never going to be another poor day.

I was raised in the cattle business and my Grandfather once said “When your banker starts wearing boots, its time to get out of the business.” He also said, “If your banker ever agrees to grant you a signature loan without any collateral, you need to change banks.  ” My Grandfather was a wise man.  (P.S. If you’re our banker, please don’t take offense.  We Love You.)

Where are we today?

Well, basically, housing prices are down approximately 25% plus or minus from their record levels in late 2005 to early 2006. In other words, if you bought a home in the year 2000 for $100,000, in 2005 it was probably valued in the $200,000 range and today, most likely, around $150,000. Land values or lot prices in most cases are off 35% to 50%. For those folks that got carried away, caught up in the fever, and purchased vacant land in less desirable areas, they could be off 85% to 90%. We are, by all accounts, currently, back somewhere between 2003 and 2004 levels. Timing is everything. For some it is pretty bloody.

What’s in store for the future?

I knew you were going to ask that.  I read an article recently that likened real estate to the perfect storm. The bubble has burst. Record inventory and sub-prime loans are reeking havoc on all fronts, and now, even prime loans are taking a hit. JP Morgan’s purchase last spring of Bear Sterns and, as of this writing, Wall Street, once again, in the midst of crises with the Chapter 11 filing of the 158 year old firm Lehman Brothers; the Merrill Lynch, purportedly, forced sale to Bank of America; the AIG request for emergency funding from the Fed; the bailout two weeks ago of Fannie Mae and Freddie Mac now requiring tax payer capitalization estimated at up to 200 Billion; and of course European, Asian, and world markets all effected by the USA’s housing market. The gloom and doom prognosticators are out in force and having an absolute hay-day. The list goes on and on. Man, we have really hit the big time.

This plethora of negative rhetoric reminds me of another pivotal time in history-The stock market collapse of 1973-74. Today’s news media reporting with regard to real estate strangely parallels the following 1974 stock market headlines. Business Week: “Whistling Past the Graveyard”; Forbes: “Why Buy Stocks?”; Barron’s: “Running Scared” and Fortune: “A Case For Gloom about Stocks”(Lowenstein, pg. 157). All this negativity was espoused at the tail end of a six year bear market with the Dow in the 500 to 600 range, price-earning at post great depression ratios, and all the while Warren Buffett is licking his chops and buying with both hands. Undervalued stocks or companies with major intrinsic value (the yard stick of measurement taught by Buffett’s mentor Benjamin Graham) were all over Wall Street ripe for the plucking. Yet, most all the celebrated securities analysts remained fearful and too timid to pull the Trigger. During this apocalyptic newscasters vision of Wall Street’s world spinning out of control, Warren Buffett granted Forbes an interview and made the first public prediction of his life with the Stock Market at 580 in early October 1974. “How do you feel?” asked Forbes. Buffett explained that he was so excited about the market that every morning he couldn’t wait for his feet to hit the ground. He said, “This is the time to start investing” (Lowenstein, pg. 161).

Well, as the old adage goes, “It is always the darkest before the Dawn” or if you are a pessimist, “It is always the darkest right before it goes completely Black.” I choose to be an optimist. I believe that adversity and opportunity are kissing cousins and if there has ever been a time to kiss your cousin, the time is now. It was John D. Rockefeller who said, “Be Fearful when people are greedy and greedy when people are fearful, the time to buy is when there is blood in the street.” Has the market hit bottom? Who knows? Can the market decline further? Of course. Will the market decline another 25%? Now here is where I pull out the old crystal ball. Some say “yes”; I say “no, I don’t believe it will” and let me give you a couple of reasons why.

The first turn of events which was of absolute necessity to signal a turn around or a slow down in price decline, was a housing inventory top. The number of properties for sale peaked at just under 8000 homes in November of 2007 and today’s numbers are around 7100. Second on the agenda was housing starts. Supply and demand has remedied that dilemma. Housing starts in Marion County for the 2005-2006 period ending in June were approximately 6750 and for the same period in 2007-2008 they were 784. That’s a reduction of 90%. New Homes are currently selling below builders’ cost. The bottom line is that if you are a builder in Marion County today, unless you are into renovations, you are retired. Third are REO bank foreclosures and short sales. These properties had to start moving and they have, primarily due to drastic price reductions. However, they still have a substantial way to go. At present, short sales and REO properties have put a lid on everything. Fourth and last but not least are the financial markets. The U.S. government’s decision to seize mortgage giants Fannie Mae and Freddie Mac a couple weeks ago produced a huge sigh of relief on Wall Street. While I understand that many do not necessarily applaud their action, I do know this . . . The last time I checked, it appeared to me that Americans were pretty well hooked on Credit. Also, I am quite sure that the financial sector’s sudden inability to sell or lay off securities in these secondary markets would most certainly have further exasperated the current housing crisis.

Now, the main reason for this lengthy discourse, as stated in paragraph one, is to share my opinion. So here goes. I think the market is at or near a bottom. The market could certainly be in for further decline, but I think anything substantial is unlikely. Let me put it this way-if you bought property in late 2005 and are selling today, it would be like jumping off a cliff, but I believe if you buy today and were forced to sell in the next year, it would be no worse than falling off a 3 ft stepladder. We’re close.

One set of circumstances that render Marion County real estate particularly enticing is our median price level. The national median is $212,000- down 7% from last year; Ocala’s median price level is $138,000, which is down from $168,000 last year. We live in one of the most beautiful spots on the planet, yet we are much less expensive than other comparable locations. Hmm . . . , maybe that is what Benjamin Graham considers to be intrinsic value.

Will the market turn on a dime and head right back north? I doubt it. As a matter of fact, I think we will probably go flat for a couple years and then begin a slow but gradual recovery. A likely scenario, in my opinion, is that it could be 2015 before we see 2005 price levels again. If you bought in 04, you looked like a genius in 05. Hopefully those of us who buy in 08, 09, and 10 will look like the smart guys in 2015.

It was Henry David Thoreau that said, “The mass of men lead lives of quiet desperation”. Personally, I believe it is fear that holds the majority back. None of us want to be known the rest of our days as a certain top level IBM executive, who said in the early 1970’s, “Why would anyone buy a personal computer; the market there will always be limited”. Fortunately, if you are to succeed in any venture, you have to get off the fence. The only time a turtle moves forward is when he sticks his neck out. That’s why there is currently so much opportunity out there in real estate. Most folks are still on the fence because they don’t want to stick there neck out. Allow me to share one of my personal favorites by President Theodore Roosevelt, “Far better is it to dare mighty things, to win glorious triumphs, even though checkered by failure… than to rank with those poor spirits who neither enjoy nor suffer much, because they live in a gray twilight that knows not victory nor defeat”.

Is it time to buy? I believe so. Is it time to sell? I think not. Shall we sit on the fence? You decide. In summary, please remember, should all this heart felt, expertly crafted, finely tuned rhetoric prove to be totally without merit, as I said early on, my standard response is, “I don’t know anything, but……”.

Your Realtors for life,

Art & Brigitte Shultz

The Shultz Team

Re/Max Premier Realty
Direct Toll Free: (800) 243-4087
Info@OcalaVisualTours.com
www.OcalaVisualTours.com

Works cited

Lowenstein, Roger. Buffett The Making of an American Capitalist, 2 ed. Random House, Inc., New York, 2008.

The Federal Reserve has cut key interest rates for the fifth time since September 2007.

For those of you with a loan tied directly to the Prime Rate, like home equity lines of credit or HELOC accounts and charge cards with variable rates will see an interest rate reduction on their next statement.

Long-term mortgage rates, however, could actually see an increase after today’s cut, based on past performance and trends.

So don’t count on long term rates to decrease more. Our current rates are the lowest rates we have seen since 2005. Go ahead and buy to capture a great rate before it is too late.

Art Shultz
The Shultz Team
#1 Team at Re/Max Premier Realty
Ocala, FL
Toll Free: 800-243-4087
Direct: 352-291-1276
Info@OcalaVisualTours.com
www.OcalaVisualTours.com
* FREE OCALA MOVING TRUCK! * – Contact for more details!