Limited supply of Homes is giving Buyer’s Headaches

To understand why Buyer’s are having headaches due to the limited supply of homes in , Florida it is relevant to first take a glance at the subprime mortgage crisis that coincided with the U.S. recession December 2007-June 2009. Many of the details in the following paragraph are from facts and information gathered by Wikipedia. Before we review those findings I would like to share with you a personal perspective as a licensed Real Estate Broker and Broker-Associate for 30 years in Central Florida. During the economic crisis my real estate expertise was primarily focused in the Southeast corridor of Orlando, FL specifically referred to as the area, and home of Medical City in Lake Nona. My husband, and real estate partner work at Keller Williams Realty Advantage III on 9161 Narcoosee Rd, Orlando, FL . 32827. Contact us anytime at 407-251-1314.  I can attest to you that we distinctly felt the hit of a “brick wall” in October 2005. A brick wall at the time we had no way of knowing just how thick and long it would be … not to mention with rebar steel inlayed within it. You will see that most reports begin showing signs in 2007, however, as Realtors we are effectively the “front lines” of army troops going into battle before the fly over and bombings come into the picture of war. It was brutal. The financial impact was devastating to Millions of Americans and Europeans, yet the psychological pressure and devastation it brought to so many families was equally devastating. Witnessing family feuds, divorces, children displaced from their schools and homes, forced relocations, and the overall ripple effect was heart breaking. Allyn Maycumber and myself did every thing in our power to ease them through these unprecedented challenging times. In my opinion it frustrated me that the government kept calling it a recession when in reality it was truly a GREAT depression. Review the Wikipedia information below, and then I will share Market Pulse graphs and statistics from the Orlando Regional Realtor Association to give you a clear 2016 up to date view of the low inventory of homes in our market place which is giving Buyer’s those nasty headaches. On a positive note you do have the Maycumber team of professional Realtors to find you your dream home even in the most interesting market. You need us now more than ever, and we are here to help serve you.

The United States (U.S.) subprime mortgage crisis was a nationwide banking emergency that coincided with the U.S. recession of December 2007 – June 2009.  It was triggered by a large decline in home prices after the collapse of a housing bubble, leading to mortgage delinquencies and foreclosures and the devaluation of housing-related securities. Declines in residential investment preceded the recession and were followed by reductions in household spending and then investment. Spending reductions were more significant in areas with a combination of high household debt and larger housing price declines.

The expansion of household debt was financed with mortgage-backed securities (MBS) and collateralized debt obligations(CDO), which initially offered attractive rates of return due to the higher interest rates on the mortgages; however, the lower credit quality ultimately caused massive defaults.  While elements of the crisis first became more visible during 2007, several major financial institutions collapsed in September 2008, with significant disruption in the flow of credit to businesses and consumers and the onset of a severe global recession.

There were many causes of the crisis, with commentators assigning different levels of blame to financial institutions, regulators, credit agencies, government housing policies, and
consumers, among others.  A proximate cause was the rise in subprime lending. The percentage of lower-quality subprime mortgages originated during a given year rose from the historical 8% or lower range to approximately 20% from 2004 to 2006, with much higher ratios in some parts of the U.S. A high percentage of these subprime mortgages, over 80% in 2006 for example, were adjustable-rate mortgages.  These two changes were part of a broader trend of lowered lending standards and higher-risk mortgage products.  Further, U.S. households had become increasingly indebted, with the ratio of debt to disposable personal income rising from 77% in 1990 to 127% at the end of 2007, much of this increase mortgage-related.

When U.S. home prices declined steeply after peaking in mid-2006, it became more difficult for borrowers to refinance their loans. As adjustable-rate mortgages began to reset at higher interest rates (causing higher monthly payments), mortgage delinquencies soared. Securities backed with mortgages, including subprime mortgages, widely held by financial firms globally, lost most of their value. Global also drastically reduced purchases of mortgage-backed debt and other securities as part of a decline in the capacity and willingness of the private financial system to support lending.  Concerns about the soundness of U.S. credit and financial markets led to tightening credit around the world and slowing economic growth in the U.S. and Europe.

The crisis had severe, long-lasting consequences for the U.S. and European economies. The U.S. entered a deep recession, with nearly 9 million jobs lost during 2008 and 2009, roughly 6% of the workforce. One estimate of lost output from the crisis comes to “at least 40% of 2007 gross domestic product”.  U.S. housing prices fell nearly 30% on average and the U.S. stock market fell approximately 50% by early 2009. As of early 2013, the U.S. stock market had recovered to its pre-crisis peak but housing prices remained near their low point and unemployment remained elevated. Economic growth remained below pre-crisis levels. Europe also continued to struggle with its own economic crisis, with elevated unemployment and severe banking impairments estimated at €940 billion between 2008 and 2012.

Now that you have a better understanding what happened in the housing bubble let’s take a at the Orlando, Florida three year history of inventory 2014,2015, and 2016.And while you are inventory Hsitoryreviewing these statistics keep in mind a few factors of home owners and investors. Given the sustained low interest rate environment, many owners have either purchased or refinanced and are locked into tremendously low interest rates over the past six years. It is highly unlikely that these homes will be coming  up for sale anytime soon as a result of this favorable financing. In addition to the sustained low interest rate environment and its potential damper on those properties actually coming up for sale anytime during the life of their loans, I should mention the “value disruption” factor that occurred between 2007-2010+.

A number of areas experienced a complete “reset” of values and in some cases to nearly HALF of their peak values. Buyers purchased properties in this marketplace at significant discounts from the high point, resulting in additional “frozen inventory”.  If you combine those two factors, it’s unreasonable to expect that these homes will be coming up for sale anytime soon. In addition, an unprecedented number of institutional investors entered the residential real estate market acquiring large pools and blocks of properties. This inventory is now also frozen and held. There is a current mentality among some homeowners and investors that home values will continue to rise. And indeed the low inventory has attributed to a strengthening of home values. Right or wrong, this mindset has become another factor in tightening of inventory.

This same dilemma plagues retirees finding limited or no options for retirement communities in their local area. Those retirement communities are costly. This also limits housing supply on the top end of the market since seniors are not motivated to sell unless they know exactly where they are going.

In the Lake Nona area of Orlando, Florida we do have a strong new housing development engine, and that is indeed giving our local buyers more options than most buyers across the country. Remember if you are interested in new construction let us represent you. The builder already factors in our compensation, and we carefully review your new home build contracts to make any needed changes to protect you. Meet us personally, or verify our single agency representation for you by email. The same applies to existing home sales. Our real estate expertise with Florida sales contracts is extensive, and so very important for one of the most critical asset purchases in your life.

Maycumber and Associates Lake Nona Florida

Writer and Realtor Pam Maycumber