Smaller Fla. counties tops for residential investors

IRVINE, Calif. – Jan. 29, 2015 – Where should property investors park their money to achieve the greatest return on investment?

According to RealtyTrac's first quarter 2015 Residential Property Rental Report, Florida's top markets, depending on the age of renters, are located outside major urban areas. The study breaks out top markets by generation, including millennials, Generation Xers and baby boomers. It also includes a list of the U.S. markets where rents increased by at least 10 percent year-to-year, and "safe havens" – markets where economic conditions make real estate investment relatively safe.

"There is still plenty of opportunity in the U.S. housing market for single family rental investors employing a variety of investing strategies," says Daren Blomquist, vice president at RealtyTrac. "Whether focusing on markets where homeownership-shy millennials are migrating, markets where recovering Gen X homeowners-turned-renters are prevalent, or markets where baby boomers are testing for retirement, investors can find good options with solid potential rental returns."

However, Blomquist says some markets no longer offer a significant return to investors "because of rapidly rising prices over the past few years. Savvy single family rental investors will tread cautiously in such markets despite the siren song of strong home price appreciation."

Best overall markets for buying residential rentals

The nation's highest potential return on investment, according to RealtyTrac, is in Clayton County, Ga., near Atlanta with a 25.83 percent projected return. However, four Florida cities made the top-20 list:

7. Pasco County: Annual gross yield: 17.86%

8. Hernando County: Annual gross yield: 17.86%

12. Marion County: Annual gross yield: 16.88%

19. Citrus County: Annual gross yield: 15.30%

Best markets for renting to millennials

Among the 516 counties RealtyTrac analyzed, 50 had a millennial share of the population above the national average of 22 percent and potential annual rental returns on residential properties of 9 percent or higher.

However, only one Florida county made the top-10 list for residential real estate investment to millennials: Duval County, with an annual gross yield of 13.16 percent, and a growth in the number of millennials (2007 to 2013) of 19.18 percent, ranked ninth.

Best markets for renting to Gen Xers

Twenty U.S. counties had Generation X shares (adults born between 1965 and 1976) above the national average of 16 percent with potential annual rental returns on residential properties at 9 percent or higher.

For Gen X rental investment, two Florida counties made the top 10 list: Clay County (No. 4) with an annual gross yield of 11.88 percent and growth of Gen X (between 2007 and 2013) of 5.14 percent; and Osceola County (No. 9) with an annual gross yield of 11.40 percent and Gen X growth of 8.35 percent over the same timeframe.

Best markets for renting to baby boomers

RealtyTrac found 40 markets where the Baby Boomer share of the population was above the national average of 25 percent – many in Florida – where potential annual rental returns on residential properties are 9 percent or higher.

Six Florida counties made the top 10 list including:

1. Hernando County: Annual gross yield 17.86%; increase in baby boomers (2007 to 2013) of 31.45%

2. Pasco County: Annual gross yield 17.86%; increase in baby boomers 17.10%

3. Marion County: Annual gross yield 16.88%; increase in baby boomers 31.95%

5. Citrus County: Annual gross yield 15.30%; increase in baby boomers 35.64%

8. St. Lucie County: Annual gross yield 12.39%; increase in baby boomers 29.39%

9. Volusia County: Annual gross yield 12.29%; increase in baby boomers 17.25%

Markets with the biggest rent increases over the past year

Among all counties analyzed, the average fair market rent for a three-bedroom property was up 2 percent in 2014. Fair market rents on three-bedroom properties increased 10 percent or more from 2014 to 2015 in 35 counties. RealtyTrac found only one Florida county with returns above 10 percent: Sumter County, No. 34, at 10.18 percent.

Safe haven rental markets

According to RealtyTrac, a safe haven rental market has an unemployment rate below the national average of 5.6 percent and annual rental returns of 10 percent or higher.

One Florida county made the top 10: Broward County, with an annual gross yield of 13.10 percent.

Source: Florida Realtors®

FHFA defends lower downpayments

WASHINGTON – Jan. 29, 2015 – New programs that back mortgages with downpayments as low as 3 percent are "just as safe" as a loan with a 10 percent downpayment, Melvin Watt, director of the Federal Housing Finance Agency (FHFA), assured lawmakers Tuesday.

When FHFA, the regulator of Fannie Mae and Freddie Mac, announced last year that first-time buyers could qualify for loans with downpayments as low as 3 percent, some experts feared that the move could stir a wave of future defaults. Some lawmakers worry that smaller downpayments could lead to the irresponsible lending practices blamed for the last housing crisis. Others express concern that smaller downpayments will allow buyers to purchase homes they really can't afford.

The change was done to expand credit to qualified home shoppers sidelined from the housing market over the last few years due to high downpayment requirements.

"When the downpayment is lower, there's the potential it can be a riskier loan," Watt told lawmakers. "But when you pair that with other compensating factors … you offset that additional risk. That's exactly what we've done."

To qualify for the smaller downpayment loans, Fannie and Freddie require full documentation, strong credit scores, housing counseling and private mortgage insurance, Watt said. Also, the loans will comprise only "a very small percentage" of the mortgages in Fannie Mae and Freddie Mac's portfolios.

Fannie began backing the loans with the smaller downpayments in December; Freddie will begin in March.

"If somebody can't pay a loan, they shouldn't be given a loan," Watt told lawmakers. "It would be irresponsible to say we should be making those loans, or that Fannie and Freddie should be backing those loans." Watt argued that the smaller downpayments would allow those who have not been able to save enough for a large downpayment to break into homeownership sooner.

The National Association of Realtors® (NAR) has voiced support for the smaller downpayments.

"Realtors support responsible lending to qualified buyers, which is essential for building strong communities," NAR President Chris Polychron said in a statement released Tuesday. "NAR research shows that saving for a downpayment is the biggest hurdle to homeownership for many first-time buyers, who have been entering the market at lower than normal rates. Improved access to safe, affordable mortgage credit through FHFA's 3 percent downpayment program will help new borrowers achieve the dream of homeownership."

Housing and Urban Development officials also defended the Federal Housing Administration's (FHA) move to lower annual premiums on its insurance, which could save a typical first-time homebuyer about $900 a year.

FHA, which insures home loans with downpayments as low as 3.5 percent, dropped its annual premiums this week from 1.35 percent to 0.85 percent. Some lawmakers and critics have voiced concern that the lower premium could lead to another FHA bailout from taxpayers.

FHA regained its financial footing last year after requiring a $1.7 billion taxpayer bailout in 2013. But officials with HUD, FHA's regulator, said that the lower premiums will not come at a cost to taxpayers, and it will also help FHA increase its market share.

Source: "Fannie Mae, Freddie Mac Regulator Defends 3% Downpayment Mortgages," The Los Angeles Times (Jan. 27, 2015) and "FHA: Lower Premiums Will Not Cost Taxpayers," Realtor® Magazine Daily News (Jan. 27, 2015)

The new electric company: Your home

WASHINGTON – Jan. 28, 2015 – Some builders are starting to design "net-zero" homes for the mass market in hopes of taking the concept mainstream. Long viewed as a niche product for the wealthy buyers, net-zero homes generate more electricity in a year than they use; and the homeowner receives credit for the excess electricity.

Builders believe there is rising demand from home buyers and local regulators. However, the cost of achieving net-zero status – the initial outlay for equipment – will be the main hurdle.

Customers who switch to solar would have to wait several years for electricity-bill savings to cover the thousands of dollars they spent upfront on features like solar panels and energy-efficient windows, doors and appliances.

The industry predicts that parts of the country with a lot of sunshine to generate solar energy – such as Florida or the American Southwest – will see the highest initial demand for solar energy.

The Department of Energy certified 370 homes as "net-zero ready" in the past year, but the total number of homes is just a fraction of the overall market.

Source: Wall Street Journal (01/21/15) P. A3; Hudson, Kris

White House says no to oil drilling near Fla. coast

WASHINGTON – Jan. 28, 2015 – The Obama administration announced a proposal that would approve oil drilling along some states along the eastern seaboard, but as written, it would keep the waters off Florida's coast free from oil drilling for at least the foreseeable future. The recommendation was part of a five-year draft proposal released yesterday.

U.S. Sen. Bill Nelson (D-FL), part of a contingent of lawmakers pushing to ban oil drilling off Florida's coasts, called the plan yet another victory. "They left us alone for the last five years, and it looks like they're going to leave us alone for the next five years," Nelson said in a statement.

In 2006, Nelson and then-Sen. Mel Martinez successfully brokered a deal to ban drilling off Florida's Gulf coast through the year 2022.

Not everyone opposes oil drilling, but the BP crisis in the Gulf of Mexico still resonates with many Floridians. Nelson also cited other reasons for an oil rig ban off state coasts, such as the Florida's tourism-driven economy that depends on clean beaches, military training areas off Florida's shore and the launch activities at the Kennedy Space Center and Cape Canaveral Air Force Station.

While Florida would remain off limits for drilling under the proposal released today, some U.S. senators are upset that the plan could open up other areas in the Atlantic Ocean to drilling, notably off the coasts of Maryland and South Carolina.

Source: Florida Realtors®

Freddie Mac advises buyers to move quickly

WASHINGTON – Jan. 28, 2015 – Freddie Mac recently cited a number of favorable opportunities for the housing sector but stressed the need for consumers and businesses to take advantage of them sooner rather than later – they may be limited.

According to Freddie Mac's January 2015 U.S. Economic and Housing Market Outlook, one big positive for housing currently is the attractive potential for refinancing. Looking at conventional 30-year fixed mortgage agency mortgage-backed securities (MBS), approximately $361 billion had a 4.5 percent coupon while another $479 billion had a coupon higher than 4.5 percent. Many had a rate higher than 5 percent, providing borrowers with plenty of incentive to refinance at current 30-year fixed annual rates.

Job growth, though, is the most important positive tailwind for housing cited in Freddie Mac's report. Payrolls expanded by an average of 246,000 a month last year versus just 194,000 a month in 2013, the Bureau of Labor Statistics (BLS) reports. The unemployment rate, meanwhile, dipped 1.1 percentage points from January through December to 5.6 percent – the lowest level it has been in six and a half years. That drop reduced the amount of unemployed persons in the United States by 1.7 million, notes BLS researchers.

Source: DSNews (01/20/2015) Honea, Brian

Shrinking inventory may raise prices again

WASHINGTON – Jan. 28, 2015 – For the first time in 16 months, the total inventory of U.S. homes available for sale dropped in December, according to the National Association of Realtors®. While the decline was slight – less than 1 percent month-over-month – the drop does represent "a reversal to the general growth of listings that had been occurring throughout 2014," writes Lawrence Yun, NAR's chief economist. "More inventories are needed, not less. Or else, home prices could re-accelerate."

In Florida, the inventory of homes for sale fluctuated between a low of 104,339 in January 2014 to high of 108,105 in October, according to monthly numbers released by Florida Realtors Industry and Data Analysis Department (IDA). However, the inventory declined after October. Month-to-month, the number of active listings dropped about 0.5 percent month-to-month in November and another 2 percent month-to-month in December.

In addition, Florida patterns don't always follow more general U.S. fluctuations. In December, the inventory of Florida homes was up 1.2 percent year-to-year.

Nationwide in December, however, 1.85 million homes were listed for sale – an 11 percent drop from November and 0.5 percent drop from year ago levels, according to NAR housing data. A drop in inventory is common from November to December, but Yun notes "what is of interest is the year-over-year decline in inventory because this hints at possible acceleration in home prices in upcoming months."

In December, the month's supply of existing-homes on the market was 4.4 months; 6 months is considered healthy by most economists' standards.

U.S. home prices may have already begun "re-accelerating" in some markets, Yun suggests. In spring and summer last year, the median price was rising at 4 to 5 percent. In November and December, prices rose by 6 percent.

In Florida, median home prices rose in November rose 3.5 percent year-to-year; in December home prices rose 6.9 percent over the same year-to-year timeframe.

Source: "Shrinking Inventory," National Association of Realtors® Economists' Outlook Blog (Jan. 26, 2015)

‘Boomerang buyers’ to help shape housing market

MIAMI – Jan. 27, 2015 – More than 300,000 South Floridians who lost their homes during the housing bust could be eligible to own again over the next eight years, a new report shows.

In Palm Beach, Broward and Miami-Dade counties, 322,141 homeowners have completed short sales or foreclosures since 2007, when the housing downturn intensified, according to RealtyTrac Inc. But those people are gradually jumping back into the market as "boomerang buyers."

Among major metros nationwide, only the Phoenix area could have more potential boomerang buyers with 348,329, RealtyTrac said.

A large supply of former homeowners looking to buy again portends well for housing demand in the coming years, said Daren Blomquist, vice president of RealtyTrac, a foreclosure listing firm in Irvine, Calif.

"Certainly, first-time homebuyers are an important part of what will happen with housing, but another big piece that will shape the market going forward is those boomerang buyers," he said.

Fannie Mae and Freddie Mac, the government agencies that back more than half of all home loans, used to require a two-year wait after a short sale before a borrower could qualify for another mortgage. The guidelines now call for a four-year wait. A foreclosure still requires a seven-year wait.

But credit unions and community banks don't necessarily follow those guidelines and may qualify a borrower for a mortgage sooner than the prescribed waiting periods.

Ryan Paton, president of Capitol Lending Group in Fort Lauderdale, said he's working with plenty of former homeowners who want back into the market. They're making 20 percent downpayments and have fixed credit and financial problems that forced them into short sales or foreclosures, Paton said.

Some people bought more than they could afford or sucked the equity out of their homes during the housing boom, but others were responsible and just caught a bad break, Paton said.

"We were one of the hardest-hit areas in the country, and many people did nothing wrong and still lost 60 percent of their home value," he said. "They just happened to purchase at the wrong time."

Because of the lessons they learned, those who lost their homes during the crisis often are considered ideal buyers today, mortgage brokers and lenders say.

"It's kind of like a fresh start," said Doug Leever, mortgage sales manager for Tropical Financial Credit Union in Miramar.

Source: The Sun Sentinel (Fort Lauderdale, Fla.), Paul Owers. Distributed by Tribune Content Agency, LLC.