Homebuyer tax credit creates a ripple effect in housing indicators
(June 11, 2010 – Orlando, FL) Across-the-board increases in sales, new contracts, and pending sales together reflect the broad impact that the homebuyer tax credit and favorable affordability conditions are having on the Orlando housing market. In addition, the area’s month-over-month median sales price has increased for the fifth consecutive month.
Members of the Orlando Regional REALTOR® Association reported completed sales on 2,605 homes in May, which is a 38.42 percent increase over the May 2009 mark of 1,882.
The number of new contracts filed in May 2010 (3,669) represents an increase of 6.19 percent more than were filed in May 2009 (3,455). The area’s pending sales statistic — also an indicator of future sales activity – is likewise remaining at a record high with 56.76 percent more homes (10,351) under contract and awaiting closing in May of this year than in May of last year (6,603).
And finally, the median price of all existing homes combined sold in May 2010 increased 0.33 percent to $115,380 from the $115,000 recorded in April 2010. May 2010’s median price is, however, a decrease of 11.25 percent compared to May 2009’s median of $130,000.
“The upswing in May housing sales was expected because of the tax credit,” explains ORRA Chairman of the Board Kathleen Gallagher McIver, RE/MAX Town & Country Realty. “No doubt there will be some fallback in new contracts in the months to come due to its expiration, but other factors are also affecting the market.”
“Nationwide, the homebuyer tax credit brought close to 1 million additional buyers into the market,” says Gallagher. In Orlando, those new buyers have helped stimulate the trade-up market and have significantly improved Orlando’s inventory,” says Gallagher
May’s $115,380 median price encompasses all types of sales situations and home types. The median price for “normal” sales is $160,000. The median price for bank-owned sales is $81,800 (up 12.52 percent from last month’s $72,700), and the median price for short sales is $110,000 (down 4.35 percent from last month’s $115,000).
Of the 2,605 sales in May, 921 “normal” sales accounted for 35.36 percent of all sales, while 1,091 bank-owned and 593 short sales made up 64.64 percent.
The Orlando affordability index increased to 225.86 percent in May. (An affordability index of 99 percent means that buyers earning the state-reported median income are 1 percent short of the income necessary to purchase a median-priced home. Conversely, an affordability index that is over 100 means that median-income earners make more than is necessary to qualify for a median-priced home.) Buyers who earn the reported median income of $53,048 can qualify to purchase one of 11,767 homes in Orange and Seminole counties currently listed in the local multiple listing service for $260,594 or less.
First-time homebuyer affordability in May increased to 160.61 percent. First-time buyers who earn the reported median income of $36,073 can qualify to purchase one of 7,762 homes in Orange and Seminole counties currently listed in the local multiple listing service for $157,515 or less.
Homes of all types spent an average of 85 days on the market before coming under contract in May 2010, and the average home sold for 94.58 percent of its listing price. In May 2009 those numbers were 103 and 94.26 percent, respectively. The area’s average interest rate decreased in May to 4.89 percent.
Inventory
There are currently 15,963 homes available for purchase through the MLS. Inventory increased by 197 homes from April 2010, which means that 197 more homes entered the market than left the market. The May 2010 inventory level is 16.52 percent lower than it was in May 2009 (19,123). The current pace of sales translates into 6.13 months of supply; May 2009 recorded 10.16 months of supply.
There are 11,992 single-family homes currently listed in the MLS, a number that is 1,742 (12.68 percent) less than in May of last year. Condos currently make up 2,635 offerings in the MLS, while duplexes/town homes/villas make up the remaining 1,336.
Condos and Town Homes/Duplexes/Villas
May when compared to May of 2009 and decreased by 1.00 percent compared to April of this year. To date, condo sales are up 92.50 percent (2,670 condos sold to date in 2010, compared to 1,387 by this time in 2009).
The most (325) condos in a single price category that changed hands in May were yet again in the $1 - $50,000 price range, which accounted for 54.90 percent of all condo sales.
Orlando homebuyers purchased 230 duplexes, town homes, and villas in May 2010, which is a 40.24 percent increase from May 2009 when 164 of these alternative housing types were purchased. Forty-seven duplexes, town homes, and villas sold in May 2010 fell into the $100,000 - $120,000 price categories.
MSA Numbers
Sales of existing homes within the entire Orlando MSA (Lake, Orange, Osceola, and Seminole counties) in May were up by 26.61 percent when compared to May of 2009. Throughout the MSA, 3,145 homes were sold in May 2010 compared with 2,484 in May 2009.
To date, sales throughout the MSA are 41.26 percent above this time in 2009 with 14,252 homes exchanging hands compared to 10,089. Each individual county’s year-to-date sales comparisons are as follows:
Lake: 30.18 percent above 2009 (1,898 homes sold to date in 2010 compared to 1,458 in 2009);
Orange: 44.14 percent above 2009 (7,713 homes sold to date in 2010 compared to 5,351 in 2009);
Osceola: 26.26 percent above 2009 (2,428 homes sold to date in 2010 compared to 1,923 in 2009); and
Seminole: 63.08 percent above 2009 (2,213 sold to date in 2010 compared to 1,357 in 2009).
For detailed statistical reports, please visit www.orlrealtor.com and click on “Housing Statistics” on the top menu bar. This representation is based in whole or in part on data supplied by the Orlando Regional REALTOR® Association or its Multiple Listing Service (MLS). Neither the association nor its MLS guarantees or is in any way responsible for its accuracy. Data maintained by the association or its MLS may not reflect all real estate activity in the market. Due to late closings, an adjustment is necessary to record those closings posted after our reporting date.
ORRA REALTOR® sales, referred to as the core market, represent all sales by members of the Orlando Regional REALTOR® Association, not necessarily those sales strictly in Orange and Seminole counties. Note that statistics released each month may be revised in the future as new data is received.
Orlando MSA numbers reflect sales of homes located in Orange, Seminole, Osceola, and Lake counties by members of any Realtor® association, not just members of ORRA.
Friday, June 25, 2010
Think the Gulf Spill Is Bad? Wait Until the Next Disaster
by Robert Kiyosaki
Tuesday, June 22, 2010
The world knows BP is a disaster, a monster of a disaster. Every time a TV news station shows oil gushing from a broken pipe -- one mile below the ocean’s surface -- the audience feels sick. Scenes of oil-soaked pelicans struggling for life angers and saddens us. The financial losses endured by small businesses and fishermen cannot be imagined, let alone conveyed by the media interviews alone. BP is a disaster whose scope is beyond comprehension.
I was in England this month when President Barack Obama blamed and criticized BP for this tragedy. His criticism sparked the anger of the English. Politicians wanted him to tone it down, to be more careful in his choice of words. English Prime Minister David Cameron told Obama “not to go after BP for the sake of it.” Richard Branson said he was “kicking a company when it was on their knees.” Their concern was not for the environment or those suffering the ravages of this disaster. Their concern was for the pensioners who are counting on BP for a secure retirement
On June 17, the UK’s Daily Mail ran a headline screaming, “Bullied Into a £13 Cave-In." Brits are angry with Obama for pressuring BP to suspend dividend payments and set aside $20 billion for the clean up. Obama’s strong-arm position has affected British pensioners, who own 40% of BP, as well as American pension funds that own 39%. In other words, the economic damage of BP goes far beyond the Gulf. The damage is spreading to pensions, pensioners, and portfolios all around the world.
Ground Zero for the Next Disaster
While in London, I decided to go to dinner at London’s Canary Wharf, ground zero for the next BP. Only a few years ago, Canary Wharf was one of the centers of the financial universe. Condo prices were sky high, offices were packed, and high-paid bankers filled Canary Wharf with wealth and excitement. Today Canary Wharf seems to be dying. It has lost its vibrancy. Many restaurants and offices were nearly empty and there were few lights to be seen in those once high-priced condos.
Canary Wharf will be the next BP, and its BP stands for Bomb Production. Canary Wharf is much like AIG, a factory for exotic financial products known as derivatives. The problem is that most people do not know what these murky and mysterious products are -- and that includes the people who make or buy them. It’s why Warren Buffett has called derivatives “weapons of mass financial destruction.” That is how powerful they are.
Back in 1966, when I was a student training to be a ship’s officer, my ship carried bombs from California to Vietnam. During World War II, a ship exploded while loading bombs at Port Chicago, California, the port where the bombs were loaded onto ships. The explosion flattened everything for miles. It is said that the ship’s anchor, which weighed tons, was found more than 60 miles away. Derivatives -- financial bombs -- have the same power if they accidently detonate inside a bank’s balance sheet.
Financial Bombs
The subprime disaster was a result of financial bombs -- derivatives -- exploding in financial institutions such as AIG and Lehman Brothers, as well as banks and financial institution throughout the world. After the bombs AIG manufactured exploded, AIG received $181 billion in taxpayer funding and immediately sent $11.9 billion to France’s Societe Generale, $11.8 to Deutsche Bank, and $8.5 billion to Barclays Bank of Britain. U.S. taxpayer money was going to bail out banks around the world. During the last three months of 2008, AIG was losing more than $27 million an hour. That is how powerful these derivatives can be. The problem I see is this: There are many more such bombs still sitting in balance sheets all over the world.
Military bombs are classified by weight such as 500, 750, and 1,000 pounds, while financial bombs have interesting labels such as CDO (collateralized debt obligations), ABS (asset backed securities), and CDS (credit default swaps). While they sound exotic and sophisticated, when put in everyday language, a CDO is simply debt sold as an asset. And CDS, or swaps, are simply a form of insurance. Since the insurance industry is strictly regulated and the bomb factories producing CDS did not want to comply with insurance industry regulations, they simply called them “swaps,” rather than insurance.
To make matters worse, rating agencies such as Moody’s and S&P (and even Fed Chairman Alan Greenspan) blessed these financial bombs as safe, sound, and good for you. It was almost as good as the pope blessing these products. In 2007 the subprime boom busted, and we know what happened from there.
The problem is that approximately $700 trillion of these financial time bombs are still in the system. While people watch the BP disaster in the Gulf, few people are aware of the other BP -- the financial bomb production -- that is still going on. If this derivative market begins to collapse, we will see another disaster.
Most of us know there is not enough money in the world to fully clean up the Gulf. The same is true with the $700 trillion derivatives market. If just 1% of the $700 trillion derivatives market goes bust, that is a $7 trillion disaster. The entire U.S. economy is only $14 trillion annually. A 10% failure, equating to $70 trillion, would probably bring down the world economy. As with the BP Gulf disaster, there is not enough money in the world to clean up the next disaster.
Could It Happen?
Could such a financial disaster happen? The answer is “Yes.” In fact, just as President Obama pressured BP into doing the “right thing,” so is he pressuring the financial markets to do the right thing. The president and our congressional leaders are pushing through financial reform legislation. My concern is that, if not handled delicately, it is this financial reform that will set off the derivative time bomb -- the next BP.
Currently, derivatives are traded over-the-counter. This mean derivatives are uncontrolled, unregulated, and unsupervised. Proposed financial reform legislation is pushing to have derivatives traded through an exchange. This will bring in greater transparency and controls. My concern is, when this happens, the change to an exchange system will reveal fraud and failures we do not yet know about today. It will be like turning on the light and watching the cockroaches (bankers) run for cover.
While it is commendable that President Obama hold the rich and powerful accountable, I wonder what the price will be? And how many BPs can we afford?
Tuesday, June 22, 2010
The world knows BP is a disaster, a monster of a disaster. Every time a TV news station shows oil gushing from a broken pipe -- one mile below the ocean’s surface -- the audience feels sick. Scenes of oil-soaked pelicans struggling for life angers and saddens us. The financial losses endured by small businesses and fishermen cannot be imagined, let alone conveyed by the media interviews alone. BP is a disaster whose scope is beyond comprehension.
I was in England this month when President Barack Obama blamed and criticized BP for this tragedy. His criticism sparked the anger of the English. Politicians wanted him to tone it down, to be more careful in his choice of words. English Prime Minister David Cameron told Obama “not to go after BP for the sake of it.” Richard Branson said he was “kicking a company when it was on their knees.” Their concern was not for the environment or those suffering the ravages of this disaster. Their concern was for the pensioners who are counting on BP for a secure retirement
On June 17, the UK’s Daily Mail ran a headline screaming, “Bullied Into a £13 Cave-In." Brits are angry with Obama for pressuring BP to suspend dividend payments and set aside $20 billion for the clean up. Obama’s strong-arm position has affected British pensioners, who own 40% of BP, as well as American pension funds that own 39%. In other words, the economic damage of BP goes far beyond the Gulf. The damage is spreading to pensions, pensioners, and portfolios all around the world.
Ground Zero for the Next Disaster
While in London, I decided to go to dinner at London’s Canary Wharf, ground zero for the next BP. Only a few years ago, Canary Wharf was one of the centers of the financial universe. Condo prices were sky high, offices were packed, and high-paid bankers filled Canary Wharf with wealth and excitement. Today Canary Wharf seems to be dying. It has lost its vibrancy. Many restaurants and offices were nearly empty and there were few lights to be seen in those once high-priced condos.
Canary Wharf will be the next BP, and its BP stands for Bomb Production. Canary Wharf is much like AIG, a factory for exotic financial products known as derivatives. The problem is that most people do not know what these murky and mysterious products are -- and that includes the people who make or buy them. It’s why Warren Buffett has called derivatives “weapons of mass financial destruction.” That is how powerful they are.
Back in 1966, when I was a student training to be a ship’s officer, my ship carried bombs from California to Vietnam. During World War II, a ship exploded while loading bombs at Port Chicago, California, the port where the bombs were loaded onto ships. The explosion flattened everything for miles. It is said that the ship’s anchor, which weighed tons, was found more than 60 miles away. Derivatives -- financial bombs -- have the same power if they accidently detonate inside a bank’s balance sheet.
Financial Bombs
The subprime disaster was a result of financial bombs -- derivatives -- exploding in financial institutions such as AIG and Lehman Brothers, as well as banks and financial institution throughout the world. After the bombs AIG manufactured exploded, AIG received $181 billion in taxpayer funding and immediately sent $11.9 billion to France’s Societe Generale, $11.8 to Deutsche Bank, and $8.5 billion to Barclays Bank of Britain. U.S. taxpayer money was going to bail out banks around the world. During the last three months of 2008, AIG was losing more than $27 million an hour. That is how powerful these derivatives can be. The problem I see is this: There are many more such bombs still sitting in balance sheets all over the world.
Military bombs are classified by weight such as 500, 750, and 1,000 pounds, while financial bombs have interesting labels such as CDO (collateralized debt obligations), ABS (asset backed securities), and CDS (credit default swaps). While they sound exotic and sophisticated, when put in everyday language, a CDO is simply debt sold as an asset. And CDS, or swaps, are simply a form of insurance. Since the insurance industry is strictly regulated and the bomb factories producing CDS did not want to comply with insurance industry regulations, they simply called them “swaps,” rather than insurance.
To make matters worse, rating agencies such as Moody’s and S&P (and even Fed Chairman Alan Greenspan) blessed these financial bombs as safe, sound, and good for you. It was almost as good as the pope blessing these products. In 2007 the subprime boom busted, and we know what happened from there.
The problem is that approximately $700 trillion of these financial time bombs are still in the system. While people watch the BP disaster in the Gulf, few people are aware of the other BP -- the financial bomb production -- that is still going on. If this derivative market begins to collapse, we will see another disaster.
Most of us know there is not enough money in the world to fully clean up the Gulf. The same is true with the $700 trillion derivatives market. If just 1% of the $700 trillion derivatives market goes bust, that is a $7 trillion disaster. The entire U.S. economy is only $14 trillion annually. A 10% failure, equating to $70 trillion, would probably bring down the world economy. As with the BP Gulf disaster, there is not enough money in the world to clean up the next disaster.
Could It Happen?
Could such a financial disaster happen? The answer is “Yes.” In fact, just as President Obama pressured BP into doing the “right thing,” so is he pressuring the financial markets to do the right thing. The president and our congressional leaders are pushing through financial reform legislation. My concern is that, if not handled delicately, it is this financial reform that will set off the derivative time bomb -- the next BP.
Currently, derivatives are traded over-the-counter. This mean derivatives are uncontrolled, unregulated, and unsupervised. Proposed financial reform legislation is pushing to have derivatives traded through an exchange. This will bring in greater transparency and controls. My concern is, when this happens, the change to an exchange system will reveal fraud and failures we do not yet know about today. It will be like turning on the light and watching the cockroaches (bankers) run for cover.
While it is commendable that President Obama hold the rich and powerful accountable, I wonder what the price will be? And how many BPs can we afford?
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