Destin 32541 News
Short sale sellers need to close in 2012
WASHINGTON – Feb. 3, 2012 – Ιf а bank writes off debt іn а short sale, it’s а “taxable event,” аnd thе lender tells thе Internal Revenue Service аbоut thе deal by submitting а “Form 1099-C, Cancellation оf Debt” аt thе end оf thе year. Home sellers must acknowledge thе amount whеn thеу fill оut thеіr federal taxes. Through Dec. 31, 2012, however, thе federal government forgives аnу tax liability associated wіth forgiveness оf а mortgage loan.
“Ιn general, homeowners believe thе government wіll extend thіѕ tax provision,” says San Diego Realtor Joy Bender. “However, аѕ evidenced by thе First Time Homebuyer Credit expiration іn 2010, уоu can’t always count оn thе government tо bail уоu оut.”
Τhе government generally considers forgiven debt tо bе income. Ιf а seller hаѕ signed legal loan papers tо tаkе оut а $200,000 mortgage аnd thе lender accepts $100,000 іn а short sale, fоr example, thе seller received thе equivalent оf $100,000 іn free money by government estimates. Αѕ а result, thе IRS taxes іt. For tax year 2012, however, thе government still forgives thе debt; іn 2013, іt might nоt.
Τhе tax amount cаn bе significant. Οn а debt оf $100,000, а short-sale seller іn thе 25 percent tax bracket cоuld end up owing $25,000 іn income taxes.
Since short sales cаn tаkе months аnd еvеn fall through, homeowners considering а short sale mау wаnt tо start thе process sooner rather thаn later.
Finally, Time to Buy a House
U.S. house prices have fallen by nearly one-third in five years, and the nation's homeownership rate is dropping at the fastest rate since the Great Depression.
Two key measures now suggest it's an excellent time to buy a house as a long-term residence or an income property (but not necessarily for a quick flip). First, the nation's ratio of house prices to yearly rents is nearly restored to its pre-bubble average, suggesting the financial advantages of homeownership once again await buyers. Second, when ultra-low mortgage rates are taken into consideration, houses are the most affordable they've been in four decades of data.
Two mantras prevalent during the real estate bubble were that a house is the best investment you'll ever make and that a renter "throws money down the drain." Whether buying is a better financial deal than renting isn't a stagnant fact but a changing condition that depends on the relationship between prices and rents and the cost of financing, among other factors.
But the math is shifting in favor of buyers. Stock-oriented folks can think of a house's price-to-rent ratio as akin to a stock's price-to-earnings ratio in that it compares the cost of an asset with the money it's capable of generating. For investors, a lower ratio suggests more income for the price. For prospective homeowners, a lower ratio makes owning more attractive than renting, all else held equal.
Nationwide, the ratio of median home prices to rents on average-size apartments is 11.3, down from 18.5 at the height of the housing bubble, according to Moody's Analytics. The average price-to-rent ratio between 1989 and 2003 was about 10, according to Moody's. So valuations appear almost back to normal, on average.
But for most house buyers, mortgage rates are a key determinant of their total costs. Rates are so low right now that houses in many markets look like bargains, even if price-to-rent ratios aren't hitting new lows. The latest rate is still less than half the average since 1971.
As a result, house payments are more affordable than they've been in at least four decades of data. The National Association of Realtors Housing Affordability Index hit 183.7 in August, near a record high in data going back to 1970. A reading of 100 would mean that a median-income family with a 20% down-payment can afford a mortgage on a median-price home. The index's historic average reading is 120. So today's buyers can afford handsome houses -- but prudent ones might opt instead for moderate houses with skimpy payments.
For example, a median house in Phoenix costs $121,700, according to Zillow.com. With a 20% down-payment, a buyer's monthly payment would be about $470. Rent for a comparable house would be more than $1,100 a month, according to data provided by Zillow.com. That suggests buyers are much better off, even after adjusting for their additional expenses.
Of course, all of this assumes mortgages are available -- no given now that lending standards have tightened. But long-term data on down-payments and credit scores suggest conditions are more normal than many buyers think, according to Stan Humphries, chief economist at Zillow.com. "If you have good credit, a job and a down-payment, you can get a mortgage," says Mr. Humphries. "There's more paperwork and scrutiny than five years ago, but things are pretty much like they were in the '80s and '90s."
Not all housing markets are cheap, of course. Mr. Humphries says Zillow has developed a new price-to-rent ratio that uses price and rent estimates for each individual property rather than city medians, to better reflect the choices facing typical buyers. A fresh look at the numbers suggests Detroit and Miami are plenty cheap for buyers, with price-to-rent ratios of 5.6 and 7.7, respectively. New York and San Francisco might favor renters, with ratios of 17.6 and 17.2, respectively. The median ratio for 169 markets is 10.7.
For investors seeking income, one back-of-the-envelope way of seeing how these numbers stack up against yields for other assets is to divide 1 by the price-to-rent ratio, resulting in a rent yield. The median market's rent yield is 9.3% and Detroit's is 17.9%. From those yields, a real estate investor would have to subtract for taxes, insurance, upkeep and other expenses, and costs vary widely by market and case. But suppose total expenses are 4% of the purchase price. Rents for residential housing in many markets look attractive, even after expenses.
It's little wonder that, as The Wall Street Journal reported in August, even investment funds are dabbling in single-family houses.
A few caveats: First, not all transactions are average ones. Even in attractively priced markets, buyers should shop carefully. Second, prices may well fall further. Celia Chen, a senior director at Moody's Analytics, expects that prices will fall another 3% before bottoming early next year and rising slowly thereafter.
Third, property "flipping" can be dangerous even when prices are rising. That's because absent a real-estate boom, house price gains simply aren't that exciting. Research by Yale economist Robert Shiller suggests houses more or less track the rate of inflation over long time periods.
That's what we'd expect from something made from sticks and stones and other ordinary materials. Houses aren't the magic wealth creators they were made out to be during the bubble. But when prices are low, loans are cheap and attractive investment yields are scarce, as now, buyers should jump.
DESTIN MARKET SNAPSHOT AS OF OCTOBER 11, 2011
DESTIN SINGLE FAMILY HOMES SOLD:257 , TOTAL:$116,205,827
DESTIN CONDOS SOLD: 364, TOTAL:$113,104,407
DESTIN COMBINED RESIDENTIAL PROPERTIES SOLD:696 , TOTAL:$240,378,609
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Statistics Summaries Report For Area: Destin FL32541 |
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Category - Combined All Residential |
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Total |
Total List/Total Sold |
Avg List |
Avg Sold |
Avg DOM |
Median Price |
%SP/LP |
%SP/OLP |
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MARKET SNAPSHOT AS OF OCTOBER 11, 2011 |
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Currently Pending |
56 |
$23,355,845/ N/A |
$417,068 |
N/A |
217 |
$285,000 |
N/A |
N/A |
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Currently Active |
887 |
$609,677,788/ N/A |
$687,348 |
N/A |
379 |
$479,000 |
N/A |
N/A |
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Currently Contingent |
154 |
$46,979,066/ N/A |
$305,058 |
N/A |
185 |
$195,000 |
N/A |
N/A |
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ON MARKET (1/1/2011 - 10/11/2011) |
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New (1/1/2011 - 10/11/2011) |
1159 |
$590,681,050/ N/A |
$509,647 |
N/A |
90 |
$325,000 |
N/A |
N/A |
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Pending (1/1/2011 - 10/11/2011) |
841 |
$322,274,358/ N/A |
$383,203 |
N/A |
199 |
$239,800 |
N/A |
N/A |
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OFF MARKET (1/1/2011 - 10/11/2011) |
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Sold |
696 |
$273,649,648/$240,378,609 |
$393,174 |
$345,371 |
211 |
$239,000 |
88% |
76% |
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Withdrawn |
419 |
$262,785,072/ N/A |
$627,172 |
N/A |
383 |
$439,000 |
N/A |
N/A |
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Expired |
574 |
$376,514,819/ N/A |
$655,949 |
N/A |
380 |
$415,000 |
N/A |
N/A |
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Sales of Destin FL homes increased more than 25% for the first quarter of 2010 when compared to the same time period last year. The increased demand is also exerting pressure on home values as the average sales price was $435,715 or 17% higher than last year. Other key statistics are listed in the table below.
| Q1 2009 | Q1 2010 | % CHANGE | |
| Homes Sold | 82 | 103 | 25.61% |
| Average Sold Price | $373,124 | $435,715 | 16.77% |
| Median Sold Price | $297,500 | $320,840 | 7.85% |
| Highest Sales Price | $1,300,000 | $2,700,000 | 107.69% |
| Lowest Sales Price | $114,900 | $105,000 | -8.62% |
The increase in sales came as the number of Destin FL homes for sale declined. In other words, homes in Destin are selling faster than new listings are coming on to the market. This trend is especially prevalent in the lower price ranges where inventory for Destin FL homes is almost below 6 months now. However, the luxury price ranges aren’t fairing as well and inventory levels exceed 8 years for homes in Destin FL priced above $1M.
I field many calls each week from buyers looking for Destin FL homes that are bank owned (REO’s) or short sales. While these can lead to great “deals” there are many Destin FL homes for sale from “normal” sellers. These sellers typically own their properties free and clear and are able to sell at today’s market values. In fact over 61% of sales in the first quarter came from these sellers while Destin Foreclosures and Short Sales only accounted for 39% of the total market.
SUMMARY:
- Buyers: Homes in the lower price ranges are selling faster than new homes are being listed. There are still some good deals available but time is running out. There are fewer homes available so you must be ready to move quickly and aggressively when you see something you like.
- Buyers: Homes in the higher price ranges are stagnant. You have a great selection of quality, location, and size available to you right now. This won’t last forever and the best homes will be bought first. You can negotiate aggressively on both price and terms being more aggressive as you go higher in price. The key is figuring out which seller’s are motivated.
- Sellers: If you are selling a home priced below $400k, make sure you are pricing within recent comparable sales. While the market has improved in your favor, conditions are still not strong enough for you to be overly aggressive.
- Sellers: If you are selling a home in the upper price range, lower your price! The market is still extremely weak and you must be extremely aggressive to sell.
