Florida was one of the hardest-hit states in the real estate recession, with several areas suffering because of a collapse after overbuilding and skyrocketing prices.
Today, things are much improved in the state, but there are still some challenges.
Sales of existing homes were up 15% in 2Q13 compared with the same period in 2012, and the median sales price was up 14%.
FAMP chief economist John Tuccillo said, “The market continues its gradual improvement and return to stability.”
But lately there have been some clouds on the horizon, most notably the spike in interest rates during the second quarter. But as the members of our panel at the recent Florida Association of Mortgage Professionals annual convention in Orlando noted, while refinancing volume is down, the rise in rates moved consumers timing the market to enter and purchase a home.
Origination News managing editor Brad Finkelstein sat down with FAMP president Valerie Saunders, an industry consultant with Origination Compliance and Consulting in Jacksonville; president-elect David Kane, senior loan officer at Fairview Lending in Cape Coral; and government affairs chairman Kimber White, managing partner at United American Mortgage, Oakland Park.
FINKELSTEIN: Starting in May, mortgage interest rates have been going up hard and fast, although they seem to have stabilized as of late. Has that affected your origination markets in Florida?
WHITE: I think what it has done, and from what I am seeing, is that it has gotten people off the fence. They were saying “we’re going to wait until prices come down. We’re going to wait until this flushes out.” I am actually busier. I have 26 years in this business. The national average rate in my time has been 6%; we’re still historically low. But if all you are doing are refis, you are done.
KANE: It will cut into the refi end, but for purchases, it has spurred a few people to get off the fence before rates go up even further.
SAUNDERS: I have found the same in my market in north Florida. I think we are still waiting for that moment which will definitely be a pivotal situation in the housing market in Florida when the short sales and REO sales transition away and we get the more traditional sales and people beginning to list their homes who are not having financial difficulties.
FINKELSTEIN: Are distressed sales still making up a fair amount of the inventory?
SAUNDERS: Definitely in my market they are.
KANE: In Southwest Florida, it is still a part, but it starting to transition to regular, nondistressed sales.
WHITE: In South Florida, we do not have a distressed sales problem, which is amazing. The banks aren’t just putting them on the market. What we’re finding is that it is a seller’s market in south Florida. South Florida was the first market to go under (in 2005); but I think we’re the first to comeback. We’re having bidding wars, where people are paying above appraised values for properties.
SAUNDERS: In North Florida, we have bidding wars as well. However, they are over the foreclosed/REO properties. The second it gets listed on MLS, you’ll have 10 people going there to look. If you don’t get in there fast enough, and try to get your contract written, it is already gone.
FINKELSTEIN: Kimber, you were talking about people paying above appraised values. Are you having problems having getting secondary market approvals for those loans?
WHITE: You aren’t going to get more than what it appraises for. But buyers are paying, especially (property) investors, are paying above market values because they know what the property is going to be worth (in the future). The loans are written at 80% or 90% (of the purchase price) based on the appraised value.
KANE: Buyers are also paying in cash.
WHITE: There are a lot of investors in South Florida right now.
KANE: There is not a lot of that in my area. If the seller doesn’t lower the price if the deal doesn’t appraise, then it just falls apart.
SAUNDERS: It’s the same in my market. I think South Florida is has a unique market right now.
WHITE: We do.
SAUNDERS: Other markets will transition up.
FINKELSTEIN: Are you having problems with wholesale investors right now? Recently, Jacksonville-based EverBank announced it was exiting the channel.
SAUNDERS: EverBank is much more retail in the Florida market. They really did not have an active wholesale market in Florida. But I do see a lot more companies—just from our trade show, we’re seeing a lot more companies come into the market place, which gives a competitive advantage to a consumer and definitely to a mortgage broker.
KANE: Talked to one this morning which just got its license in Florida. They got out of the business in 2007 and are just getting back in.
FINKELSTEIN: There used to be a lot of hard money lenders at the FAMP trade show. Is that business still active in Florida?
SAUNDERS: The hard money lenders from years ago, the equity-based lending, doesn’t exist anymore.
KANE: There are a few subprime lenders which are trying to come back.
FINKELSTEIN: I spoke with one at the show. Are we going to see more nonconforming product of all types start to come back?
SAUNDERS: With what is about to happen with (the qualified mortgage regulation) set to go into effect, instead of conforming and nonconforming, you are going to have safe harbor and non-safe harbor. You will have options.
KANE: But it is hard to say when and where. With all that is happening, I don’t think anybody right now would want to get into nonconforming.
SAUNDERS: It is going to be difficult. Before, conforming was Fannie and Freddie and nonconforming was everything else. With QM, you’re not going to be following Fannie/Freddie guidelines, you are going to be following FHA underwriting guidelines. And you will be following FHA guidelines whether it is safe harbor or non-safe harbor. The words conforming and nonconforming really don’t fit the industry any longer.
FINKELSTEIN: Even the future of Fannie and Freddie are in doubt; the government would like to get rid of it, but the stockholders have a different opinion.
SAUNDERS: With the changes transitioning into QM, the only purpose they will serve other than having their automated underwriting systems which will end up following FHA guidelines anyway, is truly just as a pass-through.
WHITE: To show how the market is going about QM, Calyx (during a break-out session) this morning, said it is rolling out in August a test to see if your loan is QM qualified. You’ll push a button and it will come up if the loan is QM or not. I think QM is going to make a big change in our industry and we don’t where we are going right now. It is all new to us. We preparing for it. It is going to be a different world for us.
FINKELSTEIN: It might be hard to prepare if the rules aren’t finalized yet.
SAUNDERS: The rules are finalized, as far as what we do on a day-to-day basis. Can they be amended? Yes, of course they can. Will they be amended significantly? No, they won’t.
