2007: Florida’s Top Real Estate Issues

What’s happening in my market?

The January issue of Florida Realtor magazine includes its annual forecast of local markets and, for most, the outlook holds generally good news – especially for the second half of 2008. Look for it in early January

What were the top real estate stories of 2007? The slowing home sales market tops the list, followed by Florida-specific concerns – property taxes and property insurance – along with troubles in the mortgage market and, finally, a proposed Hometown Democracy constitutional amendment that could go before voters in 2008. Here are the issues that shaped Florida’s real estate world in 2007 and a glimpse at what the New Year holds.

Home sales: Bad to worse, yet turning around?

Home sales slowed to a crawl in 2007; though some areas of Florida fared better. It’s a single story with multiple causes – the perfect storm. News stories in 2007 have, independently, pinned the blame on real estate investors with more money than common sense; mortgage brokers and banks willing to give a homebuyer more money than he can possibly pay back; and homebuyers who did not the time to read the mortgage terms associated with the biggest financial deal of their life.

Florida, along with a handful of other states, had the dubious honor of being at the epicenter of the home sales slowdown. In the October monthly sales report from the Florida Association of Realtors, the year-over-year number of home sales fell 29 percent, though price declines were more modest at 8 percent. While much of the mainstream media focuses on the drop, however, the figures more accurately reflect how out-of-control the real estate market was during the now-past boom years. Currently, Florida home sales compare favorably to five years ago. And over a five-year period, Florida housing prices have actually risen more than any other state except Hawaii, even with the recent price declines – up 96.23 percent in Florida, according to OFHEO, the government agency that tracks home price changes.

As the year ends, buyers have a bountiful inventory to choose from and demand exists. Many buyers fear, however, that prices will drop a bit more, making a current purchase ill-advised if they can wait it out. While that stance comes more from anxiety than actual fact, the market will turn – slowly, doggedly, yet evenly – barring any new housing-related crises, such as the mortgage meltdown that peaked in August.

Wild cards impacting the market in 2008 include:

• Business tactics: The word’s getting out – it’s time to buy. Mortgage interest rates remain historically low and much of the media, once focused on housing market woes, now seems to be picking up on some bright spots. A few Florida cities may already be seeing the early signs of a turnaround, and if buyers sense the market has bottomed out, those waiting for a better deal will jump in quickly, afraid to miss the trough. If that happens soon – a big “if” – the rebound could be quick, just as the slowdown seemed to happen overnight.

• Foreclosures: Subprime lending also empowered a number of homebuyers to purchase a home they could not afford once adjustable mortgage rates moved higher – in some cases, dramatically so. As ARMs adjust higher in 2008 and later, more homeowners could lose their home, adding inventory into a system that already has more homes for sale than buyers. However, actions by the federal government to save borrowers, banks or both could moderate the impact of foreclosures.

• Mortgage rates: In December 2007, 30-year fixed-rate mortgages were close to their lowest level in two years – 6.14 percent on Dec. 21. Most experts predict a slight rise in 2008 but within reasonable levels that won’t deter homebuyers. But mortgage rates always impact home sales and any significant increase could throw cold water on a recovering real estate market.

• Developer bankruptcies: Bonita-based WCI Communities is struggling; Miami-based Levitt and Sons went under. Financial troubles within the home construction industry present challenges to buyers under contract, homeowners living in unfinished developments, and financial institutions stuck with assets worth less than the money they lent. A strengthening real estate market will boost struggling builders, but a few could still face bankruptcy before the market regains its footing.

• Condominiums: Condos in many Florida cities proved a flashpoint for investors who sometimes buy and trade real estate as if it’s stock, willing to put down more money than a property is worth, sure in the knowledge that someone else will come along and pay even more. But the last person holding the deed when the market stalls is left with property worth far less than they owe the bank – and thousands of condo owners, including some developers, now find themselves “upside down.” In some Florida cities, this industry should struggle for a while even after the market rebounds.

• Legislative changes: A Jan. 29 ballot approval of property tax portability could entice Floridians who wish to move up or down to jump into the market. Lawmakers generally agree that not enough has been done, even if the amendment passes, and during the 2008 session of the Florida Legislature, which begins March 4, 2008, other initiatives are expected, notably those that offer more relief to businesses and non-homesteaded homeowners. Property insurance and housing affordability are other issues that could be impacted by legislative changes.

Property tax relief: Is it here yet?

The problem: As property values skyrocketed, property taxes – a percentage of property value – rose with them. Most local governments, flush with new tax money, spent it. Homesteaded owners, protected by Florida’s Save Our Homes constitutional amendment, saw only slight increases, which were viewed as unfair by non-homesteaded owners who picked up the slack. Commercial and non-homesteaded property owners balked and demanded property tax cuts.

Possible solutions (pick one): A constitutional amendment approving property tax portability to be voted on in January. Or a citizens amendment being promoted by House Speaker Marco Rubio. Or an amendment that will be created by Florida’s Taxation and Budget Reform Commission. Or new laws created by the 2008 Florida Legislature that expand the property tax reform laws passed during a June 2007 special session. Or the result of a court case involving a property tax reduction plan approved at that same June session.

Or none of the above. Or, perhaps, all of the above.

Each property tax reform initiative developed so far has had one group waving the flag of passage, while local governments and civil servants quickly form an opposition team, with many teachers, firefighters, health care professionals and others saying any property tax reduction will surely result in a cutback of services. Some homeowners may look at the potential tax savings – perhaps only hundreds of dollars a year – and turn a sympathetic eye to these government servants. Consequently, passage of a constitutional amendment reforming property taxes, which would require approval by 60 percent of voters, could become a challenge.

But the fight for property tax reform will continue even if the final solution remains unclear. FAR, as the forefront protector of Florida property owners, considers relief the lynchpin of its 2008 legislative efforts, and the association will remain in the thick of things until a solution is found. FAR strongly backs passage of Amendment 1 on the Jan. 29 ballot (http://www.floridarealtors.org/LegislativeCenter/TopInitiatives/index.cfm)

Property insurance: Improving but not there yet

One year ago, property insurance topped FAR’s list of real estate stories for the year, but things have improved – slightly. In January, a special session of the Florida Legislature boosted the state’s reinsurance fund, lowering risk for insurers. But savings were less than promised, so the state started carrying a bigger stick when insurers requested rate adjustments. Add to the mix a legislative change in the state’s insurer, Citizen’s Property Insurance Corp., that froze rates and expanded coverage, and Florida property owners now have a few more affordable choices.

A key component of the ongoing battle, however, cannot be legislated or changed. While the state has experienced two years without having a hurricane that hit land, another blow will again send insurers packing even though they enjoyed highly profitable years. Lawmakers and regulators could still tinker with the rules to encourage greater savings, even as the big insurers continue to limit their risk, notably in coastal areas.

Mortgage market meltdown

Rising home values convinced mortgage lenders that their risk was limited. If a homeowner puts no money down and loses a home to foreclosure, banks recoup their investment and more if the home went up in value. But when home prices started to decline, the lenders’ risk increased – even on mortgages issued under the old rules.

In the heyday of the seller’s market, mortgage lending looked like the old West, with gamblers and gunslingers running wild and turning a profit. Now that the dust has settled and the gunslingers have moseyed into the sunset, here’s what’s left heading into 2008:

• Tightened lending standards: The subprime mortgage meltdown that peaked in August caught industry experts by surprise. Mortgages became harder to get as lenders raised their credit standards. Barring unseen complications, most credit-worthy borrowers should see a brighter 2008.

• Financial bankruptcies: Homeowners aren’t the only ones facing bankruptcy; some lenders are also in trouble. In some cases, mortgages became impossible to get as lenders halted operations. Washington Mutual and Countrywide cut back their mortgage businesses significantly; H&R Block backed out; Citigroup reported troubles; and the list goes on.

• FHA resurgence: With subprime mortgages harder to the find, the federal government plans to expand mortgage programs under the FHA, and bills to do so are already working their way through Congress. FHA Commissioner Brian Montgomery hopes his agency’s programs “fill the void” as the subprime market continues to unravel.

The undemocratic Hometown Democracy

Hometown Democracy is a citizens’ initiative to amend the Florida Constitution that, if approved by voters, would require all local comprehensive land-use plan changes to be put to a referendum-like vote. That would force Florida citizens – rather than the local leaders they elected to office – to make decisions on thousands of complicated land-use planning issues. Hometown Democracy has the potential to greatly impact Florida’s real estate industry.

A bright spot appeared in 2007, however: A law now allows voters to rescind their signature from any proposed citizens constitutional amendment should they have second thoughts; and Associated Industries of Florida has been working with a coalition of businesses and associations to prevent the proposed Hometown Democracy constitutional amendment from appearing on next year’s general election ballot. The new law gives signers of a petition 150 days to cancel their first signature; for more info, go to: (http://www.fbnnet.com/hometowndem/Form_DS-DE_19R_Petition%20Revocation_Final.pdf).


© 2007 FLORIDA ASSOCIATION OF REALTORS®

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President Signs Extension Of IRS Deduction For Mortgage Insurance

WASHINGTON – Dec. 21, 2007 – President Bush signed legislation yesterday that extends the IRS tax deduction for private mortgage insurance (PMI) premiums. Qualified borrowers get the deduction for mortgage originations between 2007 and 2010.

The deduction was first approved late in 2006 and initially applied only to the 2007 tax year. Extension of the tax deduction was part of the Mortgage Forgiveness Debt Relief Act of 2007 approved earlier this month by both the U.S. House of Representatives and the U.S. Senate.

Families with an adjusted gross income of $100,000 or less may use the PMI tax break. Families with incomes up to $109,000 receive a partial deduction.

“Continuing this tax deduction will help low- and moderate-income consumers, particularly first-time home buyers who are unable to put down 20 percent,” says Kevin Schneider, president of the Mortgage Insurance Companies of America (MICA). “On average, the annual tax break could be worth $350 per taxpayer.”

Even with home prices declining in many areas, many families find it difficult to accumulate a 20 percent downpayment.

“This important tax deduction is a crucial component in keeping the American dream of homeownership alive for many families,” says Suzanne Hutchinson, MICA executive vice president. “As risky, exotic loans are no longer considered viable housing finance options, more secure loans with private mortgage insurance remain readily available for qualified borrowers.”

© 2007 FLORIDA ASSOCIATION OF REALTORS®

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Commercial Real Estate Fundamentals Sound – Investment Slowing

WASHINGTON – Dec. 21, 2007 – The fundamentals in commercial real estate remain healthy with only slight increases in vacancy rates expected for the office and industrial sectors during 2008, although credit restrictions have recently slowed overall investment activity, according to the latest Commercial Real Estate Outlook of the National Association of Realtors® (NAR).

The report said commercial fundamentals are essentially sound. “Although vacancy rates remain relatively low for all sectors, they are expected to rise slightly in the office and industrial markets during the coming year because much of the space being absorbed is in high-quality buildings or is built-to-suit,” says NAR Chief Economist Lawrence Yun. “As a result, there is a fair amount of older space on the market, particularly in the industrial sector where obsolescence is a factor, although industrial rents are showing healthy gains. Vacancy rates in the retail and multifamily sectors are projected to tighten in 2008 with rents rising in all sectors.”

Yun said the credit crunch has been impacting the market over the last few months, but 2007 is already a record for commercial real estate investment. “Tighter credit conditions will limit individual commercial real estate investment deals moving forward,” he says. “Because capitalization rates are already very low, it is likely that commercial property prices will ease. The era of rapid commercial property price increases has ended.”

A record $325.0 billion was invested in commercial real estate in the first 10 months of 2007, up from $306.8 billion for all of 2006; that total does not include transactions valued at less than $5 million or investments in the hospitality sector, based on analysis of data from Real Capital Analytics.

Patricia Nooney of Saint Louis, chair of the Realtors® Commercial Alliance, says commercial real estate investment is expected to stay historically strong. “Even with the credit crunch there’s been no significant impact on institutional investors, and it’s unrealistic to set new records every year in a cyclical business,” she says. “There’s been a shift in investment activity to foreign buyers, who are taking advantage of the dollar’s decline relative to other currencies. With many areas showing favorable fundamentals, commercial property in the U.S. has become very attractive to foreign investors.”

The NAR forecast in four major commercial sectors analyzes quarterly data for various tracked metro areas. The sectors are the office, industrial, retail and multifamily markets. Torto Wheaton Research and Real Capital Analytics provided historic metro data.

Office market

With jobs still being created, the demand for office space remains positive and is helping to absorb the more than 30 million square feet of new space becoming available in the current quarter. Investment grade office properties with solid income streams will be the most in demand by institutional investors, equity funds and foreign investors.

Since not all of the vacated space is being back-filled or leased, office vacancies are forecast to rise to 13.2 percent by the fourth quarter of 2008 from an estimated 12.9 percent in the current quarter; it was 12.6 percent at the end of 2006. Annual rent growth in the office sector should be 8.0 percent this year and 2.0 percent in 2008, after rising 5.2 percent in 2006.

Projections for the fourth quarter show areas with the lowest office vacancies include New York City; Honolulu; Tucson, Ariz.; Long Island, N.Y.; Los Angeles; and Riverside, Calif., all with vacancy rates of 10.0 percent or less.

Net absorption of office space in 57 markets tracked, which includes the leasing of new space coming on the market as well as space in existing properties, is likely to total 55.4 million square feet in 2007 and 43.0 million next year, but below the 81.2 million in 2006.

Office building transaction volume in the first 10 months of this year totaled a record $173.5 billion, compared with $133.5 billion for all of 2006. So far this year foreign investors purchased $12.5 billion worth of office properties, with buyers from the Middle East and Germany accounting for half of that volume.

Industrial market

The weaker dollar is fueling an increase in exports, but leasing activity has declined in port distribution hubs, and vacancy rates in those markets are edging up; some users are building or renting in secondary markets.

With abundant land and relatively low concerns regarding site remediation, secondary and tertiary markets are experiencing greater interest. So far this year, almost 16 percent of industrial investment has taken place outside of the 58 primary markets tracked.

Vacancy rates in the industrial sector are projected to average 9.4 percent in the fourth quarter and 9.5 percent by the end of 2008; vacancies averaged 9.4 percent in the fourth quarter of 2006. Annual rent growth will more than double to 3.3 percent by the end of 2007 and is seen at 1.3 percent a year from now, compared with a 1.4 percent annual gain at the end of 2006.

The areas with the lowest industrial vacancies include Los Angeles; San Francisco; Tucson; Orange County, Calif.; Portland, Ore.; and Las Vegas, all with vacancy rates of 6.1 percent or less.

Net absorption of industrial space in 58 markets tracked is expected to total 127.4 million square feet in 2007 and 144.0 million next year, down from 205.4 million in 2006.

Industrial transaction volume in the first 10 months of 2007 was $35.8 billion, compared with $38.9 billion for all of 2006.

Retail market

Even with a decline in consumer confidence, retail vacancy rates remain fairly stable. Declining production of new space will help improve fundamentals in this sector during 2008.

Vacancy rates in the retail sector will probably rise to 8.9 percent in the current quarter from 8.0 percent at the end of last year, and then ease to 8.6 percent by the fourth quarter of 2008. Average retail rent should grow by 2.2 percent this year and 1.9 percent in 2008, after rising 3.9 percent in 2006.

Retail markets with the lowest vacancies include San Francisco; Orange County, Calif.; San Jose, Calif.; Ventura County, Calif.; Washington, D.C.; and San Diego, all with vacancy rates of 5.5 percent or less.

Net absorption of retail space in 53 tracked markets is forecast at 18.6 million square feet for 2007 and 24.7 million next year, up from 10.5 million in 2006.

Retail transaction volume in the first 10 months of this year totaled $52.9 billion, exceeding the $46.9 billion for all of 2006. The Southeast is the most sought-out region this year.

Multifamily market

The apartment rental market – multifamily housing – is experiencing increased demand from the slowdown in home sales. With a rising population and a growing number of households, vacancies are tightening and rents are rising.

Multifamily vacancy rates are projected to average 5.4 percent in the current quarter, down from 5.9 percent in the fourth quarter of last year, and then continue to decline to 5.1 percent by the end of 2008. Average rent is likely to rise 3.1 percent for 2007 and 3.8 percent next year, following a 4.1 percent increase in 2006.

Multifamily net absorption is expected to total 234,400 units in 59 tracked metro areas in 2007, below the 229,500 last year, but should rise to 245,800 in 2008.

The areas with the lowest apartment vacancies include Northern New Jersey, Salt Lake City, San Jose, San Diego, Nashville and Philadelphia, all with vacancy rates of 3.3 percent or less.

Multifamily transactions in the first 10 months of this year totaled $62.3 billion, compared with $87.4 billion for all of 2006. The sale of buildings originally constructed as condos are being sold to multifamily investors in markets like Washington, D.C., and South Florida. Many markets have seen condo “for sale” signs change to “apartment for lease” signs almost overnight. Some condominium complexes are being converted into office buildings, and others are becoming mixed-use projects.

The NAR Research Division for the Realtors Commercial Alliance publishes the Commercial Real Estate Outlook. Organizations in the RCA include the CCIM Institute, the Institute of Real Estate Management, the Realtors Land Institute, the Society of Industrial and Office Realtors, and the Counselors of Real Estate. The RCA also provides commercial products and services.

© 2007 FLORIDA ASSOCIATION OF REALTORS®

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IRS Ruling: State Grants for Hurricane Mitigation Are Tax-Free

TALLAHASSEE, Fla. – Dec. 13, 2007 – Florida Chief Financial Officer Alex Sink announced yesterday that grants awarded to homeowners through the My Safe Florida Home (MSFH) program are not taxable income and do not have to be reported when filling out federal income taxes.

CFO Sink made the announcement after receiving a Letter Ruling from the Internal Revenue Service (IRS) stating that MSFH grants will be excluded from “gross incomes for federal income tax purposes.”

“Floridians taking personal responsibility to harden their homes and receive a grant from the My Safe Florida Home program shouldn’t be hit with an additional tax bill in January 2008,” says CFO Sink, who runs the Department of Financial Services and the MSFH program. “I commend the IRS for granting our request that mitigation grants should not be considered part of a homeowner’s income.”

Following a June 2007 request from CFO Sink, the IRS issued a Letter Ruling in late November that all grants given through the MSFH program will not be considered income and will not be reported as income to the federal government. Without this recent ruling, matching grant recipients could have been facing a tax liability of $1,250 on a $5,000 MSFH grant, based on the IRS Flat Tax calculation rate of 25 percent. The ruling potentially saves approximately $2.15 million in additional federal income taxes.

The MSFH program resumed offering wind inspections and expanded statewide in April 2007 after conducting a pilot program during the previous year. During the last 7 months, the MSFH program has performed approximately 114,000 free wind inspections, and a total of 127,816 inspections since the program began. Approximately 15,985 homeowners have been approved to receive matching grants and are working with the MSFH program to harden their homes. Statewide, the program has issued a grand total of more than 2,637 grants to homeowners for more than $8.6 million.

Property insurance savings

Many Florida homeowners who participate in the free inspection program also receive insurance premium discounts without making any improvements since the inspection form, once sent to their insurer, can show hurricane mitigation features that are already in place. Sink says that 95,807 (76 percent) of participating homeowners are eligible for an average discount of $210 on their wind insurance premiums, based on the current structure of the home during the free MSFH wind inspection. Over the last seven months, the program has alerted Floridians to a potential savings in windstorm insurance premiums totaling more than $20 million.

Any Floridian who lives in a single-family, site-built home is eligible for a free wind inspection through the program. Floridians can apply on-line at www.MySafeFloridaHome.com or by calling the program toll-free at (866) 513-6734. Homeowners who receive free wind inspections through the MSFH program will get a detailed inspection report, complete with additional eligibility information on matching grants and estimated insurance premium discounts, if the homeowner is eligible.

In order to be eligible for the program’s matching grant reimbursements of up to $5,000, the Legislature requires that homeowners meet the following requirements: have received a completed wind inspection after May 1, 2007; live in a single-family, site-built home built before March 1, 2002; have a valid homestead exemption; have an insured value of $300,000 or less; and be located in the wind-borne debris region.

Additionally, while the free wind inspections will still cover seven potential wind-resistance improvements, matching grants may only be applied to opening protections, including windows, exterior doors and garage doors, as well as the bracing of gable ends.

© 2007 FLORIDA ASSOCIATION OF REALTORS®

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NAR: Worst Is Over – Existing-Home Sales To Trend Up In 2008

WASHINGTON – Dec. 11, 2007 – Existing-home sales are projected to trend up in 2008, with pending home sales showing a slight near-term rise, according to the latest forecast by the National Association of Realtors® (NAR). However, a recovery for new-home sales is unlikely before 2009.

Lawrence Yun, NAR chief economist, says the worst part of the credit crunch has already worked its way through the data. “The unusual mortgage disruptions that peaked in August were clearly seen in lower home sales that were finalized in September and October, so the market was underperforming,” he says. “Now that mortgage conditions have improved, some postponed activity should turn up in existing-home sales over the next couple of months, and I expect sales at fairly stable to slightly higher levels.”

The Pending Home Sales Index (PHSI), a forward-looking indicator based on contracts signed in October, increased 0.6 percent to an index of 87.2 from an upwardly revised reading of 86.7 in September. It was the second consecutive monthly gain, but still 18.4 percent below the October 2006 index of 106.8. “The broad trend over the coming year will be a gradual rise in existing-home sales, but because sales are exceptionally low in the final months of 2007, total sales for 2008 will be only modestly higher than 2007,” Yun says.

The PHSI in the Northeast jumped 16.0 percent in October to 80.6 but is 11.1 percent below a year ago. In the West, the index rose 8.4 percent to 87.3 but is 16.9 percent lower than October 2006. The index in the Midwest slipped 1.4 percent in October to 85.5 and is 11.7 percent below a year ago. In the South, the index dropped 7.8 percent in October to 91.6 and is 25.3 percent below October 2006.

“The improvement in the Northeast reaffirms a trend apparent for some months now that shows signs of recovery, noteworthy because that was the first region to slump, and the gain in the West indicates some easing of interest rates for jumbo loans,” Yun says. “Lawmakers need to understand that raising the loan limits on FHA and GSE-backed conventional loans will markedly improve mortgage availability.”

Existing-home sales are likely to total 5.67 million this year, the fifth highest on record, rising to 5.70 million in 2008, in contrast with 6.48 million in 2006. Existing-home prices should be down 1.9 percent to a median of $217,600 for all of 2007, and then rise 0.3 percent to $218,300 in 2008.

“Home price growth in the vast affordable midsection of America will help raise the national median existing-home price slightly in 2008. I then expect price appreciation to return to more normal patterns in 2009, perhaps rising one or two percentage points above the rate of inflation,” Yun says.

“Even with a modest decline in the national aggregate price this year, it’s important to keep in mind that nearly two-thirds of the metro areas in the U.S. are showing price increases,” he said. “The apparent disparity results from fewer sales in high-cost markets, so a change in the mix of sales is dragging down the national median home price.”

Areas showing healthy price gains include disparate markets such as Gary-Hammond, Ind.; Binghamton, N.Y.; Corpus Christi, Texas; and Spokane, Wash. “We can’t emphasis enough how much local conditions vary, even within a given area, so it’s important for consumers to make decisions based on local market conditions.”

New-home sales are forecast at 788,000 this year and 693,000 in 2008, down from 1.05 million in 2006; no sustained improvement is seen for new homes until 2009. Because builders have correctly adjusted production, housing starts, including multifamily units, will probably total 1.36 million this year and 1.16 million in 2008, down from 1.80 million last year. The median new-home price is projected to drop 3.0 percent to $239,100 for 2007, and then decline another 0.2 percent to $236,600 in 2008.

The 30-year fixed-rate mortgage is estimated to rise slowly to the 6.4 percent range by the end of 2008, with additional cuts in the Fed funds rate lowering short-term interest rates.

Growth in the U.S. gross domestic product (GDP) should be 2.1 percent in 2007, down from a 2.9 percent growth rate last year; GDP growth is forecast to improve to 2.4 percent in 2008.

The unemployment rate is likely to average 4.6 percent for 2007, unchanged from last year, but rise to 5.0 percent in 2008. Inflation, as measured by the Consumer Price Index, will probably be 2.8 percent this year and 2.7 percent in 2008, down from 3.2 percent in 2006. Inflation-adjusted disposable personal income is estimated to grow 3.1 percent this year, the same as in 2006, and then grow 2.2 percent next year.

© 2007 FLORIDA ASSOCIATION OF REALTORS®

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FAR Offers A Total Of $106,000 In Scholarship Awards

ORLANDO, Fla. –Dec. 11, 2007 – Florida high school seniors: Are you filling out college applications and poring over potential scholarship programs? Then make plans to enter the Florida Association of Realtors®’ (FAR) 2007-2008 Scholarship/Essay Contest for High School Seniors for a chance to win up to $10,000 in scholarship funding.

Entering the contest is easy. Students write a typed, double-spaced essay – 500 words or less – on the topic, “How Does a Realtor Professional Benefit the Community?” This topic allows students the freedom to write about the wide range of Realtor professionals who work in a variety of fields, including residential brokerage, commercial brokerage, industrial and office brokerage, farm and land brokerage, real estate appraising, property management, land development and real estate counseling, to name just a few of the general specialties. Or essays may address such points as the benefits of homeownership to society, or to families on a personal level, or how the selling of commercial real estate encourages economic growth.

“This scholarship program offers Florida Realtors the opportunity to demonstrate their dedication to their community by helping young people continue their education and realize their dreams for the future,” says 2008 FAR President Charles “Chuck” Bonfiglio. “There’s a side to the real estate profession that often goes unheralded – Realtors do a lot more for the community than people may realize. Now in its eighth year, our successful scholarship program is just one example.”

Now in its eighth year, FAR’s scholarship program benefits students from across the state, with prize money going to the first-, second- and third-place essays in each of the Association’s 13 districts. Students turning in the top district-winning essays will each win a $5,000 scholarship prize while the second-place entries will each receive a $1,500 scholarship award. Plus, students will be recognized for winning third in each district with a $500 scholarship award. The 13 district-winning essays will go on to compete to win three $5,000 FAR scholarships on the statewide level, for a total of $106,000 in scholarship awards. All essays, along with an official Essay Cover Form, must be postmarked before or on March 7, 2008, and mailed to the Florida Association of Realtors, 7025 Augusta National Drive, P.O. Box 725025, Orlando, FL, 32872-5025.

Check with the high school guidance office to obtain an application kit and essay cover form for FAR’s 2007-2008 Scholarship/Essay Contest for High School Seniors. Or go to the media section of FAR’s Media Center Web site, (http://media.floridarealtors.org) to download the scholarship/essay contest application kit, official cover form and list of FAR District Vice Presidents.

FAR’s statewide scholarship awards program is open only to high school seniors who reside in the state of Florida and plan on continuing their education at a college, university, technical school or other institution of higher learning. Children whose parents are licensed real estate practitioners are not eligible for contest entry; nor are children with parents employed by any local Realtor board/association or by the Florida Association of Realtors.

Just think: Write 500 words or less and win up to $10,000 – scholarship money that could cover the costs of tuition at a local community college or pay for a lot of the tuition costs at a Florida state university. Now that’s a scholarship that will go FAR.

© 2007 FLORIDA ASSOCIATION OF REALTORS

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UF Survey: Florida’s Real Estate Report Mixed

GAINESVILLE, Fla. – Dec. 7, 2007 – All is not gloom and doom with Florida real estate, according to the latest University of Florida study, which finds a positive outlook for commercial properties despite the bad news in the housing market.

“There is more than one world of real estate, and while you can paint a very grim picture of single-family housing and condos, rental and commercial property look on balance to be healthy and normal even though they are not as rosy as they were a year ago,” said Wayne Archer, director of UF’s Bergstrom Center for Real Estate Studies.

The findings are from the center’s quarterly survey of Florida real estate trends that was completed in October. A total of 339 professional real estate analysts and investors participated in the survey, with appraisers making up the largest group, 60 percent, followed by consultants, 10 percent, and brokers, 9 percent.

The report’s release coincides with Florida being reported as one of a handful of states most vulnerable to the effects of the subprime mortgage fallout, with one widely quoted property expert even going so far as to say that “Florida is the epicenter of all things wrong with the housing industry,” Archer said.

“What these apocalyptic accounts fail to consider is that job formation and migration to the state are still strong, and these are the factors that drive the real estate market,” he said.

Many of the pessimistic reports look only at the single family and condo picture, which are not doing well, but investment, occupancy and rental rates for retail, office, industrial and hospitality are considered to be progressing normally, although not in as good a shape as a year ago, Archer said.

The outlook for nearly all of the commercial and rental markets — apartment, office, retail and industrial — calls for them to increase slightly less than the rate of inflation compared to slightly more than the rate of inflation that was predicted a year ago, he said.

“With all the horror stories in the news about foreclosures, people can’t help but be a little more sober and cautious,” he said.

The one segment of the single-family market upon which the UF survey collects detailed information, the new home market, is the least distressed, Archer said. “While the outlook for existing home sales is grim for the next quarter or two and possibly even over the next year, the outlook for new home sales looks like it’s going to be stable a year from now, at least in some markets,” he said.

Inventories of existing single-family homes are at their highest levels in a long time, with part of the problem stemming from second home purchases, Archer said. Many people who were disappointed with the stock market returns invested their retirement savings in second homes or rental homes with the intention of selling them for a quick profit, only to have the market turn sour, leaving a huge inventory, he said.

To make matters worse, people who might normally meet the marginal requirements for a mortgage can no longer qualify because of the current credit crunch, Archer said. At the same time, homeowners who are selling expect to get the same price they might have received a year or two ago, he said.

“Unfortunately, those prices had inflated enormously and in most cases there is simply going to have to be some adjustment over the next year or two,” he said.

Florida’s housing picture is the worst on the southwest coast, particularly for existing single-family homes, but it is mixed in southeast Florida, Archer said. “While the condo story for Miami and southeast Florida is disastrous, it’s a different situation with freestanding single-family homes, where the volume of sales is expected to stabilize in the next year or so,” he said.

One factor to its advantage is that the southeast coast is a haven for international investment and the recent decline in the dollar makes it even more attractive, he said.

The single-family housing market is healthiest and apartment occupancy rates most stable in north and central Florida, Archer said. In Jacksonville, half the respondents expect an increase over the next year in absorption rates, the ability of the real estate market to sell off houses that are for sale, he said.

© 2007 FLORIDA ASSOCIATION OF REALTORS

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Tax Tips For Real Estate Developers And Investors

CHICAGO – Dec. 6, 2007 – As 2007 comes to an end and planning for 2008 begins, real estate developers and investors should consider some tax tips that could save money for companies in the long run:

1. Properly account for lease income. You may be accounting for your lease income for tax purposes based on the cash received or on the terms of the lease agreement. However, a Code section specifically addressing leases may require the income to be accounted for differently.

2. Determine if you are a dealer or an investor. Do you know your status as either a dealer or an investor for tax purposes? Proper planning up front will ensure the desired treatment upon disposition of the property.

3. Allocate land cost to your benefit. To defer income upon the sale of parcels from a tract of land purchased, proper allocation of the cost among the various parcels must be done. The IRS requires that the cost be “equitably apportioned.” But how? There are several methods available that should be considered when allocating cost.

4. Color your building green. Including solar and other alternative energy property in a new building can generate tax credits. A new owner can deduct up to $1.80 per square foot of the cost of an energy efficient commercial building instead of depreciating it over 39 years.

5. Take full advantage of depreciation. Has your company recently undertaken new construction projects, expansions or renovations? Substantial long-term savings could result from a cost segregation study, which categorizes your assets into the appropriate and most tax-advantaged depreciable lives.

“To learn how these tax tips may apply to your real estate business, please contact your tax advisor,” said Jerry Williford, tax senior manager in Grant Thornton LLP’s real estate industry practice.

© 2007 FLORIDA ASSOCIATION OF REALTORS®

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Outside Remodeling Projects Pay Off, Realtors Report

WASHINGTON – Dec. 4, 2007 – Many buyers judge a house by its exterior, or so it seems from the results of the 2007 Remodeling Cost vs. Value Report. Three of the four projects with the highest national percentage of costs recouped this year were exterior upgrades, according to the report, which was produced by Hanley Wood, LLC, in cooperation with the National Association of Realtors’ (NAR) Realtor Magazine.

The study found the most profitable project on the national level was upscale siding replacement, recouping 88 percent of costs upon resale. Wood deck additions and wood window replacements also returned 85 percent and 81 percent, respectively. On a national average, the only interior project to return more than 80 percent of remodeling costs this year was a minor kitchen remodel, returning 83 percent of project costs at resale.

“The results of this year’s Cost vs. Value report underscore the importance of curb appeal in the buyer’s eye,” says 2008 NAR President Dick Gaylord. “Realtors know what attracts buyers in their local markets and can help your house put its best façade forward, so to speak – it’s another way Realtors add value to the real estate transaction.”

The 2007 Remodeling Cost vs. Value Report compares construction costs with resale values for 29 midrange and upscale remodeling projects comprising additions, remodels and replacements in 60 markets across the country. Data are provided for nine U.S. regions, following the divisions established by the U.S. Census Bureau. This is the report’s 10th consecutive year.

Four new projects were added this year: the aforementioned wood deck addition, a back-up power generator, and both a midrange and upscale garage addition. Nationally, the back-up power generator only returned 58 percent of the investment on resale, although the return was highest in the West South Central region, which comprises Arkansas, Louisiana, Oklahoma and Texas, at 68 percent. Buyers in the Pacific region of Alaska, California, Hawaii, Oregon and Washington value their garages: The midrange garage addition returned nearly 70 percent nationally but 88 percent in this region, while the upscale garage addition returned approximately 65 percent nationally but 78 percent in this area.

Homeowners in the Pacific region could also expect to see some of the highest percentages of remodeling expenses returned at resale, with 13 of the 29 projects returning 90 percent or higher of project costs. Homeowners in the East North Central region of Illinois, Indiana, Michigan, Ohio and Wisconsin might expect some of the lowest returns; only one project – upscale fiber cement siding – returned more than 80 percent upon resale (82 percent of costs recouped), while nine projects returned less than 60 percent of project costs.

The least profitable projects were a back-up power generator, sunroom addition and home office remodel. The back-up power generator returned the lowest percentage of initial cost in the East North Central, New England (Connecticut, Massachusetts, Maine, New Hampshire, Rhode Island and Vermont), Pacific and West North Central (Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota and South Dakota) regions.

Sunrooms are least popular in the East South Central (Alabama, Kentucky, Mississippi and Tennessee), Mountain (Arizona, Colorado, Idaho, Montana, Nevada, New Mexico and Wyoming), and West South Central regions. Home office remodels return the lowest percentage of project costs in the Middle Atlantic (New Jersey, New York and Pennsylvania) and South Atlantic (Delaware, District of Columbia, Florida, Georgia, Maryland, North Carolina, South Carolina, Virginia and West Virginia) regions.

Gaylord explains that the resale value of any given remodeling project depends on a variety of factors. “When considering a remodeling project, particularly with an eye toward resale, it’s important to evaluate your home’s current condition, how the project will change the existing space in your home, as well as how your remodeled home will compare to other homes in your community,” says Gaylord.

“For example, using a breakfast nook to expand the kitchen seems like a good use of space, but using the same space to add a first-floor bathroom in an older home that doesn’t have one will draw more buyers,” Gaylord says. “Realtors see hundreds, if not thousands, of homes every year with their buyer clients and can provide valuable insight into what projects and improvements will make a difference with buyers in your area.”

Results of the report are summarized in the December 2007 issue of Realtor Magazine. To read the full project descriptions, access national and regional project data, and download a free PDF containing data for any of the 60 cities covered by the report, visit www.costvsvalue.com.

© 2007 FLORIDA ASSOCIATION OF REALTORS

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33,000 Subprime Mortgage Homeowners Help By FHASecure

WASHINGTON – Dec. 3, 2007 – U.S. HUD Secretary Alphonso Jackson announced that more than 33,000 borrowers, to date, have refinanced their subprime home loans with FHASecure, a government-insured foreclosure avoidance initiative created in September. An additional 20,000 are in the pipeline for approval this month, bringing the total to more than 53,000 in a four-month period.

“FHASecure is providing tens of thousands of families with a powerful incentive to obtain affordable and safe home loans,” Jackson said during his keynote address to the Office of Thrift Supervision’s National Housing Forum. “Homeowners finally have an opportunity to save their American Dream without risking their financial future, and they’re taking advantage of it everyday.”

FHASecure enables homeowners who have a history of on-time mortgage payments under their original interest rates, but missed payments after their rates reset, to refinance into FHA’s mortgage insurance program. Families with high-cost mortgages and an on-time payment history also continue to refinance through FHASecure.

HUD’s Federal Housing Administration (FHA) is on target to insure over 240,000 FHASecure home loans in fiscal year 2008, nearly two and one-half times the number served in fiscal year 2007. Since the creation of FHASecure three months ago, FHA has received more than 113,000 refinance applications from families whose loans are current or past due.

FHA refinancing has increased 125 percent over the past year, and is expected to increase further next year. FHASecure saves the average subprime homeowner about $400 a month, or $30,000 over the expected life of the loan.

For more information about FHASecure or to find the nearest FHA approved lender, phone 1 (800) CALL-FHA (225-5342) or visit www.FHA.gov.

© 2007 FLORIDA ASSOCIATION OF REALTORS®

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