2006 Top 10 Real Estate Stories

With 2007 around the corner, it's time to reflect on the major real estate events shaping the industry in Florida this year. Here are FAR's picks for the Top 10 Real Estate News Stories of 2006.

1. Property insurance: The imperfect storm

Take a couple bad hurricane years, an insurance industry that fears bankruptcy should a Category 5 hurricane hit, and a state-run insurer apparently charging too little to cover claims. Mix in a dash of new laws that help insurers more than homeowners and shake well to create a property insurance crisis. It’s a difficult issue to understand and even tougher to solve; but the problem now threatens residents throughout the state, with devastating consequences for property owners along the Atlantic and Gulf coasts. Many Floridians today can pay the mortgage but not the property insurance premium. Citizen’s Property Insurance Corp., the state-owned insurer of last resort, was created as a backup for homeowners that could not get insurance elsewhere, and in the early stages was expected to fade into history. But in July 2006, Citizens became the largest homeowners insurance provider in Florida and now has over 1.3 million policyholders. Earlier this month, the company created a Web site, www.CitizensForABetterCitizens.com, where complaints may be filed, and one writer summed up the troubles: “We can’t even sell our house to move out of Florida. We’re going to go bankrupt! We need help now!”

2. Changing market conditions: From sellers to buyers

The pace of existing home and condo sales in Florida and nationally slowed down significantly in 2006; and, coming on the heels of a five-year record run of sales, the changing conditions reflected a housing market unfamiliar to newer Realtors®. The Florida Association of Realtors’ (FAR) latest (October 2006) housing sales figures report a decrease of 22 percent from the number of homes sold one year earlier; but the existing-home median price remained level at $242,500. Existing condo sales in October fell 31 percent in the same timeframe, while the median price dropped 2 percent to $209,200. But the worst may have passed: Some markets report that the supply of homes available for sale appears to be stabilizing with sales prices leveling. Other good news for 2007: the National Association of Realtors (NAR) predicts that existing-home sales in the U.S. are expected to stay at about the same level; many analysts believe that interest rates will remain at historically low levels; homebuyers will see more opportunities; and, nationwide, home prices will trend upward or remain stable. And in good news for commercial practitioners, a fourth quarter survey of Florida real estate trends by the University of Florida (UF) notes that that occupancy rates are stable or increasing in most markets, including apartments, office buildings, retail space and industry warehouse/distribution space.

3. Property taxes: You can’t take it with you

Property values skyrocketed and property taxes followed suit – unless you have a homestead exemption. Because Florida’s Save Our Homes constitutional amendment shields homesteaded residential owners from a yearly property tax increase greater than 3 percent, governments increasingly rely on non-homesteaded property – second homes and commercial businesses – to raise funds. And homesteaded owners save money, but many times find themselves stuck in their current house, afraid to downsize or upsize because they can’t afford the property taxes that revert to current value at the time of sale. Many solutions have been proposed, though portability – taking current homesteaded tax savings to a new home – remains the hottest recommendation. But the details could derail substantial change as lawmakers weigh the costs and benefits of many options. Should all property owners, including commercial, be allowed to transfer savings? Does it work within counties or throughout Florida? Even if agreement is reached, change comes slowly. “Since property taxes are addressed in the Florida Constitution, substantive change can only be accomplished through the Constitution,” says Trey Goldman, FAR legislative counsel. “And unless a special election is held, that occurs only every two years.”

4. Hurricanes 2006: Predictions all wet

After Nov. 30, 2006, Floridians breathed a sigh of relief when this year’s hurricane season ended with a whimper – a welcome respite after the devastating 2004 and 2005 seasons, when eight hurricanes struck the state. Not a single hurricane made landfall in 2006, a feat not repeated since 2001 and only the 11th time on record. Most forecasters offered explanations on why their forecasts fell short, since most predicted an above-average hurricane season last spring; at the same time, they reminded residents that 2007 could see a reemergence of the destructive storms. “This year was a break, not a shift,” said research meteorologist Stanley Goldenberg with the National Oceanic and Atmospheric Administration. “We still see all the oceanic and atmospheric signals that we’re in an above-average era. But, even in an active cycle, you have slow years.” While Mother Nature may have given property owners a break this year, insurers aren’t likely to follow suit when it comes to skyrocketing homeowners’ insurance premiums. Insurance experts pointed out that one quiet season would not drive the marketplace “substantially downward,” citing new risk modeling software, rating agency requirements, higher construction costs and continued development in coastal areas as other factors that influence pricing. Instead, the insurance industry is viewing the 2006 season as a catch-up year to make up losses. To help ease the pain of higher premiums, the Florida Legislature gave $250 million to My Safe Florida Home, a pilot program created to help better protect Floridians by strengthening their homes against hurricanes and to reduce the state’s exposure to hurricane damage. The program launched in August, and when the first phase ended in November, state officials announced that they had achieved their goal to conduct 12,000 inspections, and were on track to complete another 40,000 inspections in 2007.

5. Eminent domain laws: Blight? What blight? I don’t see any blight.

In 2005, Americans discovered something shocking following a U.S. Supreme Court ruling: The government could take private homes and hand the property to a private developer who could, in turn, build a for-profit business on the site. With homeownership often considered a sacred right to U.S. citizens, the response was fast and furious, and 47 states took up the issue in 2006. In Florida, lawmakers this year passed HB 1567 and HJR 1569, which tighten existing definitions of blighted property and only allow governments to take property that is an immediate threat to public safety or health.


6. Exotic mortgage backlash: No closing costs! Low, looow monthly payments!

“Exotic” loan is a misnomer – these are easy to get and hard to ignore. Homebuyers need financial vehicles that help them afford the rising costs of homes in Florida, and lenders, to remain competitive, must offer new products to maintain market share. In 2006 alone, more than 15 percent of new South Florida home loans were “payment-option adjustable-rate.” Buyers sometimes paid just interest; in some cases, they paid even less. But if that many homeowners live on the financial edge, some will stumble and fall. Federal officials, worried about the resulting instability within the nation’s banking system if bankruptcies rise, issued guidelines to lenders designed to cut down on the number of exotic mortgages. As of Sept. 30, 2.76 percent of 3.3 million mortgages in Florida were more than 30 days past due, the Mortgage Bankers Association (MBA) says. That’s up from 2.47 percent of 3.1 million mortgages a year ago, and a slight uptick from June. But consumer demand has not waned for exotic mortgages; and at the end of the year, exotic mortgages can easily be found, and homebuyers continue to use them. Still, Florida’s overall delinquency rate ranks below the national average, and the foreclosure rate of 0.60 percent – or about one foreclosure for every 19,800 loans – is also well below the national rate of 1.05 percent.

7. Constitutional amendments: Change is not always good

Two proposed amendments to the Florida Constitution remained on the back burner this year, but in 2007 and 2008 they’ll likely move to the front burner and catch fire. Proposed by citizens and outside the usual legislative process, these amendments must first have their wording approved by the Florida Supreme Court to make sure voters understand the issue, but the court does not rule on the initiative itself. Then, with enough voter signatures collected, they appear on the Florida ballot. The so-called Hometown Democracy constitutional amendment would give voters – not the elected officials who serve on city and county commissions – final say on all zoning decisions. Another amendment, called FAIR (Floridians Against Inequities in Rates), could lead to additional sales taxes, including possibly a sales tax on Realtor commissions. FAIR failed to pass Supreme Court muster in November, though its sponsor promises to bring the issue back. One bright light: Voters approved an amendment in November that raises the bar on amendments, mandating that any approval must garner 60 percent (plus one) of the vote to pass. Previously, the threshold for constitutional amendments was 50 percent (plus one).

8. DOJ case against NAR: Display foray

How should Realtor associations and MLSs share and display listings on the Internet? It’s a simple question with only complicated answers. The U.S. Department of Justice claims that NAR policies governing display of MLS listing information on the Internet (including both the rescinded VOW policy and the new Internet Listing Display, or ILD, policy) violate federal antitrust laws. NAR strongly disagrees with the government’s contentions and vigorously defends both the MLS as a vehicle for broker-to-broker cooperation as well as the ability of a listing broker to control the use of listings on the Internet. NAR moved to have the case dismissed – a long shot – but lost this first round on Nov. 27, 2006. Negotiations between NAR and DOJ continue, however, and the issue could be resolved in 2007.

9. Mortgage fraud: Home is where the fraud is

Mortgage fraud has mushroomed into one of the fastest-growing white-collar crimes in the country, usually leaving homebuyers on the hook with overpriced houses – and leading to higher interest rates for everyone. However, the draw to own a home is so strong that many buyers willingly stretch the truth on applications (lie) or believe those who tell them they can get a bottom-line mortgage rate even with poor credit. With higher home prices and first-time homebuyers no longer able to jump into the market, the pressure to commit fraud – and the number of people who did so – increased in 2006.

10. Health insurance reform: Not dead, just comatose

Here’s the big news in 2006 on an NAR-backed initiative to allow associations, such as NAR, to offer health insurance to their members at reduced rates: It didn’t happen. It came close and the U.S. House and Senate agreed on more details than they had earlier. Will it pass in 2007? Maybe; maybe not. But Realtors will continue to lobby and a new slate of lawmakers may turn the tide.

© 2006 FLORIDA ASSOCIATION OF REALTORS®

Questions, comments or suggestions on this article? Have a news tip? Send a letter to the editor to: Newseditor@floridarealtors.org.