Castelli and Castelli Luxury blog

The housing market recovery hasn’t taken off yet, but a rally in its stocks sure has. The Standard & Poor’s homebuilders index is up 60 percent since October.

Given that stock prices tend to anticipate business trends, does that mean a housing market rebound is imminent during the spring home-selling season?

Not necessarily.

The biggest sustained rally in homebuilding stocks in years and recent upbeat home sales data, however, have injected some long-absent optimism into the outlook for housing.

Sales of previously occupied homes rose for three straight months at the end of last year. The glut of houses on the market is diminishing, down to 2.4 million previously owned homes on the market in December from 3.8 million in June. And buyers are slowly regaining a little bit of confidence.

“The housing market enters the spring selling season in absolutely the best shape it’s been since 2005,” says analyst Eric Landry, who follows homebuilding stocks for Morningstar. “Sales will still likely be below normal, but inventories are in the best shape they’ve been in years.”

The government’s landmark $25 billion settlement of foreclosure abuses is the latest dose of good news. Financial analysts see it as helping to clear the way for builders to gear up construction activity.

The CEOs of some of the biggest homebuilders said during earnings conference calls this month that the housing market has stabilized. But they were cautious about making any bullish forecasts.

Major improvement in the industry won’t take place until next year, according to a forecast by the chief economist of the National Association of Home Builders, David Crowe.

More important for investors, the big run-up in stock prices in the last four months makes a correction likely soon. Homebuilding stocks have a history of declining after rising in the months ahead of spring selling season.

The current rally is seen by some as the opening act in a multi-year recovery for the stocks. Low interest rates, more affordable home prices and pent-up demand should help them rise further.

But the stocks are no longer cheap. Most are currently trading at roughly 1.5 times book value – considered the best way to value this group. Book value is the value of a company’s assets if it were to be liquidated. Their current value strongly suggests they are overpriced.

Investors would be wise to keep an eye on housing-related stocks. With prices having shot up, though, they should exercise caution. Waiting for a pullback and buying after spring home-selling season, if the industry still has momentum, makes more sense. That should put investors in much better position to profit from the coming rebound.

Here are four stocks to watch, along with an exchange-traded fund that invests in homebuilders:

D.R. Horton Inc. (DHI)
Shares of D.R. Horton are up 74 percent since an industry low-water mark on Oct. 3. That’s well above the 23 percent climb of the Standard & Poor’s 500, but shares are still about where they were two years ago. The company caters mostly to low-end buyers and builds homes in 26 states. Financial analysts believe that its broad customer base can help the company grow annual revenue by double digits for years.

Lennar Corp. (LEN)
With lean construction practices, a healthy balance sheet and other strengths, Morningstar says Lennar sits poised to reap major economic gains from an eventual rebound in housing. Its revenue was up 12.5 percent and orders were up 21 percent in the fourth quarter, its highest growth in several years. The company recently created a distressed real estate unit, Rialto, that allows it to obtain land more cheaply than competitors. It also provides financial services including mortgage financing, title and closing services. Its backlog of orders is 36 percent higher than a year ago, leaving it in good shape to wait for a future surge in sales. The stock is up 88 percent since early October.

Toll Brothers Inc. (TOL)
Toll Brothers builds higher-priced homes in urban markets with job growth, particularly in the Northeast. That focus on the high-end consumer should enable the company to profit from a recovery in housing. Like Lennar, it has a distressed investment arm, Gibraltar, that helps it lock in land at bargain prices in marquee locations, an advantage that will show on the bottom line when home selling picks up. It also has modest net debt of just $400 million. Along with Lennar, it may be the best positioned of the homebuilders to profit from the recovery, according to analyst Jack Micenko of Susquehanna Financial Group. Toll Brothers shares are up 74 percent since early October.

SPDR S&P Homebuilders (XHB)
This exchange-traded fund includes seven of the largest homebuilders. It also owns shares of companies that sell building materials or furniture and other items for the home. Many of the homebuilders are sitting on large piles of cash. That will allow them to expand in the coming years. The fund is cheaper than the other homebuilder ETF, with an expense ratio of 0.35 percent versus 0.47 percent for iShares Dow Jones U.S. Home Construction.

Copyright © 2012 The Associated Press, Dave Carpenter, AP personal finance writer. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Florida homeowners and foreclosure victims will receive almost one-third of the $8.4 billion mortgage settlement announced yesterday. The settlement amount is second only to California.

“This settlement will provide substantial relief to struggling Florida homeowners, and ensures that our state gets its fair share of the relief being provided nationally,” says Florida Attorney General Pam Bondi.

According to Bondi, most of the money will go to current homeowners who are underwater – who owe more on a mortgage than their home’s current worth – in the form of principal reductions and/or converting their mortgage interest rate to lower levels. About $170 million will go to homeowners who lost their home in foreclosure.

The settlement applies to clients or past clients of five of the nation’s biggest banks: Bank of America, Wells Fargo, JPMorgan Chase, Citigroup and Ally Financial. Other banks may also sign on, though they have not been named.

Negotiations are ongoing. The settlement does not apply to loans held by Fannie Mae and Freddie Mac.

Settlement details

Relief won’t be immediate. While the agreement calls for immediate principal reductions for first and second liens, it will take up to two months for negotiators to select an administrator to handle the logistics, up to nine months to identify eligible homeowners and contact them by mail, and up to three years to complete the process.

Underwater homeowners get relief. The agreement calls for Floridians to receive $7.6 billion from banks to pay for refinancing relief, including principal reductions; borrowers with higher interest rates will also be able to refinance at 5.25 percent. While banks will handle the disbursements, state Attorneys General will oversee the process.

Foreclosed owners get cash. Ex-homeowners who lost a home within the past three years will receive about $2,000 each even if their foreclosure did not involve allegations of robo-signing. Critics, however, say that amount is far too low to compensate for their suffering.

Foreclosures could increase. “The immediate results are not going to be all that pleasant,” predicts Mark Vitner, an economist with Wells Fargo. “The amount of foreclosures will actually increase and there will be some additional downward pressure on home prices.” Some homeowners have lived in a home over two years as the foreclosure process crawls through Florida’s legal system. Analysts, such as Vitner, believe the just-announced settlement brings clarity to the process and banks will proceed more quickly to take back homes.

Florida oversight grows stronger. The state will collect $350 million from the settlement to pay for foreclosure prevention programs and to protect consumers.

A new website includes settlement documents, a set of frequently asked questions, breaking information, and addresses for the banks involved in the settlement. It also includes links to Fannie Mae and Freddie Mac so homeowners can find out if their mortgage is included in the settlement. For more information, go to NationalMortageSettlement.com.

© 2012 Florida Realtors®

Florida’s existing home and existing condo sales continued their positive trend in fourth quarter 2011, posting gains compared to the same period a year earlier, according to the latest housing statistics from Florida Realtors®.

Existing home sales rose 7 percent in 4Q 2011 with a total of 42,038 homes changing hands statewide; during the same period the year before, a total of 39,355 homes sold, according to Florida Realtors. Statewide sales of existing condos in the fourth quarter rose 4 percent compared to the year-ago sales figure.

Florida’s existing-home median sales price was $132,000 for the three-month period, down only 1 percent from the $133,400 reported in 4Q 2010. The median is a typical market price where half the homes sold for more, half for less.

In the year-to-year quarterly comparison for existing condo sales, 18,558 units sold statewide in the fourth quarter compared to 17,922 units in 4Q 2010 for a 4 percent gain. The statewide existing-condo median sales price was $88,800 in the fourth quarter; a year earlier, it was $84,400 for a 5 percent increase.

“The quarterly numbers continue to show the steady improvement of the housing market in Florida,” says Florida Realtors Chief Economist Dr. John Tuccillo. “The upward movement in sales has been pretty much across the state. Prices have stabilized, and in general, the state’s economy is improving. With that improvement, we expect continued growth in housing activity.”

Mortgage rates continued to hover around historical lows in the fourth quarter. According to Freddie Mac, the national commitment rate for a 30-year conventional fixed-rate mortgage averaged 4.01 percent in 4Q 2011; one year earlier, it averaged 4.41 percent.

The 4Q 2011 sales data release is the last release handled under Florida Realtors’ partnership with the University of Florida’s Bergstrom Center for Real Estate Studies. Beginning with the January 2012 existing sales statistics, Florida Realtors will launch a new statewide housing market reporting partnership with 10K Research and Marketing, a division of the Minneapolis Area Association of Realtors and its Industry Data and Analysis department.

10K will collect and organize housing sales data from the state’s 63 local Realtor organizations. The goal is to provide unique, localized market reports to the local Realtor boards and associations, enabling the groups and their Realtor members to serve as the definitive voice of real estate in their respective local markets.

At the same time, Florida Realtors will provide more comprehensive statewide housing market statistics – but the data series will only include statewide numbers. Beginning with the January 2012 report, Florida Realtors will no longer report any market data for Realtor members’ sales in the state’s metropolitan statistical areas, as had previously been reported.

© 2012 Florida Realtors®

South Florida’s mortgage fraud risk index shot up 10 percent during the first part of the year, shooting the region to second place nationally for potential housing scams. It ranked 20th during the same time last year. Palm Beach, Broward and Miami-Dade counties are the only high-risk areas to see an overall increase, according to a report released this month by fraud analysis company Interthinx. Modesto, Calif., experienced a 23 percent decrease in the first quarter compared with the same time in 2010.

The quarterly Mortgage Fraud Risk Report tracks indicators of fraud on mortgage applications run through an Interthinx detection program available to lenders. Nationwide, the index posted four consecutive quarters of decline until it jumped 25 percent during the first quarter of 2011. “Risk is becoming more prevalent across the board,” said Kevin Coop, president of Interthinx, which recommends that lenders continue strict screening processes before making home loans. And despite an assumption that fraud occurs only during a market boom, analysts said plenty of scams happen on the downside. “Fraud ebbs and flows,” said Ann Fulmer, vice president of business relations for Interthinx. “Whatever schemes are out there are always mutating to take advantage of the local economy and the weaknesses in lender processes.”

While the report ranks fraud on an overall basis, it also measures four types of scams: property valuation fraud, identity theft, occupancy fraud and phony income reports.
South Florida ranked in the top five for all types of fraud except income-based scams.

The area ranked first in occupancy fraud, which is perpetrated mostly by investors or second-home buyers who falsely claim they are going to live in the house full time as a way to reduce down payments and interest rates.

The region ranked fourth for identity fraud and fifth in property valuation fraud. Identity fraud typically involves schemes to hide the real buyer of a home to get a better credit profile and meet lender guidelines. South Florida real estate was the only top-five region to see an increase – 2 percent – in valuation fraud, which includes manipulating property values to create a profit margin. Flipping, in which an investor buys a property cheap or at market value and sells at an artificially inflated price, was part of what led to the real estate crash.Although flipping decreased after 2008, Fulmer said it is on the rise again. “Real estate is local, everything responds to local markets, and there are places like South Florida that are vulnerable to certain risk categories,” Fulmer said. One reason for that susceptibility is the variety of South Florida buyers, including investors, retirees, second-home buyers and foreigners.” People not familiar with the area rely on professionals for help, but con artists trade on the appearance of being upstanding individuals,” Fulmer said.

After a consistent three year low, American home foreclosure activity significantly slowed this past April allegedly due to faulty paperwork. With a significant drop of 8.6 percent from March, and a jaw dropping one third decrease since last year, banks swept up 69, 532 homes this April – a drastic difference from the climbing statistics we have seen in the past few years.

In fact the amount of foreclosures fell to a nominal 219, 258 last month alone – maintaining a seven month decline that proves to be the lowest level since December of 2007.

Before the real estate boom became a bust in 2005, banks foreclosed a mere 100,000 homes. This year alone, banks have accumulated roughly 285, 000 homes thus far with an estimated 850,000 foreclosures by the end of 2011.

This year’s real estate foreclosure estimate was expected to rise above the million plus homes that were seized last year. However with current investigations into the overall foreclosure process, temporary halts from several mortgage servicers last year have hindered the steady increase.

There is talk of a multibillion-dollar settlement over foreclosure abuse between U.S. banks and the government. Negotiations are said to be underway with sate attorney generals and huge mortgage lenders, such as JPMorgan, Chase and Bank of America. These banks and mortgage brokers are thought to have foreclosed on thousands of homes without proper paperwork, leaving borrowers unnecessarily without homes.

Interestingly enough, a mere 10 states are to blame for more than 70 percent of all U.S. foreclosures: Florida, California, Arizona, Michigan, Illinois, Nevada, Texas, Georgia, Ohio and Colorado. This recent discovery may not come as a surprise to South Florida, where an unspeakable amount of foreclosure activity has Fort Lauderdale home and condo owners upside down. Locally the Fort Lauderdale real estate market has noticeably struggled, with rental and home sale going for a fraction of the cost they once were.

Even in residential communities like Wilton Manors, real estate foreclosure has taken it’s toll on these South Florida homes.

With recent developments in foreclosure statistics, real estate in South Florida is more hopeful than ever to see a turn of events.

Castelli Real Estate is eager to announce the launch of our new website. We have added many new features that make finding the right home easier than ever.

With 13 available search options, you are now able to make your selections quicker and more efficiently than any other real estate site. With categories that include Neighborhood Search, Short Sale, Foreclosure, Commercial and Residential, Castelli makes you that much more connected to your community and it’s surrounding areas.

The quick search system quickly helps narrow down our vast database of homes to a selection that keys in on the criteria most important to you. Or you can use our map search to hone in on selected regions of your choice to pinpoint Castelli listings. With our Daily Property signup, you can receive email updates on featured properties so you are always in the know. You can also register to receive our newsletter that will keep you up to date on property listings in your neighborhood as well as current real estate trends and updates on Castelli Homes.

Not only do we want to provide you the opportunity to find the home you deserve, but also with outstanding care even after you have settled in. At Castelli, we value family and community. Now with our Community Events link, you will be kept informed on what is happening in your neighborhood as well as surrounding areas.

In order to always keep you connected and ensure that Castelli is providing you ultimate access to our database and your community, we have created an app for your mobile device and/or ipad. This resource places the ability to locate and view a property right in the palm of your hands.

With the multitude of advancements that Castelli has to offer, it is no wonder why we are the leading independent real estate company in South Florida. Despite our growth, we always put the needs of our clients first. Our attention to quality service as well as an undeniable passion for what we do, continues to place Castelli at the forefront of real estate, allowing us to grow the valued relationships that we have with our loyal clientele.