Strongly influenced by vacation home and investment property purchases, the local Bethany Beach market remains realtively strong. A local Realtor - Leslie Kopp - recapped the summer end on her website:
As the summer season ends, our real estate market is sending mixed messages. We usually use single-family homes as the surrogate for the entire market. With that measure, over the last 40 days to September 10, this year was weaker than a weak 2007. For example, only 14 homes went under contract compared to 17 in 2007. Using listing prices, the value changing hands (15.233m) was 31% lower than last year.
However, the picture shifts when adding condo/townhouses and vacant lots to the mix. 16 condo/townhouses sold this year compared to 13 in 2007, with listing prices 68% higher. In addition, 4 lots went under contract ($4.7m) but only 1 (.3m) last year.
Combining all types, 34 properties are changing hands this year compared to 31. The listing values were $31.6m, 7% higher. On a personal note, I had a strong 40 days, putting 9 properties with listing values of $14.8m under contract. Inventories are down compared to a year ago. I'll deal with inventories more later.
With cash purchases running about 30% of total sales, it's also evident that financing is still readily available for higher end purchases. I'm seeing a mix of large down payments and $417,000 loan for higher end properites alongside jumbo (greater than $417,000) financing. The most popular, and best pricing Jumbo mortgage today is the 5/1 ARM. This has a fixed rate for the first 5 years and then adjusts annually, ususally based on a LIBOR or Treasury index.
Call me if you'd like to discuss this market and the financing opportunities available.
Edited to post to the Delaware Real Estate Group
FYI - Here's the website for the local chapter: http://www.sussexcountywcr.com/
It's really just a placeholder right now, but I'm sure it will be more developed in the future. Links to SCAOR, the national WCR website; a database of members, etc.
Also, here is the leadership team for the chapter. Any A|R members other than Diane?
Officers for 2008 and 2009:
President- Paula Castiglione, Coldwell Banker Residential Brokerage Rehoboth
President Elect- Ginny Hysock, Coldwell Banker Resort Realty Lewes
Vice President of Membership- Linda Bodine, Keller Williams Lewes
Secretary- Joan Hannigan, Coldwell Banker Residential Brokerage Rehoboth
Treasurer- Dolores Desmond, Coldwell Banker Resort Realty Lewes
Committee Chairs:
Education and Program- Ruth Sivils, Realty Executives Rehoboth
Finance and Budget- Carole Kisner, Patterson Schwartz Dover
Bylaws- Sandy Duncan, Callaway Farnell & Moore Seaford
Membership- Beth Dorman, Coldwell Banker Resort Realty Rehoboth
Ways and Means- Marie Cahill, Conor Jacobsen Bethany
Awards and Recognition- Carole Kisner, Patterson Schwartz Dover
Sponsors- Marie Cahill, Conor Jacobsen Bethany
Reservations/Hospitality- Linda Morena, Monarch Mortgage Rehoboth
Newsletter/Website- Diane Sundberg, Realty Executives Rehoboth
Well, the news came today - Sunday, September 7th - that the Treasury is putting Fannie and Freddie into conservatorship under authority granted by the housing relief bill passed by Congress in July. Senior management is leaving, all lobbying will be stopped, and dividends on the stock suspended. Here's the link to the announcement from Paulson: www.treasury.gov/press/releases/hp1129.htm
The main news here is that the US Goverment has now guaranteed all Fannie and Freddie debt to the relief of many foreign banks and goverments that own it. Investors in the common stock and preferred stock are subordinated to a new class of preferred that will be owned by the taxpayers. The Treasury will purchase these shares over time to insure that each company maintains positive net worth. In addition, the Treasury will setup a lending facility to insure the two agencies have enough funds to purchase mortgages from lenders.
How will this affect mortgage rates and Treasury rates? The 10 year Treasury closed Friday yielding about 3.66% and mortgages were around 6.00% - 6.25%. My guess is that Treasuries sell off on Monday which will increase their yields. Mortgage rates will probably begin to come down some as the Treasury can now buy Fannie and Freddie mortgage backed bonds and other investors will increase demand because of the federal goverment's guarantee.
The spread between Treasuries and mortgage backed bonds has increased substantially (from a historical average of 1.25% to 2.25% currently) over the past year as fears of mortgage credits spread. Now that Treasury debt and Fannie and Freddie mortgage backed debt both have explicit government backing, the spread should compress. That will happen by Treasury yields rising, mortgage rates falling, or some combination of the two.
According to data from the Sussex County MLS, there were 229 residential sales in July, 2008, compared to 321 in July 2007 - a 29% drop year over year. These sales consisted of 145 single family homes, 59 condos/townhomes and 25 mobile homes
Year to date, there have been 941 single family homes, 389 condos/townhomes, and 153 mobile homes sold in Sussex. Total units sold this year (through July) are 1,483, compared to 2,107 in 2007 - a 30% decrease. The decline in single family homes sold is 28% YTD while condo/townhomes sales are down 34% from last year's pace.
Affordable homes are making up the bulk of the sales in the county. About 30% of single family home sales in Sussex are priced below $200,000 and another 30% are priced from $200,000 to $299,999.
On the higher priced end, here's how sales have broken out YTD:
$300,000 - $399,999 12.4%
$400,000 - $599,999 14.4%
$600,000 - $999,999 8.3%
$1,000,000 + 5.8%
55 single family homes priced over $1 million have sold in 2008 through July.
More details later.
At the beach, many property owners have used the 1031 exchange procedures outlined in our tax laws to delay or "push-off" taxable gains on the sale of investment properties and, many times, vacation homes. Part of the strategy is to continue to rent the property for a while and then move into the property as a primary home for 2 years, sell, and qualify for the exclusions from taxes on the sale of a primary home. Unfortunately, the new Housing Bill is changing that dynamic. Click on the link below for a CCH summary of the new Housing Bill (all aspacts) and read below for an explanation of the change in the home sale exclusion.
This is exerpted from Ken Harney's Real Estate Column.
"As of next January 1st, investors who exchange into rental or second home properties that they later convert into their personal homes no longer will be eligible for the full $250,000 to $500,000 tax-free exclusions now available on sales of principal residences.
Instead, they'll need to allocate their time of ownership between taxable investment or second home usage and non-taxable principal residential usage.
To qualify for tax-free exclusions they'll still need to use a property as their primary home for two out of the five years preceding any sale or exchange. But if any part of their total usage time after January 1st is what the new law calls "nonqualified" -- that is, investment, rental or second home use - then that will lower their maximum exclusion.
This an especially big deal for investors using "Section 1031" exchanges because they frequently shield their real estate gains on rental houses and condos by moving into them for a couple of years and converting previously taxable gains into non-taxable principal residential profits.
An example of the dollars and cents impact of the change was provided by the Federation of Exchange Accommodators, a national trade group representing investors and intermediaries. Under the old law, an investor could exchange into a property that he or she then rents out for three years. Then the investor would move in and use the property as a principal residence for two years.
When the investor -- who is single -- sold the house for a $300,000 gain, $250,000 of that amount would be tax-free under the old law.
Under the new law, three fifths of that gain -- $180,000 out of the $300,000 -- would be taxable, while just $120,000 would be tax free.
That $130,000 difference is why exchange investors are so upset with Congress's latest tax increase."
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From Lewes, DE to Ocean City, MD, I specialize in financing beach properites for second home purchasers and investors. Local market knowledge and a strong background in financial services.
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