let's do the numbers
30-year fixed-rate mortgage: 6.33% this week, down from 6.40% the previous week.
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 ‘Portability’ goes before voters
Late last week it seemed unlikely the Florida House and Senate would see eye to eye on how to cut property taxes for thousands of property owners. But just hours before the scheduled end of a 10-day special session on property tax reform, the Legislature reached agreement on several issues: “portability,” or allowing residents to transfer their Save Our Homes savings when they move; doubling the homestead exemption to $50,000 for most homeowners; tax relief for owners of commercial properties, second/vacation homes and rentals; and a tax break for businesses. The measures will go before voters in the form of a ballot referendum Jan. 29.
The tax package is expected to save taxpayers—and cost cities, counties, special districts and school boards—$8.74 billion in the first four years. Details of the package are available on the home page of floridarealtors.org. Here are the highlights:
- Double the homestead exemption, but only for homes valued at more than $75,000 and not for school taxes.
- Allow owners of homestead property to transfer up to $500,000 in Save Our Homes benefits, including school taxes, to a new home.
- Impose a 10% assessment cap on non-homestead property for the next 10 years. The cap does not apply to school taxes. After 10 years, voters will have the option to restore the 10% cap.
- Allow businesses to exempt $25,000 in taxes paid on computers, office equipment and other personal property.
“We are pleased the Legislature understood that missing the deadline for a January vote of the people was not an option,” says FAR President Nancy Riley. “Tax reform is necessary to stimulate our economy. To put tax relief off to November 2008 would have been devastating to our state.”
Washington answer? U.S. Rep. Tim Mahoney (D-Palm Beach Gardens) last week introduced legislation that would allow Floridians to deduct state and local property taxes from their federal income tax return. Nearly a million Floridians could save more than $2,000 a year in federal taxes, says Mahoney. "In the past six years, property taxes have doubled, but family incomes have not," he said in a statement. Earlier this year, Mahoney, along with Rep. Ron Klein (D-Boca Raton), introduced a bill that would bring relief to property owners struggling with the affordability and availability of homeowners insurance.
Market watch
- Housing industry analysts predicted the subprime mortgage crisis would affect home sales in September. By all accounts, they were right. Existing home sales in Florida plummeted 38% in September compared to a year ago, with 8,688 single-family homes changing hands. The median price fell 9% to $243,300. Sales of existing condominiums also decreased last month, with 2,557 condos sold statewide compared to 4,032 in September 2006 for a 37% decline. The statewide median sales price for condos was $194,200, down 4% from a year ago.
- Nationally, single-family home sales dropped 8.6% to a seasonally adjusted annual rate of 4.38 million in September from a pace of 4.79 million in August, and are 19.8% below the 5.46 million-unit pace in September 2006. The median existing single-family home price was $210,200 in September, down 4.9% from a year ago. Existing condominium and co-op sales fell 4.3% to a seasonally adjusted annual rate of 660,000 units in September from 690,000 in August, and are 14.7% below the 774,000-unit level in September 2006. The median existing condo price was $221,700 in September, up 1.4% from a year ago. “Although sales are off from an unsustainable peak in 2005, there is a historically high level of home sales taking place this year,” says NAR Senior Economist Lawrence Yun. “One out of 16 American households is buying a home this year.”
- Contrary to analysts’ expectations, sales of new homes nationwide rebounded in September from summer sales levels that were much weaker than previously reported, the Commerce Department reported last week. Sales increased 4.8% to a seasonally adjusted annual rate of 770,000 from a revised 735,000 in August, an 11-year low. Sales of new homes are down 23.3% in the past year. The sales figures do not account for canceled sales contracts, which have surged in recent months. Builders have reported cancellation rates as high as 68%. The median price of a new home rose 5% in September to $238,000.
- Homebuilders weigh in on housing trends. Tighter lending standards and reduced availability of credit will complicate—but not derail—a national recovery in the housing market, according to the National Association of Home Builders' (NAHB) state and metro economic forecast [http://housingeconomics.com]. The impact on housing markets will come in two forms, says NAHB Chief Economist David Seiders. First, tightened lending standards have already reduced the availability of loans overall and raised the price to riskier borrowers. A second effect, with the potential for a persistent cycle of defaults and price declines, will depend on the level of exposure to these loans, the current house price environment and the strength of the local economy.
- Bright spot. This week, the U.S. Commerce Department is expected to report that the U.S. economy grew by at least 3% in the third quarter, which would meet what economists deem the country's natural growth rate. With the exception of the housing market, much of the economy has shown little need for a boost from cheaper loans. Still, investors expect the Federal Reserve to lower the benchmark federal funds rate to 4.5% later this week as a preventive measure to head off a more serious downturn. Fed Chairman Ben Bernanke has reiterated on several occasions that declining home prices—coupled with other problems such as tightening credit markets and rising oil prices—could undermine other parts of the economy, warranting stronger action by the Fed.
Money matters
Bank of America Corp., the nation’s second largest bank, announced last week it will stop offering mortgages through brokers at the end of the year. Loans will be handled through its banking centers and loan officers. In August, Bank of America invested $2 billion in Countrywide Financial Corp.— the biggest U.S. home lender— when the Calabasas, Calif.-based company was running short of cash.
Help wanted
 Strengthen your state Realtor association by serving on the REIS Board of Managers, where your business and technology skills will help guide the development of cutting-edge real estate products. REIS is a subsidiary of FAR that develops new technologies and business solutions for Realtors. Board membership takes effect Jan. 1, 2008; members serve for three years and meet quarterly in Orlando. For more information on REIS or to apply—the deadline is Oct. 31, 2007— visit the REIS Web site at: http://www.reisinnovations.com.
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