Governor and Realtors Agree – Now is the Time to Buy

Ten Realtors from across Florida met with Gov. Charlie Crist this morning to discuss increased home sales and other positive trends in their markets, as well as offer insight into some current issues facing the real estate industry. It’s part of this year’s Great American Realtor Days, April 14-15, when about 1,000 Realtors from throughout the state join forces at the state capital to meet with their legislators and discuss concerns affecting all Florida residents.

Representing markets from Miami to Jacksonville and all points in between, Realtors reported an upswing in existing home sales in the past three to six months, when comparing year-to-year activity and also month-to-month sales figures. John Sebree, vice president of public policy for the Florida Association of Realtors® (FAR), kicked off the Real Estate Roundtable meeting with Gov. Crist by noting that February’s statewide existing home sales rose 20 percent over the same period last year, according to FAR data. He also reported that February’s home sales were about 17 percent higher than January’s statewide sales activity.

Realtors also told the governor about other positive indicators such as: mortgage interest rates under 5 percent; reduced housing inventory levels as buyers take advantage of current, more affordable housing opportunities; and encouraging market reaction to the federal economic stimulus package, especially the new $8,000 first-time homebuyer tax credit.

Upon hearing these reports from around the state, Gov. Crist said, “It doesn’t get much better than this. [Housing] supply and demand is going to come into balance here. Two to three years from now, people will be saying, ‘Back in April 2009 I could have gotten that home for so many dollars’ – so you don’t want to wait.

“Prices have gotten as low as they can. Now is the time to buy, while the deals still exist,” the governor said.

Discussing some of the challenges in today’s market, many Realtors pointed to difficulties with so-called “short sales,” where the bank or lender agrees to accept less money on a home sale than the seller owes on the mortgage. They said that short sales are problematic not only because of how long it actually takes to finalize the sale, but also because of the inconsistencies in information and documents required by lenders. Streamlining the short-sale process and providing consistency in required documentation among the lenders would boost the recovery of Florida’s real estate market.

Solutions to ease lenders’ restrictions on the state’s condo market are also needed, said Edgewater Realtor Robert Clinton. “Not only is the prospective condo buyer having to be approved for a mortgage, but the condo owners association itself has to be approved and qualified, which is causing problems,” he said.

Largo Realtor Alan Riley told Gov. Crist that 50 percent of buyers involved in recent home sales in the Tampa Bay area paid cash for their purchases, a strong indicator that investors have returned to the housing market.

“Savvy investors have returned to our market as well,” added Eric Sain, a West Palm Beach Realtor. “But we’re also seeing a lot of young families buying a home to settle down and establish roots in the community. That’s a sign that people aren’t leaving the area, aren’t leaving Florida.”

Gov. Crist agreed, saying, “Of course they are [establishing roots] – it’s Florida. Why would they go anywhere else?”

Not only is it a great time to buy a home in Florida, it’s also a great time for businesses to move to the Sunshine State, noted Suzanne Sherer, a Fort Myers Realtor. Commercial and business properties are readily available in a range of price options, she said, providing prime opportunities for entrepreneurs. She asked the governor and state leaders to take steps to encourage the relocation of businesses and industries to Florida.

At noon today on the steps of the old Capitol, Gov. Crist addressed the crowd of nearly 1,000 Realtors participating in Great American Realtor Days, applauding their perseverance and dedication to their profession despite challenges posed by the economy and the marketplace. Amid reports of increased home sales and other positive signs, the governor said that the “changing landscape” for Florida’s real estate markets is “nothing short of remarkable.”

Other participants in Gov. Crist’s Real Estate Roundtable included: Jacksonville Realtor Millie Kanyar; Fort Lauderdale Realtor Jesse Acevedo; Miami Realtor Carlos Cruz; Port St. Lucie Realtor Scott Wingfield; Panama City Realtor Katie Patronis; and Orlando Realtor Les Simmonds.

Source: http://www.floridarealtors.org/NewsAndEvents/n1-041509.cfm

The Beach Show – Our New Real Estate TV Show

Well, folks, here it is. I’ve been talking about doing this for a while, I’ve been tweeting about it for weeks and we’ve finally gotten the kinks worked out. The Beach Show is your ONLY internet TV show all about real estate in Panama City Beach.

Each week we’ll publish a video of the Three Hot Deals of the Week that show you what you need to be buying. These deals will range from $60/foot attached townhomes to $150/foot beach-front cottages to new luxury homes in Wild Heron. All of them are steals and most of them go under contract within a few days of them being featured – no necessarily from our efforts, but because they are hot deals.

The deals on the show will sell whether we feature them on the show or not, but the object is to get them in front of you before someone else buys them. The real estate market may still be in the proverbial toilet, but there are still hot deals out there that disappear faster than you can say 3 Hot Deals of the Week!

http://vimeo.com/moogaloop.swf?clip_id=4170614&server=vimeo.com&show_title=0&show_byline=0&show_portrait=0&color=00ADEF&fullscreen=1

Visit TheBeachShow.com and read the show notes.

Also, in addition to the 3 Hot Deals of the Week, we have two other segments we feature each week from our good friends Karen Smith and Hunter Palmer. Visit TheBeachShow.com to read Real Estate Tips by Karen Smith and The Mortgage Minute from Hunter Palmer.

Website, Summer Marketing and The End of Spring Break?

The Website is coming! The Website is coming! I’m totally excited, the city is excited and, with an ultra-comprehensive summer media marketing campaign, everyone will be excited. . . or theoretically persuaded to be excited… about the new PCB website. The socially interactive site is determined to rebrand PCB using promotions like a video competition, social media networking, microblogging and even username and passwords for local business to update their individual pages.

Marketing dollars are being spent, in partnership with Buffalo Rock, to drive summer bookings and launch the new branding campaign. Buffalo Rock will provide large exposure in the form of Pepsi wrappers, shelves and displays throughout the Southeast. This is only a portion of the whole plan. The rich media campaign will focus on promoting Panama City Beach as a destination using the message “Real.Fun.Beach.” and saturate the target market with repetitive engagement.

Who’s the target market you ask? Well, based on reports from Y partnership, the TDC’s advertising and marketing partner, the primary targets are Atlanta, Birmingham and Nashville and the media mix for the campaign breaks down like this: 40% cable advertising, 30% online, 24% outdoor and 6% magazine. That means television promo ads on stations like CNN, ESPN and others. That means a greater internet exposure from previous years (around 7-9% in past years) and a stronger focus on the market. All this to channel tourists to a website packed with enough umph to make them want to visit our great city.

The money spent and future spending has been validated by the Klages report numbers from the previous quarter. While other destinations throughout the state are in the red, in nearly every category Panama City Beach is up. Based on the Klages report, total average daily hotel rates so far are up from last year’s numbers by 12.4%. Last year’s total economic impact was $975,379,655.00 and winter 2009 numbers are already up 9%. That’s some tasty cream.

But not all the news from the meeting was good. Previous marketing dollars, specifically Spring Break, took complaints from the audience. Several community members spoke on behalf of distancing PCB from spring break entirely. It is well documented that Spring Break complaints are an annual occurrence; every year SB happens and every year people complain. But this year’s round of complaints hit hard with passion. Mark Canfora, a local businessman, actually came to tears and bashed the Lil Wayne concert and charged the artist with provoking the spring break incidents throughout the beach.

Jennifer Etheridge, a member of the sales team at Ocean Villa, said some of her owners were considering suing the city of PCB for negligence because they couldn’t rent their rooms. The sentiment was felt by some of the board members as well, focusing their attention on MTVu rather than spring break as a whole. Andy Phillips said, “Spring Break will be here whether we throw a million dollars into marketing or nothing at all.” He added, “I think MTV was a waste of $150,000. Plain and simple.” MTV met their contractual agreement, generating the amount of web impressions, unique visitors and television promotions as promised, but turned out to be difficult to work with as a partner to the TDC.

An example of the relationship was the show “Wasted Memories” which was supposed to be a show that followed Spring Breakers around and at the end of their stay tested how much they remembered. The show turned out to be completely different than what was promised and is still a PR nightmare for a beach trying to change its image. But, amid all the anger towards spring break, most beach businesses did well financially. Mr. Phillips acknowledged this by saying, “It is a double-edged sword and a difficult process.”

The board leaned heavily towards not spending money in the future on the likes of MTV, but recognized how what was learned from the experience of working with them would help in the use of summer marketing dollars.

In related news, Dan Rowe, Chairman of the TDC went up for review and received a 7% increase in salary. Based on the committee’s review parameters Mr. Rowe scored “very effective” on a scale that ranged from ineffective to outstanding. Good work, Dan. Can’t wait to see how the summer campaign turns out.

Click Here To Download The Focus Group Presention

Click Here To Download The Summer Media Plan

Condo Auction in Mexico Beach

Ten condominiums in the prestigious and new Tranquil Harbour community on Florida’s beautiful Mexico Beach will be sold by absolute auction (regardless of price) on Saturday, May 2nd. The beautifully-designed units will be auctioned by The National Auction Group, Inc. of Gadsden, Alabama, an elite team of highly-trained specialists in the marketing of one-of-a-kind, high-end properties. The company has established a significant track record in recent months, selling more than $87 million worth of condos on the Gulf Coast from Panama City to Gulf Shores since last May. Also to be sold separately on auction day are a dozen lots on beautiful Cape San Blas.

Situated directly across from the Mexico Beach Pier, Tranquil Harbour consists of two three-story towers with all units enjoying mesmerizing water views. Options include two, three and four bedroom units. Each of the 10 condos is beautifully-designed and richly-appointed with the first class amenities one would expect at such a superb resort community. Featuring unique designs that are both attractive and functional, all units come with an assigned boat slip with quick access to the Gulf, as well as covered parking and expansive storage areas.

Tile floors and granite countertops add special touches of quality while the over-sized, open rooms with crown moldings and nine-foot ceilings offer plenty of windows to take full advantage of the wonderful vistas. In the kitchen are top-of-the-line GE Profile or equivalent appliances including microwave, self-cleaning oven, dishwasher and side-by-side refrigerator, as well as an undermount stainless steel sink. All condos have solid core interior doors, designer light fixtures, ceiling fans in living rooms and bedrooms and high quality faucets and plumbing fixtures.

Bathrooms feature framed vanity mirrors, a separate shower in the master baths, cultured marble vanity counter tops and tubs and raised height cabinets.

Located on the Florida panhandle, Mexico Beach is a community on the edge of the Gulf of Mexico but miles from anything else. Along this stretch of scenic Highway 98, there are no high-rises and no rush-hour; just breathtaking views of sea oats, white sand and the emerald Gulf water. You may stop for a family of beachgoers crossing the road, but never for traffic lights.

Visitors take part in swimming, kayaking, fishing, recreational diving, eco-tours or just plain old relaxing with a beach chair and a good book. When it comes to supper time, if you haven’t caught your own dinner, you can visit one of the many restaurants, either on the beach or across the street.

Nature lovers relish the bird watching and aquatic animals. Look for bald eagles in the winter months and loggerhead turtle hatchlings in the late summer. Dolphins dive through the waves all year long. Visitors can also explore the shops of Mexico Beach for souvenirs, artwork, antiques and fine clothing. For golf enthusiasts, St. Joseph’s Bay Country Club, just to the east of Port St. Joe, offers 18 holes of challenging play.

The 12 residential lots are on Cape San Blas which is located between Port St. Joe and Apalachicola and has been called one of America’s “Top 10 Beaches.” Several of the lots are located directly on the Gulf of Mexico amidst spectacular sand dunes and have breathtaking views of the aquamarine water that is unique to the Florida Panhandle.

“For someone looking for a good buy on a vacation get-away, business retreat or resort rental property, the condominiums and facilities at Tranquil Harbour offer an extraordinary opportunity to the discriminating buyer to purchase luxurious and picturesque accommodations on Florida’s Emerald Coast,” said William Bone, president of The National Auction Group, Inc.

The properties will be open for inspection by appointment beginning April 17th from 10 a.m. to 5 p.m. by calling 1-800-503-0010 or (256) 547-3434. Beginning April 17th, call on site at (256) 504-5201 and (256) 504-6858. Those bidding on the condominium units will be required to pay 10% on auction day and must have $5,000 in certified funds for each two bedroom unit; $10,000 for three-bedroom units and $15,000 for the four-bedroom units. The Gulf front and Gulf-view lots will require $5,000 each. The auction will take place at Tranquil Harbor which is located at 101 36th Street in Mexico Beach.

Click Here for a printable fact sheet

Whisper Dunes is Selling

Buyer confidence returns as sales, traffic builds at Whisper Dunes

Last April, Beazer Homes’ Whisper Dunes community was a buzz of construction activity in a challenging economy.

But the national homebuilder remained confident in the Panama City Beach market, and today claims the No. 1 spot in single family attached sales volume and is in seventh place overall in home sales for Panama City Beach in 2009, according to the MLS.

“While buyers were hesitant to do more than look last year, since January it’s like a big cloud suddenly was lifted,” said Matt Brandman, Beazer’s Northwest Florida Division president. “Buyers seem much more confident and have a positive state-of-mind. They are seriously looking with an intention to buy, rather than simply shaking the bushes.”

Whisper Dunes includes town homes from the $170’s and villas beginning at $219,990. The cabana, swimming pool and network of walking paths have been completed just in time for a Grand Opening April 4 that will showcase villas which have just been finished.

Brandman said traffic since the first of the year has been more than 50 percent, and close to 25 percent of the first phase has sold, mostly in the past 90 days. The price and completed amenities, as well as special incentives and eco-friendly construction that guarantees low monthly heating and air bills, have been the big draw for those who want to own a new home.

He said half of the buyers are local and the rest have come from the Northeast and Midwest.

“We’ve seen a lot of people who have been coming to PCB for years and years and are tired of renting for three or four months at a time,” he said. “First-time buyers particularly see this as a perfect storm, with the lowest mortgage interest rates on record, great pricing on solid brand new construction and the $8, 000 tax credit that will expire before the end of the year.”

Designed for both permanent and seasonal buyers, the first phase of Whisper Dunes will include 44 homes. Once complete, the community will have a mix of 156 town homes and 222 single family attached villas, ranging in size from 1,500 to 2,000 square feet.

The April 4 Grand Opening celebration is expected to draw a big crowd because celebrity organization guru Monica Ricci will be on hand to offer complimentary advice on replacing chaos with order.

Considered a leader in her field, the author and frequent guest on HGTV’s Mission Organization has an impressive following on Twitter and Facebook, and a blog where she critiques new products as they come to the marketplace.

A little over two years ago, Beazer’s planning and design team began tapping her expertise to add space-saving storage and organizational elements to its homes nationwide, many of which are found in the builder’s model homes at Whisper Dunes.

You can meet Ricci, tour the model homes and enter to win prizes during the Grand Opening from 11 a.m. to 2 p.m. The first 25 guests will receive a free copy of her book, Organize Your Office In No Time. Whisper Dunes is located at 101 Sand Oak Blvd. in PCB. Visit Beazer.com for more information.

Hot Dog Story – Do What You Do and Change for No One

Okay, I know there is so much talk about all the awful things that people see happening in our world. Lucky for me I DO NOT buy into that. There will always be challenges and struggles and while this one seems to be very daunting I have learned that those that find the bright spots and DO NOT operate out of fear end up on the top and better yet they enjoy getting there.

Please go to this link and read this incredible hot dog story that just might convince you to just keep on doing those things that you know work. I have always loved this story and it is quite relevant today. Do not give in to the negative small minded thinking and talking that we hear so much of. Most of us have more than we need and plenty that we could be sharing with others.

I am so grateful to all of you that have made my life so bright and always filled with promise. I decided a long time ago to align myself with people that were looking for the possibilities rather than the problems. I have been writing gratitude list since I was 10 years of age and it has never failed that my life is so filled with more goodness than not.

Thanks to all of you and go read that story and share it with others…. lets the spread the good stuff. I believe the world needs a shot of happy stuff and I am just the girl to deliver it.

Remember my get even list, it is really long…. “The only people we need to get even with are those that have helped us”

with overflowing gratitude,

Karen Key Smith

St. Joe releases new Golf memberships in Wild Heron

When St. Joe purchased the Sharkstooth club house, tennis and beach club the community was all a buzz about the change in memberships. At that time the only way to get a full golf membership was to either buy a home that had an existing membership through transfer and purchase or to buy an approved St. Joe property. That was not received very well by the community since many home owners assumed this was a privilege that would always be afforded to them.

Fast forward and now St. Joe is now offering several golf, tennis and beach club memberships to Wild Heron owners as well as those that would purchase property in the community. As a past club member and owner in Wild Heron I believe this is a great idea for the health of the community. As a Realtor I have had several people that have wanted to buy a particular piece of property and without a membership possibility that was less attractive. I will tell you that the golf course is great, the community is one of a kind and the neighbors are second to none.

Please click here for more information about the membership offerings and remember to call your favorite Realtor to check out Wild Heron and if you do not have a favorite Realtor I would love to help you. Karen Smith with Beachy Beach Real Estate at 850-527-5651.

Panama City Beach Adopts Improved Planning Codes

Imagine hidden parking garages, not of the Batman variant, but of the variant of being hidden behind facades or landscaped walkways. Think beautified pedestrian walkways and shop entrance ingress and egress without risk of being mowed over by an auto. Pretend you are one of those developers that don’t do any work and make tons of money (please note the sarcasm here). Imagine reaping the rewards of not only high density, but planning codes that allow you to achieve that high density in a way that is very asthetically pleasing and doesn’t hack off the neighbors with behemoth towers. Enter the new Form-Based Code Building Regulations.

Before last week’s Panama City Beach City Council meeting, there was a public workshop held at Beach City Hall discussing the future of land planning for our area’s beach community. Attended mostly by City employees and a few developers and architects, the only other people there were media and the land owner of one of the example properties used for the analysis.

So, what are Form-Based Codes, you say? Straight out of the 11×17 color printed packet I received at the workshop:

The Form-Based Codes Institute defines form-based codes as a “method of regulating development to achieve a specific urban form. Form-based codes create a predictable public realm primarily by controlling physical form, with a lesser focus on land use, through city or county regulations.”2 While conventional zoning tends to focus on uses, intensities and setbacks, form-based codes focus on building scale and character. The key distinctions between form-based codes and design guidelines are that guidelines are advisory and often subjective, which frequently result in the need for design review boards. Form-based codes establish specific, measurable standards that require little discretion and limited architectural knowledge.

The best form-based regulations address site-specific challenges and conditions that are ignored by conventional zoning. They promote compatibility between adjacent uses through context-sensitive design. They also tend to do a much better job of addressing the interface between the public and private realms (streets and buildings). They also are better suited to addressing scale and building orientation in ways that improve compatibility between adjacent public and private uses.

Rather than focusing exclusively on “one-size-fits-all” setbacks and building heights, form-based codes may include different standards for different situations. For instance, height limitations and setbacks may depend on the proximity to lower intensity zoning districts. Conventional zoning commonly ignores the orientation of a building, allowing entries, garage openings and mechanical equipment to be located on any side. Form-based codes typically require entries to face the street, while garage openings and mechanical equipment are hidden from main streets.

Reference page 6 of the code packet available for download below.

Now, I know what you are thinking: Where was this five years ago? Well, my friend, I don’t have the answer to that, but it was conveyed by many of the council members that they had wished we had something like this in place years ago, and that if it wasn’t adopted, they would regret it in the future.

Some of the advantages outlines in the proposal are:

They describe what is allowed, in addition to setting limits and focusing on prohibited designs. This gives project designers a clearer picture of desired outcomes.
They better accommodate infill and redevelopment because of their focus on scale, orientation and other critical design elements.
They may specify specific architectural styles, materials and uses, which provides greater design predictability for property owners and neighbors.
They can be adapted to ensure compatibility in widely varying settings.
They are easy to apply in small communities because they do not require architectural expertise to use, interpret or administer.
They are more readily defensible than design guidelines and architectural review processes that involve more subjective decisions.

As part of the proposal, three independent site studies were conducted named Back Beach, Long Beach and Tidewater. The Back Beach study is located on Back Beach Road, between Colina Drive and Pearl Avenue. The Long Beach study is located on the north side of Front Beach Road, between Gulfside Drive and Henley Drive. The Tidewater study is located north of and across Front Beach Road from the Tidewater Condominium Resort. The study sites were used purely as examples with no necessary intention of this actually happening to these properties.

The Back Beach Road study sample currently consists of 24,000 sf of commercial space, 22,500 sf of manufacturing space and 0 sf of residential units. Based on the Form-Based Code, the future development possibilities could include over 54,000 total square feet of commercial space and 14 residential units. The actual building layout would be such that the parking would be in the back, away from pedestrian walkways with limited access. This would enhance beautification and create a more pedestrian-friendly area.

The Long Beach study currently allows for 131,200 sf of commercial space and 27 residential units. Based on the Form-Based Code, a over 249,000 sf of commercial space would be possible, with over 145 residential units.

The whole process would work on a tiered system. Developers would be allowed greater density the more emphasis they put on beautification towards concealing that density. One of the greatest examples of this in action is the way the Village of Baytowne Wharf was developed and the proposed plans for the Towne of Seahaven. In Baytowne, the main parking garage is hidden on all sides and the top with walls, landscaping and residential units. The side of the parking garage that is facing the “towne” part of the village is where retail is located and above that is residential. In the center, which is actually the roof of the parking garage is the amenity area for the residential component, including lush landscaping, fitness center and the pool.

Look at Pier Park. Notice the huge open parking areas in the back but where people congregate is beautified? This is all intentional and is the direction the City of Panama City Beach is going. This is an exciting step and much and long needed for our area.

Download the full Analysis of Opportunities here (7.3 mb)

Florida Existing Homes Sales up 27% for December

ORLANDO, Fla. – Jan. 26, 2009 – Florida’s existing home sales rose in December, making it the fourth consecutive month that sales activity demonstrated gains in the year-to-year comparison, according to the latest housing data released by the Florida Association of Realtors® (FAR). December’s statewide sales also increased over November’s figures in both the existing home and existing condo markets.

Existing home sales rose 27 percent last month with a total of 11,053 homes sold statewide compared to 8,712 homes sold in December 2007, according to FAR. December’s statewide existing home sales were 28.9 percent higher than November’s statewide sales.

Florida Realtors also reported a 12 percent gain in statewide sales of existing condominiums in December, marking the third recent month (following September and October) for higher statewide existing home and existing condo sales compared to year-ago levels. Statewide existing condo sales last month increased 37.7 percent over the total units sold in November.

Sixteen of Florida’s metropolitan statistical areas (MSAs) reported increased existing-home sales in December; 11 MSAs also showed gains in condo sales, marking the sixth month in a row that a number of markets have reported increased sales activity.

Florida’s median sales price for existing homes last month was $155,500; a year ago, it was $213,600 for a 27 percent decrease. According to industry analysts with the National Association of Realtors® (NAR), there remains a significant downward distortion in the current median price due to many discounted sales, including a large number of foreclosures. The median is the midpoint; half the homes sold for more, half for less.

The national median sales price for existing single-family homes in November 2008 was $180,800, down 12.8 percent from a year earlier, according to NAR. In California, the statewide median resales price was $285,680 in November; in Massachusetts, it was $283,000; in Maryland, it was $262,109; and in New York, it was $210,000.

While overall sales have softened nationally in recent months, NAR’s latest housing outlook noted a trend of increasing activity in Florida, California, Arizona and Nevada markets. “Sales are rising in areas with large numbers of distressed properties as bargain hunters take advantage of discounted home prices,” said NAR Chief Economist Lawrence Yun. “It is imperative to provide incentives for homebuyers to get back into the market. It also depends on how effectively Congress and the new administration can help facilitate the short sales process and unclog the mortgage pipeline – impediments remain for some buyers with good credit.”

In Florida’s year-to-year comparison for condos, 3,138 units sold statewide compared to 2,814 sold in December 2007 for a 12 percent increase. The statewide existing condo median sales price last month was $130,600; in December 2007 it was $192,600 for a 32 percent decrease. In the latest data available at press time, NAR reported the national median existing condo price was $185,400 in November 2008.

Last month, interest rates for a 30-year fixed-rate mortgage averaged 5.29 percent, significantly lower than the average rate of 6.10 percent in December 2007, according to Freddie Mac. FAR’s sales figures reflect closings, which typically occur 30 to 90 days after sales contracts are written.

Among the state’s large to medium-size markets, the West Palm Beach-Boca Raton MSA reported a total of 638 homes sold in December compared to 467 homes a year ago for a 37 percent increase. The existing home median sales price was $246,000; a year ago, it was $337,900 for a 27 percent decrease. In the year-to-year comparison for the existing condo market, a total of 527 units sold in the MSA last month, up 26 percent compared to 419 condos sold the previous December. The market’s existing condo median price was $112,900; a year ago, it was $161,400 for a 30 percent decrease.

Source: www.FloridaRealtors.org

Adjustable Rate Mortgages Are Our Friends

Yes, I know what you’re probably saying already. Where has this guy been? Living under a rock somewhere? Hasn’t he heard the nightmare stories about sub-prime mortgages, option ARMS and “liar loans” and how all of these ultra-risky vehicles got us into the mess we’re in right now? Indeed, the media has placed much of the blame for the collapse of home prices and the ongoing foreclosure crisis on the loose credit and lax credit standards for the proliferation of these exotic mortgage products that now make up much of the toxic debt on banks’ balance sheets. Yet, somehow, the plain old adjustable rate mortgage that has been around for decades has been painted with the same brush as the other mortgage products and unfairly so. Let me explain why ARMs are still around, always will be around, and why they may be the best friends we have right now.

The complete evaporation of a secondary mortgage market for condominiums and their twin the condo-tels, has forced banks to develop new vehicles for financing these properties. This is where the in-house loans, or portfolio loans as we call them, come in to play. These loans accept the risk associated with condos as collateral in a market that has seen condo prices plunge in recent years and ignore other factors that Fannie Mae and Freddie Mac, along with all the mortgage insurance companies, deem derogatory. But banks can’t loan money on these properties forever when they have no market to sell the loans. Eventually, they would have no money left to lend and would simply have a fat portfolio of nothing but condo loans and no capital. Corus Bank, the owner of Laketowne Wharf, is a great example of this scenario. That is why banks, like the bank I work for, turn to ARMs – they provide interest rate protection to the bank while offering the consumer a quantifiable risk scenario where they can weigh the pros and cons and make an informed decision.

I have been a little perplexed lately when potential borrowers call to inquire about financing for a fantastic deal they are getting on a condo. When I explain I have two options, a 3/1 ARM at 6.00% or a 5/1 ARM at 6.75% there is often an immediate rejection of anything that isn’t a fixed rate and an inferred suspicion that I am some sort of snake oil salesman. Never mind there are no other options out there. What about the fact these ARMs have initial fixed periods at very attractive rates? What about the fact that there are no pre-payment penalties, (we want them to pay it off) very low fees, and annual and lifetime rate caps of 2% and 6% respectively? Do they even give me the opportunity to explain that the ARMs are tied to the 1 year Treasury yield which is one of the most stable indexes to be found having averaged 4.38% over the past twenty years? Do I have a glimmer of hope that they will listen to me explain how ARMs work and that if these ARMs were to adjust today they would actually go down? Nope. If it’s an ARM it’s snake oil and will lead them to financial ruin. Yet for those who don’t associate every ARM loan with housing horror stories and who weigh the pros and cons are using my ARM loans to scoop us fabulous deals on beachfront condominiums and stand to make substantial returns on their measured risk proposition. Did I say risk? Of course there is risk with an ARM. Rates could sky rocket in a worst-case scenario but given that the U.S. will probably keep short-term rates low for a very long time, the risk is acceptable.

No one wants you to take an ARM more than the bank someone once told me. Over the years I have found this to be more or less true from a banker’s perspective. So why have I, personally, taken out several ARM loans over the years? It is because that while an ARM provides some safety for the banks, it also provides opportunities to borrowers. Lower rates equate to qualifying for more loan. If I anticipate a rise in property values or an increase in my income, why not look at an ARM? But most significantly, when it is the only mortgage option available and there perhaps once in a lifetime opportunities on beach-front real estate, do ARMs not beg some consideration? ARMs are like bridges, they get us over an obstacle though we may not know what we’ll find on the other side. One borrower said to me recently when we were discussing the end of that bridge on a 5/1 ARM he was applying for, he poignantly stated, “If things aren’t better than this in five years then God help us all.” This lead me to reflect that the bank portfolio ARMs may not be a panacea but they do offer buyers, Realtors and bankers alike, a bridge to better times ahead.

For this and more, visit my blog at www.activerain.com/blogs/hpalmer

With over fifteen years of mortgage and real estate experience, Hunter Palmer has the knowledge and expertise to help home buyers and Realtors navigate the ever changing real estate finance landscape.