Monthly Archives: August 2022

Judge Tosses Challenge to Part of Insurance Law

Contractors challenged an assignment of benefits (AOB) change passed in May by the Fla. Legislature, but the judge said people named aren’t “proper defendants.”

TALLAHASSEE, Fla. – A Leon County circuit judge has rejected a challenge by contractors to part of a new property-insurance law that restricted attorney fees in insurance disputes.

Judge J. Lee Marsh issued an order Monday dismissing a constitutional challenge filed in May by the Restoration Association of Florida and Air Quality Assessors, LLC, an Orlando firm that does work such as mold testing and leak detection.

The challenge targeted part of a law passed during a May special legislative session that Gov. Ron DeSantis called to address massive problems in Florida’s property-insurance market. The lawsuit named as defendants Melanie Griffin, secretary of the Florida Department of Business and Professional Regulation, and Donald Shaw, executive director of the state Construction Industry Licensing Board, because they have disciplinary and regulatory authority over contractors.

Marsh’s order did not directly address the constitutionality of the law but dismissed the case because he said Griffin and Shaw were not “proper defendants,” in part because they were not in charge of enforcing the law.

The insurance industry has long blamed litigation and attorney fees for driving up costs. The new law took a series of steps to try to address those issues, but this court challenge focused on part of the measure that deals with “assignment of benefits” (AOB).

In assignment of benefits, homeowners sign over their insurance claims to contractors, who then seek payment from insurance companies – often spurring lawsuits about claims and payments.

In the past, contractors could recover their attorney fees from insurers if they were successful in the lawsuits, a concept known as “prevailing party fees.” But the new law (SB 2-D) stopped contractors from being able to recover prevailing-party fees if AOB. Homeowners can still recover prevailing-party fees if they file lawsuits directly, but contractors cannot.

The lawsuit alleged that the change violates equal-protection and due-process rights and denies contractors access to courts.

“When the insurer delays, underpays or does not pay a claim at all, contractors are forced to commence an action against the insurer to recover the full amount due for the work performed,” attorneys for the Restoration Association of Florida and Air Quality Assessors wrote in an Aug. 4 response to the state’s motion to dismiss the case. “Without the corresponding right to recover attorneys’ fees, SB 2-D makes it economically unfeasible for the contractor to pursue its lawful rights and remedies in court, and thus effectively voids the AOB (assignment of benefits), leaving the assignee (the contractor) holding the bag.”

But in seeking a dismissal, the state’s attorneys focused on issues such as whether Griffin and Shaw were proper defendants. In the July 13 motion to dismiss, for example, the attorneys wrote that the law “does not charge the secretary or the executive director with enforcing its provisions” and does not implicate their “specific responsibilities.”

“In other words, do the secretary or executive director have specific responsibilities relating to property insurance or awarding attorney’s fees in insurance litigation? They clearly do not,” the state’s attorneys wrote.

As an indication of the interest in the lawsuit, state-backed Citizens Property Insurance Corp., Security First Insurance Co., Tower Hill Signature Insurance Co. and US Coastal Property & Casualty Insurance Co. formally intervened to help defend the law.

The Restoration Association of Florida and Florida Premier Roofing LLC also have a challenge pending in Leon County circuit court to another law (SB 4-D) passed during the special session.

Florida’s property-insurance market has been in upheaval as insurers have dropped customers and sought huge rate increases because of financial losses. Five property insurers have been declared insolvent since February, and policies have poured into Citizens, which was created by the state as an insurer of last resort.

https://www.floridarealtors.org/news-media/news-articles/2022/08/judge-tosses-challenge-part-insurance-law

Fla. Scammer Claims CEO Status, Steals 21 Properties

SARASOTA, Fla. – When Jim Glenn walked into the Sarasota County Tax Collector’s Office in mid-August, he expected to pay his business’ property taxes, just as he’d done many times before. But this time, he learned someone had already paid them.

“Huh, that’s weird,” he thought. “What type of idiot pays someone else’s taxes?”

Later that day, his puzzlement morphed into deep concern bordering on panic after a follow-up email from Sarasota County officials notified him that his company’s 21 properties had been sold in a bulk transfer. His lawyer found that someone he did not know had filed paperwork with Florida’s Division of Corporations, removing the officials at the decade-old business he and his mother owned, Glenco Properties Group Corp., and installing a new chief executive, he said.

Glenco Properties Group was a company formed in 2012 by Glenn and his 77-year-old mother, Beatrice Glenn, that owns all of their Sarasota properties.

Even worse, the new CEO – armed with newly filed paperwork – took out mortgages on the properties totaling $1.3 million, according to Sarasota County Clerk of the Courts records.

Glenn and his mother Beatrice appear to be victims of a shockingly easy to exploit flaw in the state’s public record-keeping system for businesses. While the system, called Sunbiz, is great for transparency and learning who’s behind Florida’s corporations, it offers little protection for business owners, has no monitoring and can be updated at any time by anyone.

Glenn quickly contacted Sarasota police, who have launched a criminal investigation, and his attorney, who has filed updated paperwork to correct the state’s database.

Still, he’s worried about the large loans taken out against his properties and the possible legal headaches to come as he untangles the mess.

“Shock was my first thought,” Glenn said. “How can something like this happen?”

#FromBrokeToRiches

The same week that Glenn learned of the mortgages taken out on his company’s properties, Robert Houston took to the skies of Sarasota in a helicopter. Flying high above the blue-green waters of the Gulf of Mexico, Houston snapped photos of Longboat Key and posted videos to Facebook of himself above downtown Sarasota.

“Bucket List Item,” Houston wrote beside a check mark. “#FromBrokeToRiches” he also posted.

Unbeknownst to Glenn or his lawyer, online records filed with the state on June 27 had named Robert Houston as Glenco’s chief executive and gave the address for a UPS Store in a shopping center in Parrish as the business’ new address.

Houston also posted photos of a new Ford F-150 Raptor – a truck that sells for more than $75,000 – after the paperwork was updated and two large loans were taken out against properties owned by Glenco. Other Facebook posts detailed apparent spending showing a “Diamond premier” level ticket to see Tony Robbins in West Palm Beach, declarations that Houston leased office space somewhere in the Sarasota area and a foot soak in two bottles of Maker’s Mark whisky after a foot injury.

A business Facebook page associated with Houston titled Mr. Commercial Industrial Inc. used the same UPS Store address as the Glenco paperwork filed with the state.

Reached by phone, a man identifying himself as Robert Houston said he didn’t know anything about allegations he filed paperwork to become CEO of Glenco Properties Group Corp. when contacted by a Herald-Tribune reporter. He then hung up the phone.

Attempts to contact him after the initial phone conversation have been unsuccessful.

Notary relied on Sunbiz

However, a notary who prepared property documents for Houston said she met Houston a couple years ago at a business event.

Destyne Jenee Hamilton confirmed to the Herald-Tribune that the Robert Houston in the helicopter on Facebook was the same Robert Houston who signed the quitclaim deeds as a signatory for Glenco Properties Group, that transferred the deeds to Mr. Commercial Industrial Inc. A quitclaim deed transfers legal interest in a property, but does not provide any guarantees to clear title.

After learning about Jim and Beatrice Glenn’s situation, Hamilton expressed dismay.

“I don’t want to be associated with anything fraudulent,” she said.

Asked how she concluded Houston owned the properties before agreeing to act as notary on the quitclaim deeds, she said she checked Sunbiz, the database maintained by Florida’s Division of Corporations. That database showed him as CEO and registered agent as well as a principal of Mr. Commercial Industrial Inc., the new owner on the quitclaim deed.

She says she feels she did her job by checking Sunbiz and questioned if what Houston had done was actually illegal.

Documents ‘accepted at face value’

The Division of Corporations falls under Florida’s Department of State and has an easily searchable database of companies registered in the Sunshine State. Companies file annual reports that often include principals, registered agents and an address.

While it is a felony to file fraudulent paperwork with the Division of Corporations, the division doesn’t actually check to see if accurate information is filed.

“The Florida Department of State, Division of Corporations is an administrative filing agency, and as such all documents submitted to and filed by this office are accepted at face value,” the agency’s website reads. “Any document meeting the stipulated statutory filing requirements and accompanied by the required filing or processing fee(s) is accepted.”

A Department of State spokesman confirmed the department received questions from the Herald-Tribune on Aug. 17, but has not answered any questions or returned other phone calls made by a reporter.

Morgan Bentley, a Sarasota attorney at the law firm Bentley Goodrich Kison who does not represent Glenco Properties or Robert Houston, said that incorrect annual reports are filed more commonly than people think, often after a dispute between business partners.

“Nothing prevents you from doing that,” he said about filing updated paperwork that removes or substitutes officers in a company.

Occasionally, a corporate filing will be rejected, but Bentley said he doesn’t know what criteria the state uses when it rejects a document or why it was rejected.

Sarasota Police have confirmed an active investigation, but declined to discuss details of the case. Glenco’s lawyer has also filed a lawsuit in Sarasota County against Houston, companies controlled by Houston and the lenders.

The mortgages taken out against Glenco Properties – one on July 27 and the next on August 10 – were both completed by private lenders and not traditional banks.

Bentley said that banks often require multiple documents and have more rigorous checks in place that would likely prevent loans from being taken out on property with little documentation. But private lenders, Bentley said, will often issue loans on as little information as provided in a balance sheet, “especially if there’s real property to point to.”

Serious policy questions

Five years ago, Yves Naman went to pay his business’ property taxes in Miami-Dade County, only to discover someone else had paid the taxes and then taken out a mortgage on the property.

Brian W. Hoffman, a Pensacola lawyer and member of the Real Property, Probate and Trust Law Section, wrote about the fraud case for a 2018 publication by the Florida Bar. Hoffman noted the fraud committed against Naman’s company raised serious policy questions about how the state handles business records and provided analysis of changes to state law legislators made in 2018. Those changes mandated notification by email or mail whenever business filings or changes occur. It also provided a 15-day grace period from state fees if the business owners catch the fraud early enough and file corrected paperwork.

But the changes did not take the more costly option to implement a secure business filing service or put any responsibility on the state’s Division of Corporations to verify information.

“With almost certainty, business identity theft will be a continuing issue and a problem that will require constant monitoring and update of Florida’s laws governing business filings,” Hoffman wrote in 2018.

He told the Herald-Tribune that while the addition of a notification requirement was significant in cracking down on fraud, if the business owner is not paying attention “this fraud could be committed tomorrow.”

Particularly vulnerable businesses are those controlled by owners who fail to file updated paperwork with the state, as this could be a signal that the owners are not paying attention.

Jim and Beatrice Glenn had not filed their annual report with state officials for two years before the chief executive’s name was changed to Robert Houston. If there was a document sent by email or mail about the corporate hijacking, the Glenns didn’t notice it. Jim Glenn said he has not seen any emails from the Division of Corporations in regard to changes in officers at Glenco nor has the company’s office received notification by mail.

His mother, he said, doesn’t have an email account.

Another possible way someone could have identified Glenco Properties Group as ripe for exploitation was that notice of tax deed application had been recorded against some of Glenco’s properties. Jim Glenn, 51, said that he would always pay the taxes before the property was auctioned, admitting that sometimes he forgot to pay one of his 21 properties’ tax bills.

While he did not file the annual paperwork with the state, he doesn’t think that should allow someone else to claim his company and mortgage his properties.

“They (the state) don’t even have the security measures needed to open an email account,” Glenn said.

Glenn said he moved to Florida when he was 18 years old and got his real estate license. However, he realized quickly that he wasn’t the best salesman, opting instead to buy houses and flip them.

“That’s all I’ve ever done,” he said.

Beatrice Glenn retired to Florida in 1995, settling in Sarasota after teaching elementary school in Lexington, Kentucky. She chose Sarasota to be close to her son who was living in Fort Myers at the time.

By Jim Glenn’s count, he’s bought about 50 properties but stopped selling them, opting for the steady income from renters once property got expensive.

“I bought them when the market was in the toilet,” he said. “They were practically giving them away.”

He now rents to people with low incomes in need of housing vouchers provided by the U.S. Department of Housing and Urban Development, largely in Sarasota’s Newtown and Amaryllis Park area.

Since he walked into the tax collector’s office, he’s had trouble sleeping. He’s run through things that may have allowed him to be victimized. He’s thought about how his lawsuit to resolve the $1.3 million in debt taken out against his properties will play out.

But he’s done everything he can think to do to resolve the issue.

“I’m in a holding pattern now,” he said. But he does recommend other business owners pay close attention to their corporate filings.

“Hire somebody to check it,” he said. “That’s the only thing I can think to do.”

https://www.floridarealtors.org/news-media/news-articles/2022/08/fla-scammer-claims-ceo-status-steals-21-properties

FSBOs Mostly Soar in Hot Markets. Not This Time

When demand outstrips supply, more sellers try to save money by going it alone – but FSBOs dropped to 7% in today’s unstable market, a level not seen since 1981.

CHICAGO – The volatile housing market over the last couple of years has driven more consumers to use real estate professionals rather than attempting to complete a transaction independently. FSBOs (For Sale by Owner) made up only 7% of home sales in 2021 – the lowest share since 1981 – according to the latest Profile of Home Buyers and Sellers from the National Association of Realtors®.

It’s a stark contrast from 15 years earlier when 12% of sellers went the FSBO route during the 2006 housing boom, the data shows.

While sellers were also in the driver’s seat last year as bidding wars exploded and list prices soared, 90% of them still worked with an agent to get their home sold, according to NAR research. This may mean consumers are getting the message: Realtors are an ally in any housing market.

Top things sellers expect Realtors to do for them

Pricing a home competitively
Marketing to potential buyers
Negotiating a deal

https://www.floridarealtors.org/news-media/news-articles/2022/08/fsbos-mostly-soar-hot-markets-not-time

Job 1? Your Database. Keep It Producing

Sphere of influence (SOI) is a code word for “the source of most sales.” A strong, organized database makes the most of the names in that list.

NEW YORK – Carl Medford, CEO of The Medford Team, believes that agents’ sphere of influence (SOI) should be the single most important component of their business. He estimates that 50% to 60% of his company’s business annually comes directly from its database.

To build and maintain an effective SOI database, include as many people as possible – the more the better. If someone doesn’t like being included, they can ask to be removed. It’s better to be over-inclusive than overlook someone in an SOI. An effective database should have a minimum of 200 contacts.

Some agents avoid adding friends and family to their database, but they should actually be the SOI’s inner core. Clubs and service organizations with a lot of members can also be a source of names for the database. Unless a group has a specific “no-advertising” policy, agents can consider all individual members part of their SOI.

To organize an SOI, it helps to use a customer relationship management (CRM) system. For sole agents, their broker’s CRM will be sufficient, and some MLSs and Realtor associations provide CRMs at little or no cost. Other options include platforms such as Wise Agent, Follow Up Boss, LionDesk, Top Producer and Realvolve. Once agents start to grow a team, they will need a more robust solution such as Brivity or BoomTown.

To maximize their SOI, agents should create a continuous contact regimen that includes phone calls at least four times a year, along with emails every other week, special promotions such as vendor discounts, a monthly newsletter, restaurant specials and free home evaluations.

Source: Inman (08/01/22) Medford, Carl

https://www.floridarealtors.org/news-media/news-articles/2022/08/job-1-your-database-keep-it-producing

‘Tool Time’ Tax Holiday Starts Saturday

Do-it-yourselfers and remodelers now have their own sales-tax free Fla. holiday. From Sept. 2 to Sept. 9, there’s no state sales tax on tools, work gloves, etc.

TALLAHASSEE, Fla. – Florida’s first “tool time” sales-tax holiday on tools and other home-repair and construction items will kick off during the Labor Day weekend.

The seven-day holiday, part of a wide-ranging tax bill passed this year, will allow shoppers to avoid paying sales taxes on numerous home-repair and construction items from Saturday through Sept. 9.

“I think it’s just to give a boost to our skilled workers,” Florida Retail Federation President Scott Shalley said. “The Legislature and the governor had a lot of insight to say, ‘Let’s give them a break around Labor Day here.’ I think it’s a great time, particularly with the inflationary pressures we are seeing right now.”

The name of the holiday loosely comes from a home-improvement show within the 1990s sitcom “Home Improvement.” The idea of the discounts is to recognize the efforts of workers, lawmakers said.

“If you think about a year-and-a-half or two years ago, the first time we started hearing the word COVID, one of the things you started hearing after that is who’s … essential workers,” Rep. Joe Harding, R-Williston, said as he argued for the tax holiday March 2 on the House floor. “We heard a lot about our first responders and our health-care workers. But we also learned really quickly how essential the people that pick up a tool bag and drive a work truck every day are.”

The tax package (HB 7071), which Gov. Ron DeSantis signed in May, also included tax holidays for purchasing disaster-preparation items before hurricane season, back-to-school items before children went back to classes and entertainment and recreation items around Independence Day. Lawmakers and DeSantis also approved a period when people could buy children’s books without paying sales taxes and gave year-long tax exemptions on items such as baby diapers and Energy Star appliances. Also, the state gasoline tax will be suspended for a month in October.

State economists have projected the tool-time holiday will reduce state revenue by $9.6 million and local revenue by $2.8 million.

Dominic Calabro, president and CEO of the non-profit Florida TaxWatch, said the holiday also will help “everyday homeowners.”

Here are some of the purchases exempt from sales taxes during the tool-time holiday:

Work gloves that cost $25 or less.
Hand tools, LED flashlights, safety glasses, protective coveralls and duffle bags that cost $50 or less.
Tool boxes that cost $75 or less.
Shop lights, tool belts and electrical-voltage and related testing equipment that cost $100 or less.
Handheld pipe cutters, drain opening tools and plumbing-inspection equipment that cost $150 or less.
Work boots that cost $175 or less.
Power tools and tool boxes for vehicles that cost $300 or less.

https://www.floridarealtors.org/news-media/news-articles/2022/08/tool-time-tax-holiday-starts-saturday

‘Why Use a Realtor?’ Tell Clients This

NAR’s latest program expands their “That’s Who We R” campaign by empowering each member to explain the Realtor benefits to family, friends and customers.

CHICAGO – The National Association of Realtors®’ (NAR) ad campaign, “That’s Who We R,” has a simple goal – to tell buyers and sellers why they should use a Realtor®.

NAR announced a new step in their Realtor-awareness program this week. In addition to touching Americans through its advertising campaign, it also wants to empower individual agents to tell personal customers why they should only use a Realtor.

“As members of the National Association of Realtors, we are unified by the Realtor brand and our iconic trademark R,” said 2022 NAR President Leslie Rouda Smith in an email announcing the new program. “It’s who we are – and it’s important for consumers to understand that distinction.”

Rouda Smith says NAR has an award-winning national advertising campaign, but asks the question, “What are WE saying to clients to engage in that conversation and articulate our value?” In addition to seeing entertaining commercials, consumers “should also learn that value directly from Realtors, and in a consistent way.”

To help individual members boost their one-on-one marketing, NAR developed language and supporting assets at TheDifference.realtor. It asks members to share the material on their websites, via social media, at the bottom of emails and anywhere else it can be read consistently.

NAR offers examples. In a personal bio, for example, Realtors could use this wording:

I am a Realtor, a real estate professional who has taken the extra step to belong to the National Association of Realtors. Through membership, I abide by a Code of Ethics and have gained expertise to help you navigate one of the most complicated and important transactions you’ll make in your lifetime.

For full information, visit TheDifference.realtor.

https://www.floridarealtors.org/news-media/news-articles/2022/08/why-use-realtor-tell-clients

Some Insurers Dropping Owners Who Install Solar Panels

FORT LAUDERDALE, Fla. – As electric bills surge and the federal government offers generous tax incentives for renewable energy investments, more and more Florida homeowners are seriously considering rooftop solar systems.

But in calculating system costs vs. electric bill savings, many would-be solar owners are neglecting to consider how a solar system will affect their home insurance bill – or how difficult it might be to find a company that will insure them at all.

And with insurance premiums skyrocketing for all Florida homeowners, solar customers who can obtain coverage might also find that the price increase will wipe out any energy-cost savings they expected from going solar.

“It’s a big deal and a lot of folks don’t realize that many carriers don’t accept solar panels,” says Dulce Suarez-Resnick, vice president at the Miami-based agency Acentria Insurance.

Oakland Park homeowner Holy Strawbridge learned this the hard way. She installed a modest 8,000 kilowatt system atop her home about two years ago and recently signed up for coverage with Edison Insurance Company. After the insurer sent an inspector to her home, she received a letter canceling her entire policy.

“I was shocked,” Strawbridge said. “I’ve never filed an insurance claim and I’ve lived in this house since 2001.”

The reasons cited in the cancellation letter sent by Edison: Her solar panels are ineligible for coverage due to the age of her roof (11 years) and because she has a tile roof.

Those aren’t the only reasons insurers won’t cover rooftop solar systems, according to interviews with solar installers, solar energy advocates, and insurance agents. Insurers who do business in Florida offer a wide variety of reasons for refusing to insure homes with them.

Net metering flagged by insurers

Increasingly, insurers are claiming that solar systems with net metering connections to utilities – which is virtually all of them in Florida – pose a unique risk of injury to line workers and damage to the utility grid.

Florida Power & Light’s net metering contract requires homeowners to take responsibility for all potential damages, says Ryan Papy, president of Palmetto Bay-based Keyes Insurance. “So if there’s a surge running through your panels that causes damage to the grid or other homes, the client is responsible.”

Solar installers and advocates call that justification unfounded. They say all equipment used to connect rooftop solar systems to the grid comply with state building and electrical codes and are inspected by utilities before new systems are activated. Utilities also have authority to come onto solar owners’ properties and disconnect them if they suspect any safety issues, they say.

Solar advocates wonder if the net metering concerns are just excuse insurers are giving to justify dropping customers.

Many insurers who operate in Florida, faced with mounting losses, have been dropping or nonrenewing policies to reduce the amount of overall risk they carry on their books of business. In some cases, state insurance regulators have ordered insurers to shed policies so they can afford to purchase reinsurance – insurance that insurers must carry to be able to pay all claims after a catastrophe.

Justin Hoysradt, president of Vinyasun, a solar installation company based in West Palm Beach, says the potential dangers of backfeeding are exaggerated. Since 2006, all power-producing inverters have complied with an electrical standard called U.L. 1741, Hoysradt said. This standard requires solar system inverters to be able to detect utility outages or any odd voltage disruption and automatically disconnect the solar systems from the grid.

Hoysradt says he is unaware of any documented instance of injury or damage from a properly installed UL 1741-certified inverter. The cut-off technology is so dependable that utilities recently removed a requirement that solar systems be equipped with separate redundant manual lockable disconnects, he said.

Until about a year ago, Hoysradt rarely heard customers complain that they couldn’t find or keep insurance because of their solar systems. Now, at least one potential customer a day says their insurer could not guarantee they wouldn’t be dropped if they install solar, he said.

Other insurers have told homeowners that net metering turns them into commercial utilities and they are no longer eligible for homeowner insurance policies, said Heaven Campbell, Florida program directors for Solar United Neighbors, a nationwide nonprofit that helps solar customers form co-ops to secure better pricing. Campbell says her organization has documented about 60 homeowner complaints over the past year. They either say they’ve been cancelled after installing solar panels or told they would no longer be eligible for coverage if they install panels, she said.

Insurer cites numerous concerns

Olympus Insurance laid out an extensive list of concerns about property and liability exposures in a 2020 filing with the Office of Insurance Regulation, while seeking approval to exclude solar systems from the risks it must cover. They included increased exposure for damage due to wind uplift when solar panels are attached to a roof, increased exposure for wind or hail damage to the solar system itself, fire hazards from loose or poorly connected parts or wires, increased risk or electrocution, presence of toxic materials and byproducts of the panels themselves, and potential liability associated with backfeeding to the grid.

Without commenting on the validity of the concerns, the Office of Insurance Regulation told Olympus it could not allow a broad mandatory exclusion for coverage of solar unless the company provided an option for solar owners to “buy back” the coverage at an increased price. Olympus withdrew the filing. It could not be immediately determined from the office’s filing database whether the company resubmitted it with the buy-back option.

Campbell disputes claims that rooftop solar systems make roofs more susceptible to wind uplift during hurricanes. She said after Hurricane Michael struck the Panhandle in October 2018, many roofs with solar panels remained intact amid roofs without solar panels that were destroyed.

Solar United Neighbors’ website contains numerous photos of installations that held up in storms that damaged roofs of surrounding homes. Campbell says modern building codes actually make roofs with solar panels better able to withstand winds.

Paul Handerhan, president of the consumer focused Federal Association for Insurance Reform, said concerns about wind uplift stem from the potential for increased damage if solar panels and roofs are torn from homes together.

Suarez-Resnick concurs: “With stronger winds like a Category 3 hurricane, you might have much more damage if panels go flying and land on your neighbor’s roof or car.”

Companies that do insure rooftop solar systems are allowed to set strict conditions for that coverage, filings show.

Edison, the company that cancelled Strawbridge’s policy, will only cover homes with solar systems that were installed after 2016, on shingle or metal roofs no older than 10 years, on flat roofs no older than five years, and produce no more 10 kilowatts of electricity, which is more or less the typical rooftop system capacity.

As Strawbridge found out, Edison will not insure solar systems mounted on clay or tile roofs. Stacey Giulianti, chief legal officer at Florida Peninsula Insurance Company, parent company of Edison, said, “We chose not to insure solar panels on tile roof homes due to the challenges presented by the attachment of the panels to the roofs. Most tile roof installations require attachment brackets which must pierce the tile roofs.”

Solar panels are routinely installed without piercing tiles, Hoysradt said. Many installers remove clay tiles at the point where solar posts attach to the roof and replace them with aluminum tiles that won’t break or crack when drilled.

Hoysradt noted that state licensing requirements for solar installers require knowledge of roofing, electrical and plumbing construction. “We’re not just a bunch of people taking roofs apart with no experience,” he said. “There’s no reason for insurance carriers to not cover solar on a tile roof.”

Nevertheless, rooftop solar consumers can expect to find a hodgepodge of insurance rules unless and until the state Legislature decides to enact common coverage standards.

Common standards for insuring solar?

The national trade organization Solar Energy Industries Association is working with fellow solar advocacy groups Florida SEIA, Solar United Neighbors and Vote Solar to reach out to insurers and try to develop legislation to eliminate confusion about insurance practices, said Will Giese, the association’s Southeast regional director.

The good news for Strawbridge and other solar owners is there are insurers that do not prohibit coverage of homes with solar systems or impose a long list of restrictions on coverage. They include state-owned Citizens Property Insurance Corp., the so-called “insurer of last resort.”

Citizens covers solar systems as part of the structure. No special endorsements or add-ons are required, spokesman Michael Peltier said. “They would just be added into the replacement value of the home,” he said. Of course, adding solar panels increases the value of a home, so homeowners can expect to pay a higher premium when they add solar.

One mistake a homeowner should never make: Installing a solar system without checking insurance options, Suarez-Resnick said. An agent can tell you whether your roof is nearing the end of its life and should be replaced first. It’s a pain to find new insurance, and it’s costly to remove and replace solar panels because Citizens or another insurer demands that you get a new roof.

Or you might look for a solar installer, like Universal Contracting and Solar, that specializes in bundling roof replacements and solar installations. You can get long-term financing and qualify for the 30% federal tax credit to offset cost of the combined job, says Jenifer Kempka, the company’s director of business development.

“Right now is the best time to go solar,” she said.

https://www.floridarealtors.org/news-media/news-articles/2022/08/some-insurers-dropping-owners-who-install-solar-panels

Fla. Consumer Confidence Up for Second Month

The August index from UF rose 4.1 points to 65.2. All five components in the larger index moved higher, with a notable rise in future expectations.

GAINESVILLE, Fla. – Floridians’ consumer attitudes increased for a second month in a row. In August, the University of Florida’s consumer sentiment index rose to 65.2, up 4.1 points from a revised figure of 61.1 in July – and all five components that make up the total index increased.

Current conditions

Floridians’ perceptions of their personal financial situations now compared with a year ago increased 2.7 points from 52.5 to 55.2.

And attitudes about buying a major household item, such as an appliance, rose in tandem with that increase, also rose 2.7 points, from 52.5 to 55.2.

The boost in attitudes was almost universal among Floridians, though a bit less among lower-income (less than $50,000 per year) households.

Future expectations

Outlooks about expected economic conditions one year from now were also positive. Attitudes about personal finances increased 4 points from 75.1 to 79.1.

Expectations for U.S. economic conditions one year from now increased a notable 7.4 points from 58 to 65.4 – the highest increase in August. And attitudes about U.S. economic conditions over the next five years increased 3.8 points from 67.3 to 71.1.

“Most of the optimism stems from Floridian’s expectations about future economic outlooks, particularly from expectations about the national economy over the next year,” says Hector Sandoval, director of the Economic Analysis Program at UF’s Bureau of Economic and Business Research. “These opinions are consistent with the strong labor market, along with falling energy prices, such as gasoline, and the overall slowdown in the pace of inflation from a four-decade high.”

Sandoval says gas prices play an outsized role in attitudes because Floridians see them “every day while traveling to and from work, (and) gas prices in Florida have declined consistently since mid-June, not only improving Floridians’ perception of the economy but also releasing pressure from their budgets.”

The Florida labor market has continued to strengthen with more jobs being added statewide in July. Florida’s unemployment rate ticked down by 0.1 percentage point in July, reaching 2.7% and matching the rate observed in February 2020, right before the pandemic hit. Moreover, newly filed unemployment claims have hovered around pre- pandemic levels.

Sandoval isn’t sure if improving attitudes are a trend or not yet.

“Although consumer confidence has increased for two consecutive months, it’s difficult to interpret this as an overall change … especially since the Fed will keep rising interest rate until there is evidence that inflation pressures and the economy are cooling, thus possibly pushing the economy into a recession.”

The index used by UF researchers is benchmarked to 1966, which means a value of 100 represents the same level of confidence for that year. The lowest index possible is a 2, the highest is 150.

https://www.floridarealtors.org/news-media/news-articles/2022/08/fla-consumer-confidence-second-month

U.S. Confidence Rises – First Time in 3 Months

Overall U.S. consumer confidence rose over 8% month-to-month in August. Attitudes about current conditions moved higher for the first time since March.

BOSTON – The Conference Board Consumer Confidence Index increased in August after three consecutive monthly declines. The Index now stands at 103.2, up from 95.3 in July, an 8.3% rise.

The Present Situation Index – based on consumers’ assessment of current business and labor market conditions – improved to 145.4 from 139.7 last month (4.1%). The Expectations Index – based on consumers’ short-term outlook for income, business, and labor market conditions – increased to 75.1 from 65.6 (14.5%).

“The Present Situation Index recorded a gain for the first time since March,” says Lynn Franco, senior director of economic indicators at The Conference Board. “The Expectations Index likewise improved from July’s 9-year low but remains below a reading of 80, suggesting recession risks continue.”

Franco says inflation concerns eased a bit, but they remain elevated.

“Meanwhile, purchasing intentions increased after a July pullback, and vacation intentions reached an 8-month high,” says Franco. “Looking ahead, August’s improvement in confidence may help support spending, but inflation and additional rate hikes still pose risks to economic growth in the short term.”

Present situation

19.2% of consumers said business conditions were “good,” up from 16.3%
23.2% said business conditions were “bad,” down from 24.2%
48.0% said jobs were “plentiful,” down from 49.2%.
But 11.4% said jobs were “hard to get,” down from 12.4%.

Expectations six months in the future

17.5% of consumers think business conditions will improve, up from 13.7%
22.3% expect business conditions to worsen, down from 26.2%
17.4% expect more jobs to be available, up from 15.1%
19.3% anticipate fewer jobs, down from 21.1%
15.8% expect their incomes to increase, up from 15.3%
14.5% expect their incomes will decrease, down from 15.5%

Toluna conducts the monthly Consumer Confidence Survey for The Conference Board. The cutoff date for the preliminary results was August 23.

https://www.floridarealtors.org/news-media/news-articles/2022/08/us-confidence-rises-first-time-3-months

FHFA: U.S. 2Q Prices Up 17.7% – But Over 26% in Fla.

Of 100 metros tracked by government-backed mortgages, 8 Fla. cities hold top-11 spots, with Sarasota-Bradenton (up 36.5%) and Cape Coral-Fort Myers (36.0%) at the top.

WASHINGTON – It’s hard to underestimate the strength of Florida’s current home price increases in the second quarter of 2022 based on the Federal Housing Finance Agency House Price Index (FHFA HPI).

Index scores are based on mortgages – more than half of all in the U.S. – backed by Fannie Mae and Freddie Mac.

Of the 100 cities the index tracks, almost all Florida metros anchored the top 10 for year-over-year price increases, including two metros in the first and second spots. Only one Florida city, Miami-Miami Beach-Kendall, didn’t make the top 10, and it was No. 11.

Overall U.S. house prices rose 17.7% year-to-year in the second quarter (4.0% quarter-to-quarter), but no Florida metro area had an increase less than 26%.

Top 100 rank of Florida metros and year-to-year price increase

1. North Port-Sarasota-Bradenton: 36.5%

2. Cape Coral-Fort Myers: 36.0%

4. Tampa-St. Petersburg-Clearwater: 29.6%

5. Jacksonville: 29.0%

8. Fort Lauderdale-Pompano Beach-Sunrise: 26.9%

9. West Palm Beach-Boa Raton-Boynton Beach: 26.4%

10. Orlando-Kissimmee-Sanford: 26.3%

11. Miami-Miami Beach-Kendall: 26.1%

Overall, however, the nation started seeing a slowdown in the rate of home-price increases.

“Housing prices grew quickly through most of the second quarter of 2022, but a deceleration has appeared in the June monthly data” says William Doerner, Ph.D., supervisory economist in FHFA’s Division of Research and Statistics. “The pace of growth has subsided recently, which is consistent with other recent housing data.”

Other 2Q findings

U.S. housing market has experienced positive annual appreciation each quarter since the start of 2012.
House prices rose in all 50 states and the District of Columbia year-to-year. The five areas with the highest annual appreciation were: Florida 29.8%, Arizona 25.5%, North Carolina 25.2%, Montana 24.9% and Tennessee 24.3%
The areas with the lowest annual appreciation were the District of Columbia 5.2%, North Dakota 10.6%, Louisiana 10.8%, Minnesota 11.3% and Maryland 12.0%.
House prices rose in all of the top 100 largest metropolitan areas over the last four quarters greatest in North Port-Sarasota-Bradenton (up 36.4%) and weakest in Washington-Arlington-Alexandria (up 9.1%).

https://www.floridarealtors.org/news-media/news-articles/2022/08/fhfa-us-2q-prices-177-over-26-fla

HUD Grants: $15M for Older Adults Aging in Place

Nonprofits can apply for HUD grants that help older low-income adults modify their homes, allowing “our nation’s seniors to age-in-place with dignity.”

WASHINGTON – The U.S. Department of Housing and Urban Development (HUD) has $15 million for home modifications to help older Americans age in place through HUD’s Older Adult Home Modification Program (OAHMP).

According to HUD, the money will help nonprofit organizations, public housing authorities and state and local governments with programs that make safety and functional home modifications that meet the needs of low-income elderly homeowners.

Secretary Fudge announced the funding opportunity while visiting a home modification project made possible by the OAHMP in Minneapolis, Minnesota. She was joined by U.S. Senator Tina Smith, Minneapolis Mayor Jacob Frey, Twin Cities Habitat for Humanity President and CEO Chris Coleman, and Betty and John Smith, the beneficiaries of the home modification project. While in Minnesota, Secretary Fudge is also visiting two properties to discuss housing supply and the Biden-Harris Administration’s efforts to expand access to affordable housing.

“By 2040, it is estimated that 20% of the population will be over 65 years old,” says HUD Secretary Marcia Fudge. “We must allow our nation’s seniors to age-in-place with dignity. This funding will give seniors the flexibility to make changes to their existing homes – changes that will keep them safe and allow them to gracefully adjust to their changing lifestyle.”

The home modification program’s goal is to enable low-income elderly persons to make low-cost, high impact home modifications that reduce their risk of falling, improve their general safety and increase accessibility.

Examples of home modifications include grab bars, railings and lever-handled doorknobs and faucets, as well as adaptive equipment, such as temporary ramp, tub/shower transfer bench, handheld shower head, raised toilet seat, risers for chairs and sofas, and non-slip strips for showers or stairs.

HUD’s Notice of Funding Opportunity (NOFO) is available online. Eligible applicants can apply for funds through Grants.gov.

https://www.floridarealtors.org/news-media/news-articles/2022/08/hud-grants-15m-older-adults-aging-place

Life’s Short – Avoid Bad Clients

Some clients aren’t a good business fit; others are simply unpleasant. Learn to identify the traits that don’t work for you and find ways to avoid those people.

SAN FRANCISCO – Real estate professionals must know how to deal with problem clients. In some cases, agents serve themselves best by referring a problem client to another agent and collect a referral fee.

How to identify clients who are likely a poor fit?

Agents should start by going through their CRM (customer relationship management), identifying their 10 worst clients, and listing their names on a paper or spreadsheet. They should then ask themselves, “What makes these clients my worst? Is it being late to appointments, missing transaction deadlines or failing to make accurate disclosures?”

Agents should study each client to find any distinct patterns. A common theme might turn out to be related to details such as location and price range or types of homes. It could be demographic factors such as age or cohort, career, gender, marital status, children/child-free, pets or recreational activities and/or hobbies.

Sometimes it’s just that person. If a client lies about anything, covers up issues, discriminates or omits information, it is time to halt that relationship. Agents should also keep detailed, dated notes if any unlawful thing was requested, and share those notes with their manager and/or attorney.

Agents should also note on the worst-clients spreadsheet how they got those clients – does any prospecting activity stand out? If one appears to attract the worst type of clients, they should devote more time on lead sources that generate “good” clients – the ones who are easy to work and who ultimately close transactions.

Source: Inman (08/24/22) Ross, Bernice

https://www.floridarealtors.org/news-media/news-articles/2022/08/lifes-short-avoid-bad-clients

Appeals Court Denies Limit on Short-Term Rentals

New Orleans tried to limit short-term rentals by requiring license holders to live full-time in the lots they rent – but the court said that violates the Constitution.

NEW ORLEANS – A key provision of New Orleans’ short-term rental law that aimed to slow the industry’s spread into neighborhoods has been ruled unconstitutional by a federal appeals court, dealing a blow to housing advocates who fought to get the law passed three years ago and potentially reshaping the local short-term rental market.

A three-judge panel of the 5th Circuit Court of Appeals in New Orleans said Monday that the 2019 ordinance illegally discriminates against out-of-state property owners.

The law, like those in other cities, bans “whole-home” rentals in residential areas and requires license holders in those areas to prove they live full-time on the lots they list. But in the ruling, which could force a near-total rewrite of the city’s rules, Judge Jerry Smith of Houston wrote that restricting licenses to city residents violates the commerce clause of the U.S. Constitution by shutting others out of the market.

“The city doesn’t just make it more difficult for (out-of-state owners) to compete in the market for short-term rentals (STRs) in residential neighborhoods; it forbids them from participating altogether,” Smith, whom President Ronald Reagan nominated to the court, wrote in the unanimous decision. Joining Smith in the decision were judges Jacques Wiener Jr. of Shreveport, a President George H.W. Bush nominee, and Leslie Southwick of Jackson, Mississippi, nominated by President George W. Bush.

The ruling doesn’t automatically strike down the law, which imposes rules for short-term rentals in both residential and commercial areas and also bans them in the French Quarter and the Garden District. But it will let the short-term rental owners who sued the city in a 2019 federal lawsuit request that a U.S. District judge kill portions of the law, said attorney Dawn Wheelahan, who represents the plaintiffs.

That would potentially allow an increase in short-term rentals as out-of-state owners list their properties or purchase new ones to list.

“All that’s left for me to do is go to the district court and ask to enjoin the city’s ordinance, which I will do,” Wheelahan said. “(The city) will have to go back to the drawing board.”

The city did not respond to a request for comment.

Louisiana Fair Housing Action Center Executive Director Cashauna Hill called the ruling “disappointing,” adding that “our elected officials should keep in mind the consensus around New Orleans, that our neighborhoods and long-term residents need protection rather than policies that cater to wealthy tourists.”

“We hope that the city remains committed to enforcing solutions that prioritize the people who make our city special,” Hill said.

An uneasy compromise

New Orleans’ 2019 short-term rental law represented an uneasy compromise between residents fed up with the rapid growth of Airbnb, VRBO and other short-term rental listings in their neighborhoods and operators who argued in favor of the burgeoning industry.

Advocates of short-term rentals said they served as a way for residents to make extra money and help deal with skyrocketing housing costs. But fair-housing advocates said that short-term rentals were responsible for displacing long-term residents and were, in fact, a primary cause of the surging property prices in gentrifying neighborhoods close to the city’s tourism areas.

The ordinance passed by the City Council gave wide latitude to short-term rental operators in commercial areas such as the Central Business District and along retail corridors in the city. But it limited short-term rentals in residential areas to owner-occupied properties. It also created licensing and enforcement mechanisms, and put in place fees to support them.

In their 2019 suit, the plaintiffs challenged several aspects of the law, but the Fifth Circuit’s ruling against the residency requirement has the broadest implications.

U.S. District Court Judge Ivan Lemelle previously found the law violated the commerce clause, but Lemelle determined the city’s interest in keeping the housing market under control, reducing STR-related nuisances and protecting the character of residential neighborhoods created legal exceptions.

The appeals court disagreed, highlighting a series of policy alternatives that it said could achieve the city’s goals without discriminating against out-of-state owners.

For example, the city could limit the number of licenses per neighborhood to keep the housing market in tune with the local economy and to preserve neighborhood character, the appeals court said. To limit nuisances, the city could strengthen penalties and enforcement actions on disorderly guests and owners who commit other quality-of-life violations, according to the ruling authored by Smith.

Smith also suggested the city could raise taxes on STRs, which he said “would discourage younger – and rowdier – guests from renting them and provide additional funds that could also be used to mitigate nuisances.”

Complaints about lax enforcement of the law popped up almost as soon as it was passed, and data provided by a city contractor last year found that the number of illegal listings outnumbered legal ones in a city database by more than three to one.

Mayor LaToya Cantrell’s administration hired that contractor, Granicus, to automatically detect illegal listings on platforms like Airbnb. The administration also recently hired new inspectors to respond to complaints and ramp up code enforcement hearings.

District A Council member Joe Giarrusso said he had not seen the ruling, but acknowledged that the City Council will likely need to once again draft a new law.

“My personal view is if the 5th Circuit has ruled this way, and said that (the law) is not constitutional and has provided potential alternatives, then let’s look at the alternatives,” Giarrusso said.

https://www.floridarealtors.org/news-media/news-articles/2022/08/appeals-court-denies-limit-short-term-rentals

Buyers Skittish? For Many, It’s Just Market Weirdness

NEW YORK – In just six months, Sam Brinton, a real estate agent in Salt Lake City, has witnessed a complete reversal in buyer sentiment.

“It’s a night and day difference,” he says.

Last year, even as the pandemic housing market pushed home prices ever higher and bidding wars were an expected part of the home buying process, buyers were motivated enough to stay in the game.

The last few months have been the opposite.

“They are confused and hesitant now. Many buyers are sitting on the sidelines because the market has cooled down so much,” says Brinton. The cooling housing market has further fueled the demand for rental units, driving rental prices even higher.

Why are people thinking about renting?

It’s been a nerve-wracking time for homebuyers grappling with still-soaring prices for existing homes despite rising inventory, falling home sales and volatile interest rates.

The average 30-year fixed mortgage rate went from 3.22% on Jan. 6 to 5.55% on Aug. 25, according to Freddie Mac. Existing home sales fell for the sixth consecutive month with sales down 6% from June and 20% from one year ago.

The wait-and-watch approach by buyers is prompting a high share of home sellers to drop their asking price. More than 15% of home sellers dropped their asking price in the 97 largest U.S. metropolitan areas, according to a report from Redfin.

In pandemic boomtowns, it was much more drastic.

In Salt Lake City, for instance, 56% of homes for sale had a price drop in July. Nearly 70% of homes for sale in Boise, Idaho, had a price drop in July, the highest share of the 97 metros.

“Last year, the market forces pushed you into a home and pushed you into doing it sooner than you wanted. It was like ‘now, now, now, high, high, high,’” says Brinton. “Whereas now the market forces are pulling you away. Even someone who’s ready to go is kind of dragging their feet.”

The median existing home sales price climbed 11% from one year ago to $403,800 in July, marking 125 consecutive months of year-over-year increases. However, it was down by $10,000 from June’s record high of $413, 800, according to National Association of Realtors data.

Should you buy or rent?

The median monthly asking rent in the U.S. surpassed $2,000 for the first time in May, rising 15% year-over-year to a record high of $2,002. Asking rents were up over 30% in Cincinnati, Seattle, and Nashville, Tennessee, and nearly 50% in Austin, Texas.

In July, the national median asking rent was up 14% year-over-year to $2,032.

“Rent prices have gone up in the last 18 months, much faster than any other time in recent history,” says housing analyst Logan Mohtashami. “So the question is, ‘Can you tolerate the rent increases on a yearly basis?’”

With a home purchase, even at a higher interest rate, a buyer is opting for a fixed payment plan, says Mohtashami. And if mortgage rates go down next year, homebuyers have the option to refinance.

“It’s a savagely unhealthy housing market in the sense that mortgage rates have gone up so much and home prices are still rising,” he says. “So there’s a lot of people who just simply can’t afford to buy a house after this year, so they’re going to be renting no matter what.”

Brinton says a client who is relocating from Maine to Salt Lake City spent a few weeks looking for a home before deciding to explore the rental market. A few weeks later, she was back, wanting to resume her house hunting.

“She realized that (renting) was an expensive option,” says Brinton. “Rental prices are so high here and they are only going higher as more and more people have dropped out due to interest rates.”

While nationally it is still more expensive in terms of monthly payments (assuming a 5% down payment) to buy ($2,316) than rent ($2,016), in some markets, such as Fort Lauderdale and Miami in Florida, Cincinnati, Detroit, and Boston, it is now cheaper to buy a home than to rent.

The downside of waiting to buy a home is that you’ll have to sign a lease if you need a place to stay and it’s not a second home, says Daryl Fairweather, chief economist at Redfin.

“And that lease is going to be expensive. A lot of these would-be homebuyers are turning to the rental market and that’s sustaining demand on the rental side,” she says. “Even as people’s budgets are pinched by higher inflation and higher interest rates.”

Are we in a housing recession?

For new home construction, yes, according to the experts. Rising mortgage rates and higher costs of construction are causing a “housing recession,” says Robert Dietz, the chief economist at the National Home Builders Association.

Builder confidence fell for eight straight months in August as elevated interest rates, ongoing supply chain problems and high home prices continue to exacerbate housing affordability challenges, according to a association’s survey.

Nearly 1 in 5 home builders reported reducing prices by roughly 5% in the past month to increase sales or limit cancellations. New home sales were nearly 30% lower in July compared with July of last year.

For existing homes, including single-family homes, townhomes, condominiums, and co-ops, sales fell 20% year-over-year in July, according to the National Association of Realtors. While all four major U.S. regions experienced year-over-year sales declines, the northeast region saw an uptick in month-over-month sales.

Buyers also have more to choose from, with unsold inventory now at a 3.3-month supply, up from 3 months in June and 2.5 months in June 2021. Months’ supply refers to the number of months it would take for the current inventory of homes on the market to sell given the current sales pace. Historically, six months of supply is associated with moderate price appreciation, and a lower level of months’ supply tends to push prices up more rapidly.

“The national inventory level is still below 2019 levels, and so another wave of lowered mortgage rates could keep the home price growth in the high single digits,” says Mohtashami.

If you plan on living in your new home for two years or less, it is better to rent, says Lawrence Yun, the chief economist for the National Association of Realtors. If it’s more than five years, it makes sense to buy.

“If you financially qualify for a house in the neighborhood you want to live in, it’s a good idea to buy,” he says. “The chance of a price decline is probably minimal, but if it does occur, it’ll be only for a short duration. But if you don’t buy, you are just paying rent and then higher rent then further higher rent with each passing year and one could potentially miss out on the price gains.”

Buying? Plan for ‘long game’

Scott Golub and his wife, Annmarie, recently confronted that decision. The couple is moving from their apartment in Queens to their new home in Pleasantville, New York, this week.

After having spent more than a year looking for homes in the area, and losing out on multiple homes, the couple, who has a 4-year-old daughter and another child on the way, found a home that was close to schools, easily accessible to the downtown, and had a good-sized yard. After being outbid more than three times over the past year, they made an all-cash offer, with help from Annmarie’s parents. The couple paid $940,000, or $90,000 above the asking price for the 2,300-square-foot home listed at $850,000.

“The house hit every box we wanted,” he says. “We didn’t want to take a chance on losing out on it,” he says.

Natalia Wixom, Golub’s agent says the couple had done their homework and were confident buyers.

In the coming months, with rising inventory, sellers will have to prepare homes better and price them more carefully, says Wixom.

Asked if he was worried about the softening housing market, Golub said it wasn’t a concern.

“Obviously, we don’t want to lose value on the house, but this is a house that we plan on being 30 years plus,” he says. “So it’s kind of a long game.”

https://www.floridarealtors.org/news-media/news-articles/2022/08/buyers-skittish-many-its-just-market-weirdness

Who Gets to Decide if We’re In a Recession?

WASHINGTON (AP) – The government on Thursday updated its estimate of the U.S. economy’s performance in the April-June quarter and confirmed what it had reported last month: That the economy shrank for two straight quarters.

Six months of contraction is a long-held informal definition of a recession. Yet nothing is simple in the post-pandemic economy. Growth may be negative, but the job market is strong. The economy’s direction has confounded Federal Reserve policymakers and many private economists since growth screeched to a halt in March 2020 as COVID-19 struck and 20 million Americans were suddenly thrown out of work.

Even as the economy shrank over the first half of this year, employers added 2.7 million jobs – more than in most entire years before the pandemic struck. In July, the economy added over a half-million more jobs. The unemployment rate sank to 3.5%, a half-century low. Robust hiring and exceedingly low unemployment aren’t consistent with a recession.

While most economists – and Fed Chair Jerome Powell – have said they don’t think the economy is in recession, some analysts still predict that an economic downturn will begin later this year or next.

Either way, inflation remains near its highest level in four decades, though gas costs and other prices have eased in recent weeks. Inflation is still so high that despite pay raises many have received, Americans’ purchasing power is eroding. The pain is being felt disproportionately by lower-income and Black and Hispanic households, many of whom are struggling to pay for higher-cost essentials like food, gas and rent.

Compounding those pressures, the Fed is jacking up interest rates at the fastest pace since the early 1980s, thereby magnifying borrowing costs for homes and cars and credit card purchases. As a result, regardless of whether a recession has officially begun, Americans have soured on the economy.

So how, exactly, do we know when an economy is in recession? Here are some answers to such questions:

Who decides when a recession has started?

Recessions are officially declared by the obscure-sounding National Bureau of Economic Research, a group of economists whose Business Cycle Dating Committee defines a recession as “a significant decline in economic activity that is spread across the economy and lasts more than a few months.”

The committee considers trends in hiring as a key measure in determining recessions. It also assesses many other data points, including gauges of income, employment, inflation-adjusted spending, retail sales and factory output. It puts heavy weight on jobs and a gauge of inflation-adjusted income that excludes government support payments like Social Security.

Yet the NBER typically doesn’t declare a recession until well after one has begun, sometimes for up to a year. Economists consider a half-point rise in the unemployment rate, averaged over several months, as the most historically reliable sign of a downturn.

Do two straight quarters of economic contraction equal a recession?

That’s a common rule of thumb, but it isn’t an official definition.

Still, in the past, it has been a useful measure. Michael Strain, an economist at the right-leaning American Enterprise Institute, has noted that in each of the past 10 times that the economy shrank for two consecutive quarters, a recession has resulted.

Still, many economists doubt that we’re in a recession now. For one thing, there’s the robust job market. For another, Americans are still spending, if more tepidly. Though purchases of goods like appliances and furniture have dropped, spending on services, like airline trips and dinners out, keeps rising, indicating that millions of consumers are venturing out more.

Don’t a lot of people think a recession is coming?

Yes, because many people now feel more financially burdened. With wage gains trailing inflation for most people, higher prices for such essentials as gas, food and rent have eroded Americans’ spending power.

Walmart has reported that higher gas and food costs have forced its shoppers to reduce their purchases of discretionary spending such as new clothing, a clear sign that consumer spending, the leading driver of the economy, is weakening. The nation’s largest retailer, Walmart has reduced its profit outlook and said it would have to discount more items like furniture and electronics.

And the Fed’s rate hikes have helped send the average 30-year fixed mortgage rate up to 5.55%, compared with 2.86% a year ago, making homebuying increasingly unaffordable.

Higher rates will likely weigh on businesses’ willingness to invest in new buildings, machinery and other equipment. If companies reduce spending and investment, they’ll also start to slow hiring. Rising caution among companies about spending freely could lead eventually to layoffs. If the economy were to lose jobs and the public were to grow more fearful, consumers would further reduce spending.

The Fed’s rapid rate hikes have raised the likelihood of recession in the next two years to nearly 50%, Goldman Sachs economists have said. And Bank of America economists now forecast a “mild” recession later this year, while Deutsche Bank expects a recession early next year.

What are some signs of an impending recession?

The clearest signal that a recession is under way, economists say, would be a steady rise in job losses and a surge in unemployment. In the past, an increase in the unemployment rate of three-tenths of a percentage point, on average over the previous three months, has meant that a recession will soon follow.

Many economists monitor the number of people who seek unemployment benefits each week, which indicates whether layoffs are worsening. Weekly applications for jobless aid, averaged over the past four weeks, are just below 250,000, the highest level since last November. Though that is a potentially concerning sign, it is still a low level historically.

Any other signals to watch for?

Many economists also monitor changes in the interest payments, or yields, on different bonds for a recession signal known as an “inverted yield curve.” This occurs when the yield on the 10-year Treasury falls below the yield on a short-term Treasury, such as the 3-month T-bill. That is unusual. Normally, longer-term bonds pay investors a richer yield in exchange for tying up their money for a longer period.

Inverted yield curves generally mean that investors foresee a recession that will compel the Fed to slash rates. Inverted curves often predate recessions. Still, it can take 18 to 24 months for a downturn to arrive after the yield curve inverts.

For the past several weeks, the yield on the two-year Treasury has exceeded the 10-year yield, suggesting that markets expect a recession soon. Many analysts say, though, that comparing the 3-month yield to the 10-year has a better recession-forecasting track record. Those rates are not inverted now.

Will the Fed keep raising rates even as the economy slows?

The economy’s flashing signals – slowing growth with strong hiring – have put the Fed in a tough spot. Chair Jerome Powell is aiming for a “soft landing,” in which the economy weakens enough to slow hiring and wage growth without causing a recession and brings inflation back to the Fed’s 2% target.

But Powell has acknowledged that such an outcome has grown more difficult to achieve. Russia’s invasion of Ukraine and China’s COVID-19 lockdowns have driven up prices for energy, food and many manufactured parts in the U.S.

Powell has also indicated that if necessary, the Fed will keep raising rates even amid a weak economy if that’s what’s needed to tame inflation.

“Is there a risk that we would go too far?” Powell said recently. “Certainly there’s a risk, but I wouldn’t agree that’s the biggest risk to the economy. The biggest mistake to make … would be to fail to restore price stability.”

https://www.floridarealtors.org/news-media/news-articles/2022/08/who-gets-decide-if-were-recession

Study: 80% of Buyers Compromise on Priorities

A study of recent homebuyers found 1 in 4 (22%) unsatisfied with the experience: 30% went over budget and 20% bought in a less-desirable neighborhood.

ST. LOUIS – It’s been a rough real estate market for buyers since the start of 2021, but a few managed to find and purchase their dream home. Still, a study by Anytime Estimate, an online real estate education platform, found that 80% of buyers had to compromise on high-level priorities in order to become homeowners.

The study surveyed 1,001 people who purchased a home in 2021 or 2022 and found almost one in four (22%) weren’t satisfied with the buying experience. A higher percentage – 88% – said the competitive housing market at least had an impact.

Due to a competitive market and lack of inventory, many Americans compromised on their priorities. While 50% of respondents said that finding a home in a good neighborhood was their No. 1 priority, for example, 20% settled for a home in a less-desirable neighborhood.

Four out of five buyers (80%) made more than one offer before succeeding, with two out of five 41% making five or more. The house hunt took one month or more for 61% of buyers, including one in eight (12%) who looked for six months or longer before an offer was accepted.

In part due to lockdowns that made home showings more difficult, more than one in three buyers made at least one offer sight unseen, and 55% bought a fixer-upper. However, almost 25% of the fixer-upper buyers later regretted that decision.

Over asking price

Despite compromising on their home wish list, one-third of buyers still paid over asking price, including 1 in 8 (12%) who paid more than 30% over asking price.

Although Realtors typically recommend offering no more than 1-3% over asking price, 29% of the respondents who paid over asking price said it was 21-30% more – and 12% reported paying at least 30% more.

First-time homebuyers

First-time homebuyers dominated the market in 2021 and 2022, with 70% saying it was their first home. This group, however, struggled to submit attractive offers, and they were 1.6 times more likely than repeat buyers to submit at least 10 offers or to make risky moves, such as making an offer sight unseen.

Forced to make decisions on the spot, it comes as no surprise that nearly three in four recent home buyers (72%) have regrets about their purchase, including spending too much (30%) and buying too quickly (26%).

https://www.floridarealtors.org/news-media/news-articles/2022/08/study-80-buyers-compromise-priorities

NAR Donates $500K to St. Louis Flood Victims

The Realtors Relief Foundation is donating funds to the Missouri Realtors after flooding in St. Louis and Charles. The money helps victims pay housing expenses.

CHICAGO – The Realtors® Relief Foundation – a charitable arm of the National Association of Realtors® (NAR) – announced it’s making $500,000 in disaster relief aid available to the Missouri Realtors.

The money is to help victims after record-setting rain and subsequent flooding recently damaged homes in St. Louis and nearby St. Charles, Mo. It can be used by victims to address housing issues, such as payments, as relief and recovery efforts continue in the ensuing weeks and months.

“Our thoughts are with everyone in the St. Louis metro area affected by these devastating storms,” said RRF President Michael Ford. “Realtors serve and care about the communities in which they live and work. … The Realtors Relief Foundation looks forward to assisting those who’ve experienced unimaginable loss and doing what we can to help these victims pick up the pieces of their lives.”

Since 2001, RRF, 501©(3) non-profit, a has disbursed over $36 million in aid, funding over 100 disaster recoveries and helping some 19,000 families across 42 states and territories. NAR collaborates with state and local Realtor associations to cover all administrative costs so 100% of all funds collected can be distributed directly to disaster relief causes.

https://www.floridarealtors.org/news-media/news-articles/2022/08/nar-donates-500k-st-louis-flood-victims

How Honest Are Sellers on Property Disclosures?

Buyers may want to think twice about nixing the inspection contingency. A study found that 94% of sellers admitted that they didn’t disclose a known issue.

CHICAGO – Homebuyers who waive the inspection contingency must rely heavily on seller disclosures to be informed about any potential problems with the property – but more than 90% of buyers say they found at least one issue with their home after the transaction that the seller didn’t disclose, according to a new survey from Cinch Home Services, a home warranty company.

Even more alarming is that 94% of sellers admit to selling their homes without disclosing a known issue.

“Sellers failing to disclose home damage is against the law in most states,” says Cinch spokesperson Bella Valentini. “To ensure protection, prospective homebuyers should ask for a completed seller’s disclosure in addition to conducting a thorough home inspection before closing on a new home.”

The top three problems buyers discovered after closing involved the electrical system, fixtures and plumbing. The survey shows the majority came from unpermitted repairs and upgrades, suggesting sellers should rethink doing some DIY jobs.

Problems buyers found after closing

Electrical: 88%
Fixtures: 58%
Plumbing: 58%
Exterior structures: 54%
Basement: 52%
Water Damage: 46%
Heating and cooling: 43%
Exterior façade: 42%
Mold or termites: 39%
Major appliances: 34%
Roof: 31%
Foundation: 27%

Source: National Association of Realtors® (NAR)

https://www.floridarealtors.org/news-media/news-articles/2022/08/how-honest-are-sellers-property-disclosures

Another Property Insurer Exiting Fla. Home Market

Fla. homeowners who have coverage with St. Petersburg-based United Property & Casualty Insurance Co. must soon find a new provider.

TALLAHASSEE, Fla. – United Property & Casualty Insurance Co. will exit Florida’s troubled homeowners’ insurance market, forcing customers to find new coverage as their policies come up for renewal, the insurer’s parent company announced Thursday.

The St. Petersburg-based United Insurance Holdings Corp. said it has filed plans to withdraw from what are known as personal-lines markets in Florida, Texas and Louisiana. It also will file a withdrawal plan in New York.

A news release from the parent company said the plans would “effectively place United P&C into an orderly run-off,” which means policies will be gradually dropped as they come up for renewal. The announcement pointed, in part, to problems in obtaining reinsurance, which is critical backup coverage to help handle such things as hurricane claims.

“Due to significant uncertainty around the future availability of reinsurance for our personal lines business, I believe placing United P&C into an orderly run-off is prudent and necessary to protect the company and its policyholders,” United Insurance Holdings Chairman and CEO Dan Peed said in a prepared statement. “The company is actively pursuing opportunities to leverage our people, technology and other capabilities. Our commercial business continues to perform well and provides the company a stable platform to build new engines of growth and profitability.”

The parent company said in July that it had started a “review of its strategic and capital raising alternatives” amid financial losses. The Demotech financial-rating agency later downgraded United Property & Casualty from an “A Exceptional” rating to a “M Moderate” rating.

The news release Thursday said Demotech has notified United Property & Casualty that it will withdraw the insurer’s rating. Rating withdrawals have been precursors to some insurers being declared insolvent and placed into receivership.

Thursday’s announcement did not say how many customers in Florida and the other states would be affected. But a United Insurance Holdings investor presentation in May cited about 185,000 Florida policies as of March 31.

United Property & Casualty is the latest insurer to leave the Florida market or dramatically scale back coverage amid losses. As indications of the troubles, five property insurers have been deemed insolvent since February, and the state-backed Citizens Property Insurance Corp. has ballooned to more than 1 million policies as many homeowners have few other coverage alternatives.

During a state Cabinet meeting Tuesday, Insurance Commissioner David Altmaier acknowledged Florida is dealing with a “very challenging market.” But he said the state has taken a “significant number of positive steps in addressing this crisis” with legislation passed in recent years and during a May special session.

“As we have said numerous times before, there is no overnight fix to this insurance crisis. It’s been years in the making, unfortunately,” Altmaier told Cabinet members and Gov. Ron DeSantis. “But the steps we have taken so far under your leadership are going to be significant steps forward into addressing this issue.”

In addition to difficulties obtaining reinsurance, property insurers have blamed large numbers of lawsuits in Florida for financial problems. Florida, Louisiana and Texas also are prone to getting battered by costly hurricanes.

“Extreme weather, coupled with runaway litigation, is the reason for this announcement,” insurance lobbyist and former regulator Lisa Miller said Thursday of the United Property & Casualty decision.

After the initial Demotech downgrade of United Property & Casualty, the state Office of Insurance Regulation on Aug. 2 put the company into a new stopgap program aimed at making sure coverage would continue for homeowners.

The program involves Citizens Property Insurance acting as a financial backstop for private insurers that get downgraded. Citizens took on a reinsurance role to help make sure claims get paid if insurers go insolvent.

Financial ratings are important, in part, because mortgage-industry giants Fannie Mae and Freddie Mac require homes to be insured by financially sound companies. For insurers rated by Demotech, Fannie Mae and Freddie Mac require “A” ratings or better.

The Demotech downgrade of United Property & Casualty put the insurer below an A rating. The state’s stopgap program is designed to satisfy Fannie Mae and Freddie Mac in such situations. It uses an exception in Fannie Mae and Freddie Mac standards that applies when reinsurers take responsibility for paying claims if insurers go belly up.

https://www.floridarealtors.org/news-media/news-articles/2022/08/another-property-insurer-exiting-fla-home-market

Gov. Ron DeSantis Joins Realtor Party Town Hall

The governor addressed over 700 Realtors during Florida Realtors Convention & Trade Expo and received Florida Realtors PAC’s endorsement for his re-election.

ORLANDO, Fla. – Gov. Ron DeSantis joined Realtors® on Friday during the Realtor Party Town Hall, part of the 2022 Florida Realtors® Convention & Trade Expo.

At the same event, Florida Realtors® Political Action Committee (Florida Realtors PAC) officially endorsed DeSantis in his race for a second term as Florida’s governor in the upcoming November election. Florida Realtors President Christina Pappas introduced the governor and said DeSantis asked the Realtors to hold announcing the endorsement until he had a chance to address Realtors in person.

Pappas called the governor a “long-time supporter of the real estate industry,” and a man who deemed real estate an essential business when the pandemic began. “He also supports the state’s affordable housing efforts, including $100 million for the Hometown Heroes program.”

In his address, DeSantis recounted pandemic challenges and how the state handled many of them.

“We ended the fiscal year, June 30, with by far the largest budget surplus in the history of the state,” DeSantis said. “You guys (Realtors) know better probably than anyone, but we saw an unprecedented migration of people moving into states like Florida.” In 2020, the latest year data is available, “We led in net migration – $20 billion in adjusted gross income moved into the state. … There’s never been any year in American history that saw that kind of wealth moving into the state, and we did it two years in a row.”

DeSantis also addressed the Hometown Heroes program, which he signed into law – an initiative strongly backed by Florida Realtors.

The Hometown Heroes program is “very important when you have a lot of folks who represent the staples of communities … how are they going to live in the community they serve. If they have to commute and hour, an hour and half, that’s not ideal.”

DeSantis said the program has had a great response so far. “It’s probably a model that we’re going to build off of in the next legislative session, so stay tuned for that,” he added.

In addition to Hometown Heroes, DeSantis said he and the legislature are “looking to do some stuff on the ballot, including some property tax relief.”

Florida Realtors PAC endorsements

Florida Realtors PAC interviews candidates for office and endorses those who support the state’s real estate industry and its homeowners. It released the majority of its 2022 endorsements in July, following that up today with endorsements of Governor DeSantis and Florida Chief Financial Officer (CFO) Jimmy Patronis at the Realtor Party Town Hall.

“Governor DeSantis is a true champion of the real estate industry and the professionals who work within it,” says Margy Grant, CEO of Florida Realtors. “Whether it was designating us essential at the start of the pandemic, being a vocal advocate for affordable housing solutions, or working hard to protect Florida’s natural resources, the governor clearly recognizes the importance of Realtors and the critical services they provide Floridians.”

Regarding the endorsement of CFO Patronis, Grant said he “knows just how critical of a role the real estate industry plays in the health of Florida’s economy and he’s not afraid to take action to ensure that connection remains strong. Most recently, he pushed for COVID-19 liability protections to help safeguard our members and their businesses, advocated for new homeownership programs for front-line workers struggling to buy a home, and he is working to find solutions to the state’s property insurance crisis.”

https://www.floridarealtors.org/news-media/news-articles/2022/08/gov-ron-desantis-joins-realtor-party-town-hall

Climate Change: Younger Owners Worry Most

Company focused on technology for insurance says more homeowners have long-term worries about climate change, with 3 in 4 (72%) of young adults most concerned.

NEW YORK – A survey from Policygenius finds widespread concern about climate change-related extreme weather, especially among young homeowners.

The survey found that nearly three quarters (72%) of young insured homeowners (age 18 to 34) expect their homes (describing it as very or somewhat likely) to be damaged by extreme weather in the next 30 years, compared to nearly half (45%) of all adult homeowners. Nearly two in three (64%) young owners believe it likely they will choose or be forced to move in the next 30 years, compared to 27% of all homeowners.

This disparity increases for young parents: 77% of young homeowners with children under 18 expect to move in the next 30 years due to climate change, compared to 25% of all non-parents and 15% of total parents with children older than 18.

“In 2021, there were 20 climate disasters in the U.S. that each caused over $1 billion in damage,” including an “unprecedented cold wave in Texas that left many homes without power, and Colorado’s Marshall Fire which destroyed an entire community,” says Pat Howard, a licensed property and casualty insurance expert at Policygenius.

Policygenius survey findings

31% of insured homeowners have already sustained home damage from a hurricane, tornado, wildfire, flood or other extreme weather event; 48% know another homeowner who has.
33% of homeowners either don’t believe they have enough insurance for a full rebuild of their homes or aren’t sure if they do.
21% of homeowners have purchased flood insurance, even though flood damage isn’t covered by most home insurance policies.
In the South, about 37% of homeowners have suffered damage to their home due to extreme weather, versus 31% of all homeowners; 54% of Southern homeowners know someone whose home has been damaged by extreme weather, versus 48% of all homeowners.
However, homeowners in the South aren’t more likely to move: While 52% think it likely their homes will be damaged by climate change-related extreme weather over the next 30 years, only 31% said they’re likely to move because of it. In the West, it’s 32%, and in the Northeast it’s 28%.

https://www.floridarealtors.org/news-media/news-articles/2022/08/climate-change-younger-owners-worry-most

Fed May Raise Interest Rates for ‘Some Time’

Fed Chair Jerome Powell said Americans should expect more large interest-rate hikes in the coming months, one of the “unfortunate costs of reducing inflation.”

JACKSON HOLE, Wyoming (AP) – Federal Reserve Chair Jerome Powell delivered a stark message Friday: The Fed will likely impose more large interest rate hikes in coming months and is resolutely focused on taming the highest inflation in four decades.

Powell acknowledged that the Fed’s continued tightening of credit will cause pain for many households and businesses as its higher rates further slow the economy and potentially lead to job losses.

“These are the unfortunate costs of reducing inflation,” Powell said in the written version of a high-profile speech he is giving at the Fed’s annual economic symposium in Jackson Hole. “But a failure to restore price stability would mean far greater pain.”

Powell’s message may disappoint investors who were hoping for a signal that the Fed might soon moderate its rate increases later this year if inflation were to show further signs of easing.

After hiking its key short term rate by three-quarters of a point at each of its past two meetings – part of the Fed’s fastest pace of rate increases since the early 1980s – Powell said the Fed might ease up on that pace “at some point” – suggesting that any such slowing isn’t near.

The Fed chair made clear that he expects rates to remain at levels that should slow the economy “for some time.”

Since March, the Fed has implemented its fastest pace of rate increases in decades to combat inflation, which has punished households with soaring costs for food, gas, rent and other necessities. The central bank has lifted its benchmark rate by 2 full percentage points in just four meetings, to a range of 2.25% to 2.5%. Those hikes have led to higher costs for mortgages, car loans and other consumer and business borrowing. Home sales have been plunging since the Fed first signaled it would raise borrowing costs.

https://www.floridarealtors.org/news-media/news-articles/2022/08/fed-may-raise-interest-rates-some-time

Essential Safety Tips for Real Estate Agents

Agents constantly meet up with strangers, aka “possible clients.” The job comes with a certain amount of risk, and agents should constantly consider their own safety.

NEW YORK – Undertaking the responsibilities of a real estate agent involves risk, and agents must take steps to stay safe.

When meeting new clients, it’s important not to go to a private property; instead, invite them to the office or meet for coffee at a cafe to discuss their real estate objectives.

It’s also smart to prepare for the meeting by looking at new clients’ social media accounts. Get a sense of their personality, and do a quick Google search of their names to look for red flags. If some worrisome information comes to light, consider running a full background check before meeting the client.

If agents are going out to meet clients, they should tell someone where they’ll be. This can also be achieved using free apps like Google calendar; they can incorporate GPS tracking that automatically transmits their location. Florida Realtors® also offers SafeShowings as a free member benefit. It’s also important to have a contingency plan and rehearse it, such as having an excuse to end a showing if something seems suspicious.

Agents shouldn’t use post their personal phone number or home address online or in marketing materials – it can lead to unprofessional and unwanted contacts.

If agents use several digital devices for their business, they should consider cybersecurity strategies to prevent data hacks.

In addition, never advertise properties as “vacant.” Doing so may invite trespassers.

Source: Inman (08/09/22) Babich, Luke

https://www.floridarealtors.org/news-media/news-articles/2022/08/essential-safety-tips-real-estate-agents

RE Q&A: Why Won’t Condo Make Repairs?

A frustrated condo owner reports frayed carpet, peeling wallpaper and dirt, but her requests for action go unheeded. How can she force the fixes?

FORT LAUDERDALE, Fla. – Ask Lois: Can you help me get my condo common areas repaired?

“In my condo building, the wallpaper is buckling, peeling off the walls and is visibly dirty. The baseboards are filthy. There is frayed carpet by the elevator with an unprofessional repair. The repair was only after I tripped getting off of the elevator. I’ve spoken to the property manager and I’ve emailed the board a letter of complaint.

I’ve lived here since August 2015. I want to know how to get the board and property manager to maintain the common areas. They are obtaining proposals to paint the stairwell, change lobby doors, and renovate the clubhouse for $170,000 when the common areas are filthy and in need of repair. It’s disgusting to have to pass through. I have to wear a mask because it triggers my asthma.” – Winona Cohn, Boca Raton

Winona – Since the Surfside tower collapse that killed 98 people a year ago, condominium boards and managers have been super-alert to needed improvements, so hopefully you will soon get some attention from the powers-that-be in your building.

You told me in a follow-up email that you were in contact with Palm Beach County Code Enforcement, which is looking into sanitary conditions, fire systems and electrical work. This is a good initial step.

I contacted two attorneys who specialize in condominium law, and here’s what they said about how you should proceed. Peter Sachs, a founding partner with Sachs Sax Caplan in Boca Raton, recommended a three-pronged approach.

“As to the routine maintenance items, she needs to continue to complain to management and the board, vote for like-minded directors in the next election, and then be prepared to pay her share of the costs,” Sachs said.

For items that are safety-related: “Assuming the board continues to be nonresponsive, she could file a complaint with the local building official or with code enforcement. After Surfside, I think she would get some quick action from the city or county.”

The key is to be courteous but also relentless, said Gary Singer, a board-certified real estate lawyer who writes about industry legal matters and the housing market in his “Ask A Real Estate Pro” column in the Sun Sentinel.

“In my experience, most association managers and board members want to do right by the residents,” Singer said. “Be polite but insist that the repairs get done. Be understanding about delays, but do not allow your concern to be forgotten.”

https://www.floridarealtors.org/news-media/news-articles/2022/08/re-qa-why-wont-condo-make-repairs

Mortgage Rates Head Higher Again, Hit 5.55%

The rate for a 30-year, fixed-rate mortgage rose almost half a percentage point (0.42%) this week after hovering just above 5% for a while.

WASHINGTON (AP) – Average long-term U.S. mortgage rates rose this week as inflation worries remained at the fore and a slowdown in economic growth weighs on the housing market.

Mortgage buyer Freddie Mac reported Thursday that the 30-year rate increased to 5.55% from 5.13% last week. Last year at this time, the rate stood at 2.87%.

The average rate on 15-year, fixed-rate mortgages, popular among those looking to refinance their homes, jumped to 4.85% from 4.55% last week.

Rapidly rising interest rates – which add hundreds of dollars to monthly mortgage payments – have pushed many potential homebuyers to the sideline this year, cooling the once red-hot housing market.

The National Association of Realtors said last week that existing home sales fell for the sixth consecutive month in July, slowed by higher mortgage rates and home prices that are still steadily rising, though at a slower pace.

The U.S. economy shrank at a 0.6% annual rate from April through June, the government reported Thursday in an upgrade from its initial estimate. It marked a second straight quarter of economic contraction, which meets one informal sign of a recession. Most economists, though, have said they doubt that the economy is in or on the verge of a recession, given that the U.S. job market remains robust.

In a drive to tame the worst inflation bout the U.S. has endured in four decades, the Federal Reserve has embarked on its fastest series of interest rate hikes – four times this year – since the early 1980s.

Inflation worries are top of mind as Fed officials and leading economists meet this week at their annual symposium in Jackson Hole, Wyoming, to discuss global economic challenges. A speech on Friday by Fed Chairman Jerome Powell could signal how high or how fast the central bank may raise interest rates in coming months.

Mortgage rates don’t necessarily mirror the Fed’s rate increases. They tend to track the yield on the 10-year Treasury note, which is influenced by a variety of factors, including investors’ expectations for future inflation and global demand for U.S. Treasurys.

Recently, faster inflation and strong U.S. economic growth have sent the 10-year Treasury rate up sharply.

https://www.floridarealtors.org/news-media/news-articles/2022/08/mortgage-rates-head-higher-again-hit-555

What to Do if a Social Media Post Goes Sideways?

On social media, an agent praised a group of bipartisan lawmakers who passed a favorable real estate bill – but comments weren’t bipartisan and the post took off.

MIAMI – Anthony Askowitz, broker-owner of South Florida’s largest RE/MAX office, recently examined a hypothetical situation involving the risks of social media:

A successful real estate agent ventured into social media to potentially expand her net profits, and she thought it worthwhile to share a local newspaper endorsing the passage of bipartisan, statewide legislation related to real estate.

While the bill passed with the support of both political parties, however, the post’s comments were polarized. One commenter started using the platform to criticize elected officials without referring to the legislation in question. Other people joined in, and the issue snowballed into a larger argument involving various political views.

The agent’s broker advised her to deescalate the issue by explaining what her intent was and, if necessary, apologize if it offended someone and remove the post.

Agents are bound by the National Association of Realtors’ Code of Ethics, which prohibits statements that are discriminatory or imply discrimination in any way. But while agents oversee the content they post, they have little control over the comments that might follow.

Brokerages should develop clear company guidelines regarding social media, and require agents to sign an agreement in the hiring package. Other good practices include using direct links to third-party articles or columns whenever possible and not paraphrasing them, encouraging agents to begin comments with “In my personal opinion …” and limiting commentary to groups of like-minded people in their social media contacts.

It’s also good policy not to make postings “sharable.”

Source: Inman (08/17/22) Askowitz, Anthony

https://www.floridarealtors.org/news-media/news-articles/2022/08/what-do-if-social-media-post-goes-sideways

New Housing Won’t Arrive Anytime Soon

Many areas need more housing units to fill a shortage, but the new-home industry is slowing for a variety of reasons, such as higher mortgage rates and wary buyers.

CHICAGO – The U.S. housing market is undergoing a correction after two years of unrestrained price appreciation, with higher mortgage rates squeezing out buyers who were banking on new construction.

“We should anticipate fewer homes being built over the next 12 months,” says Zonda chief economist Ali Wolf. “The new-home market is struggling right now. Demand has cooled more than you would imagine this time of year.”

Devyn Bachman with John Burns Real Estate Consulting adds that many buyers who could afford houses would rather hold off than risk owning homes that could decline in value amid economic volatility. Significant drops in new-home development sales in June and July have made builders wary.

“Without a doubt, the first half of 2022 qualifies as a housing recession,” says National Association of Home Builders chief economist Robert Dietz. “Homebuilding’s going to contract. It’s kind of a reset.”

Home builders are trying to entice prospective buyers with various perks, such as buying down mortgage rates, offering fancier amenities and even cutting prices. Bachman foresees building slowing the most in the Pacific Northwest, Northern California, the Southwest and Texas.

Source: Realtor.com (08/11/22) Trapasso, Clare

https://www.floridarealtors.org/news-media/news-articles/2022/08/new-housing-wont-arrive-anytime-soon

Florida Realtors Honors 2022 Award Winners

ORLANDO, Fla. – Aug. 25, 2022 – Florida Realtors® recognized Cheryl Lambert, 2021 Florida Realtors president, as its 2022 Realtor® of the Year. The award – one of several – was presented Thursday during the state association’s annual Convention & Trade Expo at Rosen Shingle Creek in Orlando, Fla.

The crowd of Realtors stood up and applauded as Lambert proudly walked to the stage to accept the award from 2022 President Christina Pappas.

“You just have to work hard and never give up,” Lambert said. “Set your focus and decide what you want to achieve, and work hard toward it. Don’t ever let anything stop you. Thank you all for your support and for being on my journey with me. Remember, there’s nothing wrong with dreaming. Continue to dream big!”

Florida Realtors has presented Realtor of the Year and Associate Realtor of the Year awards for 68 years. Winners are honored as the greatest individual lifetime contributors to their local Realtor board, community, state association and the National Association of Realtors® (NAR).

Over the course of her real estate career, Lambert has passionately worked to make a positive impact on her profession, advance the industry and help her Realtor colleagues. She is a member of the Realtors® Association of Citrus County (RACC).

Wendy Crews Waller, RACC association executive, noted that Lambert “has a lengthy history of service to the Realtors Association of Citrus County and her contributions are invaluable. Cheryl joined RACC in 2005 and either formed, served on or chaired every committee we offer. She became president in 2013 and has continued to help guide and lead this association. Even as she took on responsibilities at the state level, she is always available to lend her time and expertise.”

A leader in regional, state and national real estate organizations, Lambert has served in every officer position for Florida Realtors, leading to being its 2021 president. A long-time passionate advocate for affordable, attainable housing, she currently serves on Florida Realtors’ Board of Directors and the Fair Housing Policy committee. Lambert also has served on the National Association of Realtors®’ (NAR) Housing Opportunities Task Force and participated in its affordable housing workshop.

During her year as Florida Realtors president, while the COVID-19 pandemic remained a national concern, Lambert emphasized the continued importance of Realtors working together to help others, especially during hard times. Florida Realtors’ four charities – the Disaster Relief Fund, Education Foundation Student Scholarships Program, Silent Angels and the license plate “Support Homeownership for All” program – achieved funding milestones in 2021.

In her community, she has served on the Citrus County Planning and Development Roundtable team, the Affordable Housing Coalition and the Inverness Old Town Association. Lambert founded the nonprofit corporation Home Ownership Matters for Everyone (HOME), which was awarded grant funding for container homes to help people in the Florida Panhandle whose homes were destroyed by Hurricane Michael in October 2018. In 2019, the Mid-Florida Homeless Coalition honored her with its Pioneer Award for her local work on attainable and affordable housing.

Lambert continues to make a difference in her community, looking for ways to help others and seeing what needs to be done, whether it’s communitywide or on a smaller, individual scale. Wendy Waller shares an example about her compassion:

“Cheryl is the kind of neighbor you want in your community. One of my favorite stories involves a young lady working at our local Wal-Mart who had recently received a raise that put her in a position to no longer be able to afford her rent, due to losing her financial assistance after her raise. Cheryl stepped in and not only assisted the young family in overcoming that obstacle but helped them become homeowners and get into their first home. This exemplifies who Cheryl is, not only as a Realtor but as a person.”

Throughout her career, Lambert has demonstrated her service, commitment and dedication to her profession, to her fellow Realtors and to her community.

Associate Realtor of the Year

Florida Realtors honored Cynthia “Cyndee” Haydon of the Pinellas Suncoast Association of Realtors as Associate Realtor of the Year for 2022. A real estate professional for 17 years, Haydon has long supported the real estate industry and her profession, and she’s an advocate for homeowners’ rights, especially when it comes to property insurance issues.

Haydon has served on numerous committees, all officer positions and in many other capacities for her local association, which does business as the Pinellas Realtor Organization (PRO). She has been a member of PRO’s board of directors for the past eight years and was its president in 2020. She has been awarded three PRO Service awards for her local contributions, as well as the PRO Lifetime Achievement Award in 2017. A 2015 graduate of the District 6 Leadership Institute, she was recognized with the first Vern Taylor Leadership Institute Hall of Fame Award in 2017.

In 2018, Haydon was part of her local association’s leadership team that successfully negotiated a merger with the Central Pasco Realtor Association and created a model for the chapter system. Currently, she serves as the 2022 president of the Tampa Chapter of the Women’s Council of Realtors (WCR).

On the state level, Haydon serves as Florida Realtors’ 2022 District 6 vice president and is a member of the Executive Committee. A 2017 graduate of Florida Realtors Leadership Academy, she has been a member or chaired numerous committees for the state association and served as one of Florida Realtors’ directors for the National Association of Realtors in 2019. Through that capacity, she also was accepted into the state association’s well regarded NAR Mentee Program. Haydon is active in global activities, advocacy efforts and legislative issues, serving as a key contact for state legislative leaders and is a Golden R and President’s Circle investor in the Realtors Political Action Committee (RPAC). She has a passion for insurance issues, especially flood insurance, and advocates for affordable insurance as well as educates others on the need for affordable insurance.

On the national level, Haydon currently serves on NAR’s board of directors, Insurance Committee, Public Policy Coordinating Committee and several work groups. She graduated from NAR’s Leadership Academy in 2021.

In the community, Haydon volunteers with a number of organizations, including the Clearwater Jazz Holiday Foundation, a nonprofit that supports jazz entertainment and education in Florida; St. Anthony’s Triathlon; John Hopkins All Children’s Guild; and Homes for Our Troops, which builds and donates specially adaptive homes nationwide for severely injured veterans from Iraq and Afghanistan. She has worked with Leadership Pinellas for many years, including as president in 2019, and continues to help build the area’s future leaders as part of the 42-year-old organization.

A dedicated Realtor, Haydon leads by example and demonstrates her commitment to her profession and her community.

Realtor Achievement Award

Daniel “Dan” Lopez, a member of the Orlando Regional Realtor Association (ORRA), was named the winner of Florida Realtors 2022 Realtor Achievement Award, which recognizes a Realtor who serves as manager, broker of record or officer in his or her company. The award acknowledges the winner’s previous three years’ contributions to the community, local, state and national Realtor associations.

Lopez serves on the board of directors for Florida Realtors and the National Association of Realtors, and previously served six years on his local association’s board of directors. He also sits on or has chaired multiple professional committees at the local, state and national levels. He is a major investor in the Realtors Political Action Committee (RPAC) and a past member of the board of directors for the Orlando chapter of the National Association of Residential Property Managers.

Lopez is a graduate of the ORRA Leadership Institute 2009, Florida Realtors Leadership Academy 2014, as well as Leadership Seminole 2018 and Central Florida Political Leadership Institute 2019.

He teaches for Florida Realtors, offering CE (continuing education) and GRI (Graduate Realtor Institute) courses, Code of Ethics training, property management and other classes. Lopez also is a faculty member for Gold Coast Schools, one of the largest real estate schools in Florida, where he teaches theoretical, practical and legal aspects of real estate.

In service to his local community, Lopez is a member of the city of Lake Mary’s Code Enforcement Board and serves on the Seminole County Planning and Zoning Board.

Newcomer of the Year Award

Winning Florida Realtors Newcomer Award for 2022 was Allisa Pipes, a member of the Naples Area Board of Realtors (NABOR). The Newcomer Award recognizes someone who entered the Realtor profession within the past three years, and, during that time, made notable contributions to the local and state associations, as well as to his or her community.

As a mother of three, she strives to lead by example to her children. Pipes is dedicated to her career as a Realtor and actively seeks involvement and growth within her local association. She has been working NABOR’s Young Professionals Network (YPN) and its Realtors Political Action Committee (RPAC) since 2021. She was appointed vice-chair of her local YPN in 2022, and when she becomes its 2023 committee chair, her goal is to continue to expand and welcome new members to YPN. As part of her YPN efforts, she helped organize it’s Knowledge is Power sessions, where a speaker comes in and shares their expertise on a specific topic.

Pipes also recently became a major investor in RPAC to support advocacy and public policy issues. She was honored with NABOR’s Realtor Rising Star Award in 2021.

Commercial Realtor Achievement Award

Anthony Gambardella, a member of the Broward, Palm Beaches and St. Lucie Realtors, received Florid Realtors’ 2022 Commercial Realtor Achievement Award, which honors a Realtor’s lifetime of contributions to commercial activities at the local, state and national levels.

A commercial Realtor since 2004, Gambardella has dedicated his time and talents to the industry during his 18-year career. He has served his local association on many committees, task forces and as 2011 president, and he was named its 2008 Realtor of the Year and 2018 Commercial Realtor of the Year. He also has represented the Broward, Palm Beaches and St. Lucie Realtors in numerous commercial property negotiations, obtaining “sublets” of its facilities, reducing overall operating expenses and saving money for the association. He recently became an instructor for his local Realtors Commercial Alliance, presenting commercial real estate classes for local board members as well as his office.

For the past 11 years, Gambardella has been instrumental in working with the St. Lucie County Attainable Housing Fund, assisting with funding needs for first-time homeowners in the St. Lucie and Treasure Coast area. He currently is the 2022 chair of the fund’s board of trustees.

At the state level, he has been an active member of numerous Florida Realtors’ committees, including Commercial Alliance, Building, Legislative & Regulatory Business Issues and Finance, as well as serving as on the state association’s board of directors. He currently chairs the National Association of Realtors’ Commercial Economic Issues and Trends Forum, and is a member of its Commercial and Research committees.

Gambardella is passionate about investing in his profession, contributing to the Realtor Political Action Committee (RPAC) and achieving Golden R, President’s Circle and RPAC Hall of Fame.

Humanitarian of the Year

Proving that Realtors make a difference, Katiuska (Kat) Villamizar, a member of the Naples Area Board of Realtors, was named the 2022 Humanitarian of the Year by Florida Realtors. She has long supported the American Red Cross in all of its efforts, proudly serving as a Red Cross Emergency Disaster Services volunteer for 12 years and receiving awards and recognition for her service. The Florida Gulf Coast Chapter is her local Red Cross organization.

Villamizar has helped families displaced by wildfires and home fires. She has been deployed both locally in Florida and nationally to assist in pre-storm and post-storm evacuation shelters in areas impacted by hurricanes – being deployed involves shelter preparations, logistics coordination, obtaining supplies, food preparation, ensuring the security of the facility and working with local government officials to provide a safe environment for the community. She also has acted as a government liaison within her local county’s Emergency Operations Center during disasters.

Why volunteer with the Red Cross? Villamizar said, as a Realtor, she saw “first-hand how the Red Cross provided immediate assistance, like shelter and other resources, to families who lost their homes in fires. This inspired me to become involved with the organization so I could help others in their time of need.”

She also has served as a volunteer to the Armed Forces within the Red Cross, helping active-duty service members at special events as well as veterans in hospitals in Southwest Florida.

And while Villamizar is passionate about all that the Red Cross does to help others, she also works with other community causes, including providing ongoing financial aid and other support to Destiny Village, an orphanage located in Haiti and helping organize “Un Regalo en Navidad” (A Christmas Gift) by the Una Mano Amiga foundation, which is dedicated to the Southwest Florida community.

Spirit of Advocacy Award

Russell Grooms, the 2004 president of Florida Realtors and a member of the Northeast Florida Association of Realtors, was recognized as the 2022 winner of the Spirit of Advocacy Award.

This award honors a member of Florida Realtors who has demonstrated excellence in advocacy at the local board, state association, national association and community within the governmental or political arena over their lifetime. Monetary donations are not a consideration for the award.

Grooms has invested more than 40 years in the real estate industry as a Realtor Emeritus. He has long been committed to advocacy and doing the hard work needed to support his profession. In fact, he has spent decades inspiring and educating others on key industry issues and asking for their support.

At the state level, since the mid-1980s, Grooms has been a key contact helping to keep many legislators informed about real estate industry concerns and issues, and has served on or chaired dozens of Florida Realtors committees, presidential advisory groups (PAGs) and forums.

At the national level, he has served as a Federal Political Coordinator to members of Congress for the National Association of Realtors and on countless NAR committees, from its Federal Legislative and Political Forum to the State and Local Issues Mobilization Committee.

In the Jacksonville area community, Grooms has personally worked on numerous local, state and congressional candidate campaigns. His advocacy efforts over his long career include successfully fighting a proposed sales tax on services in Florida – twice – as well as calling for changes in the guidelines for PACE (Property Assessed Clean Energy) programs in the state.

Grooms is a dedicated advocate for private property rights, a strong voice for Realtor engagement and investment, and represents the real estate profession at its best.

Environmental (ENVY) Award, residential category

Florida Realtors ENVY award for 2022 recognizes a residential development that showcases green practices and features designed in harmony with Florida’s natural resources: SweetBay in Panama City.

In 2007, St. Andrew Bay Land Company acquired Panama City’s original airport, which was located on the beautiful coastal waters of St. Andrew Bay and ranged over 700 acres. Developers had a vision of creating Florida’s largest adaptive reuse and infill development with this project – and SweetBay was the result.

The project’s master plan includes shared community spaces, a walkable neighborhood and thriving mixed-use areas. Framed by over five miles of unspoiled bayfront waterways, the project’s planning and development paid careful attention to the preservation of, and impact to, natural areas.

More than 1,500 native trees have been planted, transforming the former bare commercial site, with more 140 acres set aside as conservation areas. In a space that was once an airport, wildlife abounds and native habitat like seagrasses around the bay and bayou areas is preserved. In fact, a rare and unique Panama City Crayfish species was identified on site during SweetBay’s development, and a habitat has been designated especially for the species’ preservation.

Once the development is completed, almost one quarter of SweetBay’s acreage will be green space, canopied parks, conservation areas and wetland preserves.

Education Volunteer of the Year

The Education Volunteer of the Year Award recognizes members who volunteered their time and energy to advance professional development for Realtors. This year’s Education Volunteer of the Year winner is Gwen Davis-Gideon from the Naples Area Board of Realtors.

A small business owner who has managed her own investment properties for 30 years, Davis-Gideon is a graduate of the University of Cincinnati with a degree in business management. She is active in her community and numerous real estate organizations. Currently a member of the NABOR Leadership Academy, she also serves on her local board’s Professional Development, Professional Standards and Membership committees. Davis-Gideon is a member of Florida Realtors’ Professional Development and Global Business committees and serves on the National Association of Realtors Professional Development Committee.

She is a member of the National Association of Hispanic Real Estate Professionals and the Southwest Florida Real Estate Investment Association, as well as a member of her area Women’s Council of Realtors.

Davis-Gideon teaches several Florida Realtors-approved courses under CE Express, including “Be the Change, Fair Housing and You,” and “How to Make the Most of Your Property Management Business.” Helping fellow Realtors grow their knowledge is how Davis-Gideon gives back to her industry.

Educator of the Year

This year’s Florida Realtors Educator of the Year is Denise Oyler, a member of Realtor Association of Sarasota and Manatee (RASM). A Realtor for 17 years, she is licensed in three states: Florida, Georgia and North Carolina.

Oyler has served on the board of directors of RASM and Florida Realtors, as well as a member of several committees for both her local association and the state association. She was named Realtor of the Year in 2019 by the Realtor Association of Sarasota and Manatee in recognition of her dedication and all the courses she has taught over the years, sharing her knowledge and expertise with her Realtor peers.

During the past two years, Oyler has taught more than 125 classes as a real estate instructor at the local, state and national levels. Courses include several GRI (Graduate Realtor Institute) topics; SRES (Seniors Real Estate Specialist); and, under CE Express, Code of Ethics, Core Law, Contracts, Residential Investors and more.

One local association leader recognized Oyler for her “passion for teaching” and added, “She appeals to all different types of learners. Her firsthand experience and stories she contributes to the classes really drive home the topics and help our students understand on a deeper level.”

Florida Realtor magazine awards

Florida Realtor Magazine Best Article: Kristen Conti, Englewood Area Board of Realtors, for the article, “A (Not So) Bird-Brained Idea,” July 2021, Florida Realtor magazine

Florida Realtor Magazine Editorial Excellence: Booker Pickett, Greater Tampa Realtors, for the article, “A Path to Homeownership,” June 2021, Florida Realtor magazine

https://www.floridarealtors.org/news-media/news-articles/2022/08/florida-realtors-honors-2022-award-winners

Home Prices Dipped – Will They Now Plummet?

In some locations, prices will likely flatten or perhaps dip as much as 5% – but even with a slight drop in July, home prices were still up 10.8% year-to-year.

CHICAGO – The National Association of Realtors®’ (NAR) reported a slight drop in home prices in its latest report, leading some speculators to wonder if it’s the first volley of major price declines this fall.

According to NAR, home prices fell $10,000 month-to-month to $413,800 in July – but prices were still up 10.8% year over year.

“Prices are still growing [annually] by double digits,” says Realtor.com Chief Economist Danielle Hale. “We have a long way to go before we see prices decline.”

On the other hand, NAR found that existing-home sales fell 20.2% year-over-year, while new-home sales dropped nearly 30% in July year-to-year.

“Economics 101 says prices have to decelerate, and that’s what we’re seeing today,” says Devyn Bachman at John Burns Real Estate Consulting.

The decline will not unfold equally across the country, and Moody’s Analytics Chief Economist Mark Zandi expects home prices to flatten or possibly fall as much as 5%, particularly if a recession does not materialize.

Some of the largest price corrections could occur in construction as new homes are typically more expensive than existing ones, and rising inflation, recession fears, record-high prices and higher mortgage rates are scaring off buyers.

And, some of the largest corrections could transpire in states like Texas, where new construction has boomed, as well as in the more costly markets of Florida.

Source: Realtor.com (08/24/22) Trapasso, Clare

https://www.floridarealtors.org/news-media/news-articles/2022/08/home-prices-dipped-will-they-now-plummet

Wells Fargo Cuts Back on Mortgage Lending

NEW YORK – Wells Fargo & Co. plans to shrink its vast mortgage empire, which once churned out one of every three home loans in the US and for a time made the bank the most valuable in the nation.

No longer committed to ranking No. 1 in the business, Wells Fargo’s leadership is preparing a retreat that will probably start with the bank’s ties to outside mortgage firms that generated roughly a third of its $205 billion in new home loans last year, according to people with knowledge of the decision. The strategy shift follows changes in the executive ranks and years of struggles to avoid costly regulatory probes and hits to the bank’s reputation.

In the past year alone, flareups have included a $250 million fine for lapses that hurt borrowers in distress, as well as revelations in a Bloomberg News report that Wells Fargo, more than any other major US lender, rejected refinancings for Black homeowners more often than white ones. Both topics are likely to come up when the heads of big banks go to Washington for congressional hearings slated for next month.

Wells Fargo was the lone holdout when giant U.S. banks concluded after the 2008 financial crisis that mortgages are better done in moderation. Now, its executives are sketching plans that would curb new lending and related businesses such as loan servicing.

One senior executive said it would be surprising if Wells Fargo’s mortgage business ends up as large as what JPMorgan Chase & Co.’s is today. With many details yet to be hashed out, the focus will be on lending to people with existing relationships to the bank, or in places where it’s already present.

“Wells Fargo is committed to supporting our customers and communities through our home-lending business,” the San Francisco-based company said in a statement. “Like others in the industry, we’re evaluating the size of our mortgage business to adapt to a dramatically smaller originations market. We’re also continuing to look across the company to prioritize and best position us to serve our customers broadly.”

A debate inside Wells Fargo over what to do with the mortgage franchise has been heating up for months, with a consensus starting to take shape in recent weeks, according to the people. They asked not to be named discussing internal deliberations, which are continuing.

Retrenching will almost certainly include paring, or potentially even halting, so-called correspondent mortgage lending, in which Wells Fargo provides funding for loans arranged by outsiders, the people said. The channel offers benefits but also poses risks. Some banks use correspondent loans to diversify or round out portfolios they may keep on their balance sheets. A concern inside Wells Fargo is that when it finances large amounts of loans from other firms, it’s on the hook for any reputational damage if problems later surface.

Down the road, the bank’s third-party servicing business – which oversees billing and collections for some $700 billion in loans made by other lenders – will also shrink.

One area Wells Fargo will likely examine is servicing of Federal Housing Administration (FHA) loans. The bank already has pulled back from FHA lending. Some prominent bankers have complained over the years that handling FHA debts isn’t worth the risk that the government may fault their practices and impose heavy penalties.

Banks treat servicing rights as an asset that generates revenue over time. Wells Fargo valued the rights on its balance sheet at $10.4 billion as of midyear.

Job cuts inside Wells Fargo are already underway as the Federal Reserve’s interest-rate hikes slow applications. Insiders acknowledge those headcount reductions ultimately will go deeper as the firm recalibrates its size.

Less clear is what may happen long-term to the volume of home loans Wells Fargo makes directly, and how much the bank will stockpile on its balance sheet. Those decisions may depend more on how the economy and interest rates develop. But in one sign of the firm’s evolving philosophy, executives are already under orders to improve handling of applications from existing consumer-banking and wealth-management clients, rather than refer them to the same system used by non-customers.

In crosshairs

The hard look at Wells Fargo’s mortgage empire follows changes throughout the bank’s leadership. Charlie Scharf joined as chief executive officer almost three years ago to deal with a series of scandals that began with the revelation that the bank had opened millions of unauthorized accounts for customers. The abuses angered the public, thrust the company into Capitol Hill’s crosshairs and set off a pile of regulatory sanctions, including a Fed-imposed cap on the firm’s size. He embarked on a review of the bank’s operations, selling an asset manager, corporate-trust unit and student-lending book.

The question of whether to pare back mortgage-related operations arose repeatedly, according to insiders, but a number of key executives favored continuing the franchise’s dominance of the market. The firm hauled in more than $57 billion in fees from mortgage banking over the past decade, filings show. They don’t break out profits after covering costs.

In recent months, the tide began turning. And in June, Scharf signaled Wells Fargo was taking a closer look at mortgages. Weeks later he noted that he wouldn’t be tethered to the firm’s past ambitions there.

“We’re not interested in being extraordinarily large in the mortgage business just for the sake of being in the mortgage business,” Scharf, 57, told analysts on a conference call last month. “We are in the home-lending business because we think home lending is an important product for us to talk to our customers about, and that will ultimately dictate the appropriate size of it.”

That week, Wells Fargo announced that its head of consumer lending, Mike Weinbach, would be replaced by Kleber Santos, the lender’s head of diverse segments, representation and inclusion. Talks about strategic changes have since accelerated.

‘Want to be No. 1’

It’s quite a turnaround from just a few years ago when Wells Fargo was defending its mortgage crown from the advance of online lenders led by Rocket Mortgage.

“We want to be No. 1 regardless of who we’re competing with, because that’s the position we hold and we’re enthusiastic about it,” John Shrewsberry, the bank’s then-finance chief, said in early 2018.

Since then, Wells Fargo’s mortgage unit has repeatedly featured in scandals, with the bank vowing to do better. That year, the Office of the Comptroller of the Currency and the Consumer Financial Protection Bureau fined the company $1 billion for a variety of abuses including in mortgages. Among them, the firm overcharged some customers for locking in low interest rates.

Wells Fargo also disclosed that year that a software glitch caused the bank to deny loan modifications to some struggling buyers who would have qualified, leading it to foreclose on hundreds of them.

Then last year, the OCC punished the company again, citing a lack of progress in improving its systems for avoiding foreclosures and helping affected borrowers. The regulator ordered the bank to refrain from acquiring certain residential servicing rights from other firms and to ensure that certain borrowers aren’t transferred out of its servicing portfolio until it makes victims whole.

The latest issue in Wells Fargo’s mortgage business is a gap between the bank’s approval rates for Black and white homeowners who rushed to lower interest payments amid the Covid-19 pandemic. About 47% of Black people who filled out refinancing applications with Wells Fargo in 2020 were approved, compared with 72% of white homeowners. Since Bloomberg spotlighted the data, Wells Fargo has faced federal lawsuits and renewed scrutiny from lawmakers.

Wells Fargo has said it treats all potential borrowers consistently, regardless of their race or ethnicity, and that an internal review of 2020 refinancing decisions showed “additional, legitimate, credit-related factors” were responsible for the differences.

Mortgage cowboys

Shrinking – even in a downturn – will be complicated. Economic uncertainty and higher Fed rates can hurt the value of some mortgage assets. The bank will also have to navigate the OCC’s restriction on transferring many servicing customers out of the firm. Executives expect the process may take years.

Once done, it will close a chapter in the industry.

Banks dominated the home-loan market heading into 2008 financial crisis. After the bust, many large lenders faced tens of billions of dollars in liability from mortgage-related operations and retreated. Bank of America Corp., for example, originated more than $100 billion of new home loans in a single quarter in 2009 after scooping up scandal-ridden Countrywide Financial. By 2018, it was originating less than 10% of that.

Wells Fargo held itself out as the exception. The firm avoided an annual loss in the crisis and then rode a surge in refinancings, making mortgages a key part of its identity. By early 2012, industry observers were estimating it commanded a record share of the U.S. mortgage market with more than 33%.

Executives wanted to go further. At a gathering of more than 500 loan officers that year, sales managers dressed up as cowboys with fake mustaches on their lips and six shooters on their hips, urging staff to lend more. The invitation read: “40% or BUST!!”

Boosted by its mortgage engine, the bank would go on to post six straight years of record profits. And for much of that period, it had a greater market value than JPMorgan.

But the scandals that started erupting in 2016 ended that. Wells Fargo is now the third most valuable bank in the U.S. with a market capitalization of $174 billion – less than half JPMorgan’s.

Meanwhile, a new breed of online mortgage lenders swelled to fill the void left by banks. Quicken Loans grew from the 34th-largest provider of mortgages when the housing market reached its previous peak in 2006 to eventually pass Wells Fargo in originating new home loans. Along the way, it changed its name to Rocket. The venture still holds and services far fewer mortgages than the bank.

Bankers grouse that they are beholden to more regulators, and with that comes greater odds of probes and scandals.

“It is very different today running a mortgage business inside a bank than it was 15 years ago,” Scharf said at a June conference. “That does force you to sit back and say, `What does that mean? How big do you want to be? Where does it fit in?’”

https://www.floridarealtors.org/news-media/news-articles/2022/08/wells-fargo-cuts-back-mortgage-lending