With the Coronavirus effects growing with each passing day the Florida real
estate market has been turned upside down, in both negative and positive ways.
2019 ended
with Florida single family sales up nearly six percent, with townhomes and
condos mostly flat. South Florida had a
more modest two percent growth rate for single family homes, but townhomes and
condos fell by nearly two percent over 2018.
Prices continued to climb with the average single-family homes selling
for $360,000.00.
2020 started
with a bang, with single family sales through February 2020 up thirteen percent
and townhomes and condos up twelve and one-half percent. Nationally, new home sales jumped nearly
eight percent, to a seasonally adjusted annual rate of 764,000 units last February,
the highest level since July 2007.
Then the
virus hit, dramatically changing the real estate landscape. Reaction in the financial sector was
swift. At the beginning of March, the
Federal Reserve cut interest rates by one-half percent, then two weeks later,
another rate cut to make the borrowing rate from the Federal Reserve
essentially zero percent. The goal was
to make money cheaper and protect the economy from falling into recession.
Despite these
moves, and now a promise of an over one trillion-dollar infusion by the federal
government, the stock market has dropped dramatically, losing nearly 1/3rd
of its value since record highs on February 12.
This has caused the yield on treasury bills to also fall dramatically,
falling nearly one percent in one month.
The 10-year treasury yield, the rate most correlated with mortgages, has
fallen from 1.5% in mid-February to below one percent on March 21.
This has led
to a drop in home mortgage rates, perhaps the one silver lining in this
otherwise catastrophic problem.
Thirty-year fixed rates have remained low, dropping from five percent in
late 2018 to three and three quarters to start 2020. Rates dipped as low as to three and one
quarter (a record all-time low) on March 5 amid worsening virus news but have
now increased to mid to high threes in response to the large number of loan
applications inundating lenders.
Once the
backlog lessens, and assuming the commitment to buy mortgage back securities by
the Federal Reserve continues (started at 200 billion and could go over 1
trillion), rates will likely again fall, with some predicting rates at or below
three percent by June 2020. If you are
currently paying over four percent on your home mortgage you should watch these
rates carefully and be prepared to lock in timely. On a typical $300,000.00 loan, a one percent
drop in interest will save over $2,000 the first year.
Closing on
these new loans, as well as existing home sales, has become a challenge for
attorneys and title companies due to all the movement restrictions. However, a new law that went into effect on
January 1 is providing some relief for those still willing to close on sales
and refinances. The law now allows for
remote online notarization of legal documents, including affidavits, deeds and
mortgages.
Using a
computer equipped with a webcam, two forms of photo identification and a
cellphone that can take pictures and upload the images will be what is needed
to conduct a remote closing from any location, including overseas (for United
States citizens). A seller or
buyer/borrower will be given an email link to log into a special website to
conduct the closing.
A common
setup will have a text messaging window and instructions on the left, documents
to sign in the middle and three video windows on the right. Once logged in the consumer will see
themselves in a video window, along with the notary public and the closing
agent. The user will hold-up their two
ids for the notary to review, and once confirmed as valid, the consumer will
use a special application on their cell phone to upload pictures of the ids for
further verification. Once verified, a
set of common, consumer credit derived multiple choice questions, will further
verify identity, such as what street did you live on 1995 and what color car do
you own.
Once identity
is verified, the closing agent will direct the consumer to read and sign the
documents on screen using their choice of simulated signatures and
initials. As each document is signed,
the notary will notarize where needed, and for documents requiring witnesses,
such as deeds, both the notary and the closing agent will sign as witnesses to
the document. Once all closing documents
are signed, the consumer can either download a copy or wait for an emailed
copy. The closing agent will take the
documents that have to be recorded, such as mortgages and deeds, and
electronically submit them to the Clerk of the Circuit Court using an e-filing
program to official record the document
So now a
sequestered seller in California can sell and a vacationing buyer/borrower
stuck in Italy can buy and close on their loan as if they had flown in and
closed at the closing agent's office.
With low rates and remote closings, the devastation to the real estate
industry from the virus will be partially blunted, but make no mistake, it will
hurt sales dramatically and may take months or the rest of the year to recover.
Michael J Posner, Esq., is a partner in Ward, Damon,
Posner, Pheterson & Bleau, P.L. a mid-sized real estate and
business-oriented law firm serving all of South Florida, with three offices in
Palm Beach County. They specialize in
real estate law and can assist sellers and purchaser remotely with closing and
financing of residential and commercial real estate. They can be reached at 561.594.1452 or at
mjposner@warddamon.com
