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Florida CFO: Why aren’t insurance rates dropping? TALLAHASSEE, Fla. AP – Aug. 8, 2013 – Florida Chief Financial Officer Jeff Atwater wants to know why homeowner insurance rates aren’t dropping.Atwater sent a letter Wednesday to Florida’s insurance commissioner, Kevin McCarty, noting that one of the main costs for insurers has been going down this year. He asked McCarty why those savings weren’t being passed along to consumers.Atwater is one of the state officials with the power to hire and fire the insurance commissioner.In his letter, Atwater wrote that trade journals have reported recently that the cost of reinsurance has come down an average of 15 to 20 percent. Insurers purchase reinsurance from an out-of-state or foreign company to provide the insurer financial backing in case of major claims.Atwater said Floridians need answers and they need to see their insurance bills coming down.“If insurance companies can justifiably raise rates on Florida families because the reinsurance market drives their costs up, they can certainly lower the costs for Florida families when reinsurance prices fall,” Atwater wrote.A spokeswoman for McCarty said his office was working on a response.Annual reports prepared by Florida’s Office of Insurance Regulation show that the department has been approving more than 100 rate hike requests a year since 2009, including requests to raise rates by double-digits.But McCarty in late May said he expected insurance rates to stabilize in the coming year.The reasons for Florida’s steadily increasing rates are varied and have triggered endless arguments, especially among state lawmakers and others in the last two decades.Industry officials argue that insurers in the past did not charge adequate rates to deal with the real risk of covering homes in hurricane-prone Florida. The fragile nature of the market has been exposed by storms such as Hurricane Andrew in 1992, a Category 5 storm that destroyed much of the South Florida city of Homestead, and the series of storms that battered the state in 2004 and 2005.

New home sales hit fastest pace in 5 years

Sales of new homes rose in May to the fastest pace in five years, a solid gain that added to signs of a steadily improving housing market.

New home sales rose 2.1 percent last month compared with April to a seasonally adjusted annual rate of 476,000, the highest level since July 2008, the Commerce Department reported Tuesday.

The median price of a new home sold in May was $263,900, up 3.3 percent from a year ago.

Sales of new homes remain below the 700,000 annual rate that’s considered healthy by most economists. But the pace has increased 29 percent from a year ago.

Analysts say the housing recovery is looking more sustainable and should continue to boost economic growth this year, offsetting some drag from higher taxes and federal spending cuts.

The sales gains in May were led by a 40.7 percent increase in the Midwest followed by a 20.7 percent gain in the Northeast. Sales were also up 3.6 percent in the West but they fell 9 percent in the South.

The inventory of unsold homes rose 2.5 percent to 161,000 in May, the highest level since August 2011 but still just 13 percent higher than the record low for inventories set in July 2012. Prices of new homes have been rising in part because more people are bidding on a limited number of homes.

The National Association of Realtors reported last week that sales of previously occupied homes surpassed 5 million in May. It was the first time that’s happened in 3 1/2 years.

Sales of previously owned homes rose to an annual rate of 5.18 million in May. The last time sales had exceeded 5 million was in November 2009, a month when the pending expiration of a home-buying tax credit briefly inflated sales.

Steady hiring and low mortgage rates have encouraged more people to buy homes. And with demand up, prices rising and few homes on the market, builders have grown more optimistic about their prospects, leading to more construction and jobs.

Last week, Federal Reserve Chairman Ben Bernanke cited the housing gains as a major reason the Fed’s economic outlook has brightened.

Still, mortgage rates have jumped in recent weeks. And they’re expected to rise further now that the Fed has signaled it plans to scale back its bond purchases this year if the economy continues to strengthen. A pullback in the bond purchases would likely send long-term borrowing rates up. Higher mortgage rates could slow some of the housing market’s momentum.

For now, a brighter outlook for housing has made builders more optimistic. The National Association of Home Builders/Wells Fargo builder sentiment index rose in June to 52, up from 44 in May.

 

Remember the headlines a few years back declaring that Florida was no longer THE retirement haven.

Not so fast.

New Census Bureau estimates released Thursday show that 18.2 percent of Floridians are over age 65, the highest rate of any state in the nation. Maine and West Virginia rank second and third, respectively. Alaska had the lowest share of older residents, at 8.5 percent, followed by Utah and Texas.

Among counties, just under half of Sumter County’s residents are over age 65, the highest share of any county in the nation. The county located about 40 miles northwest of Orlando is home to the retirement community, The Villages, and also is one of the fastest-growing regions of the state.

The county with the next-highest percentage of seniors in the nation was Charlotte County in southwest Florida, where over a third of the population is over age 65.

Statewide, almost all counties experienced slower growth or a reversal of boomer population growth since 2010, said Mark Mather, an associate vice president for the Population Reference Bureau who analyzed the numbers.

“The recent decline in migration rates among baby boomers is significant because boomers were expected to jump-start economic growth in rural America,” said Mather, noting that parts of the rural Midwest and Appalachia had been losing population for decades. “But since the recession, we’ve seen more boomers aging in place.”

Nationally, the 65-and-older population grew 4.3 percent between 2011 and 2012, to 43.1 million, or 13.7 percent of the U.S. population.The 85-and-older population increased by about 3 percent from 2011 to 2012, to almost 5.9 million. The number of centenarians rose to almost 62,000.

Finally, the nation’s median age rose to 37.5, up from 37.3 in 2011.

A new FHA rule that took effect on June 3 will cushion the agency against a budget shortfall, but at the same time will saddle its mortgage borrowers with higher costs.

Going forward, new homebuyers now must pay the insurance premium on their FHA loan – which previously expired once 22 percent of the principal was paid – for a minimum of 11 years and possibly for as long as the life of the loan.

That could mean hundreds of extra dollars each month in payments for FHA borrowers, who typically have flawed credit and/or cannot contribute a large downpayment.

The time it takes to foreclosure on a mortgage in Florida may soon get a bit shorter now that Gov. Rick Scott signed a bill to speed the process into law on Friday.

“Florida’s housing market is important to our economy’s continuous recovery and this bill will aid in that effort by placing abandoned homes, caught up in the foreclosure process, back onto the market,” wrote Scott in the bill-signing letter for HB 87, sponsored by Rep. Kathleen Passidomo (R-Naples). “This process will put these homes back onto the housing market and allow Florida families who have experienced a foreclosure to begin working to repair their credit and finances.”

The new law brings more certainty to the state’s housing market, the governor added. It took effect immediately after Scott signed it.

Florida’s foreclosure process now takes about 853 days, which is more than twice the national average. In sponsoring HB 87 earlier this year, Passidomo noted that it maintains the due-process rights for struggling homeowners while boosting the state’s real estate recovery by getting foreclosed property “back into the stream of commerce.”

The new law gives lenders the right to ask the court to justify why a final foreclosure order hasn’t been entered; and it also allows condominium and homeowners associations to ask the court to speed the process along where appropriate.

Consumer interests are addressed in several provisions including:

• Requiring lenders to prove in detail that they own the loan for a property before foreclosing on it;

• Reducing the time lenders can seek deficiency judgments from five years to one year;

• And providing protections for innocent parties who purchase a property without knowledge that a previous owner may have a claim to the property.

A deficiency judgment refers to the difference between what the original owner still owes on a mortgage and the money received from selling a foreclosed property.

Consumer Confidence, which measures how optimistic or pessimistic consumers are with respect to the economy in the near future, hit a five-year high in May, coming in at 76.2. The Consumer Sentiment Index, a similar measure, also came in above expectations for May.

There was also good news on the housing front, as the Case Shiller 20-city Home Price Index rose 10.9 percent year-over-year. This was above expectations and the best annual gain in seven years.  In addition, the second estimate for first quarter Gross Domestic Product (GDP) rose by 2.4 percent. By comparison, the final reading of GDP for the fourth quarter of 2012 was 0.4 percent. GDP is an important measure of productivity growth and a key indicator of economic strength.

In inflation news, the Personal Consumption Expenditures (PCE), the Fed’s favorite measure of inflation, shows that inflation remains tame. In fact, the year-over-year core PCE (which excludes volatile food and energy measurements) is running at 1.1 percent, well below the Fed’s upper end target of 2 percent and just above the all-time low.

What does all of this mean for home loan rates? Remember: Weak economic news normally causes money to flow out of stocks and into bonds, helping bonds and home loan rates (which are tied to mortgage bonds) improve. Strong economic news often has the opposite result. With several strong economic reports released last week, bonds and home loan rates felt the impact.

However, helping bonds and home loan rates is the fact that inflation remains non-existent, as inflation reduces the value of fixed investments like bonds. An important question moving forward is: Will the Fed continue its bond purchase program known as Quantitative Easing? While low inflation gives the Fed reasons to do so, there are growing opinions that the program should come to an end.

30 year rates still around 4% is VERY low cost of money.

Chris Ryder