Official real estate sales numbers were recently released so we decided to take a look at how the Fort Myers/Cape Coral market fared against the top markets in the state. Cape Coral/Fort Myers is considered a metropolitan statistical area (MSAs) Our MSA includes Bonita Springs, Estero and all of Lee County Florida.
Let’s start off with the bad news and get that out of the way, which will lead us to the good news. The bad news is the Cape Coral/Fort Myers MSA led the state in median sales price decline year over year for July. Lee County was down 43% to $89,000 in July 2009, down from $154,900 in July of 2008. This isn’t new news as we’ve led the state all year as SW Florida was perhaps the most over supplied market in the state for single family homes.
This leads us to the good news. Our area also leads the state in sales increases in transactions. Because SW Florida was quicker to react than other markets, we were quicker to post sales gains. The Cape Coral and Lehigh Acres areas have been the focus of news reports on NBC Nightly News, the Today Show, Wall Street Journal, and many other worldwide media outlets which has led to an awareness of the bargains available in SW Florida. You’ve heard the old saying, “Even bad press is good press.” Well, it’s certainly true as Lee County has drawn the attention of northerners, Canadians, Europeans and Germans among others looking to buy a piece of paradise at a decent price.
While we have seen many northerners buying second homes in our area, most of the single family home sales have been first time home buyers and investors. My friend Jeff Tumbarello with the SW Florida Real Estate Investors Association recently did a study and found recent sales were 64% cash buyers, which is an indication investors have found SW Florida and realize it is a bargain.
Cash buyers can also be a sign that the new government appraisal rules are not working and are limiting many home sales. The new program is called HVCC and stands for Home Valuation Code of Conduct. This new program creates a middle man and increases costs to borrowers, and it prohibits communication from loan officers and appraisers. At first glance this may sound good, but in reality it has increased pressure on appraisers to turn around appraisals quickly, while at the same time slowing down appraisals getting to the lender. Imagine that, a government program increasing costs, increasing pressure and slowing things down.
The worse news is buyers are shopping these bargains, finding them, making offers and applying for financing only to be told that an out of area appraiser doesn’t think these homes are worth it. The buyer wants to buy, and the seller wants to sell, but neither can, so it goes back on the market and is sold to a cash buyer for less because regular buyers can’t get financing. Many of the foreclosures go to cash buyers because bank asset managers know it’s tough to get financing buyers through due to appraisal issues.
Fannie Mae and Freddie Mac back most of the loans other than government FHA and VA loans, and both have adopted the HVCC which was put together by regulator Federal Housing Finance Agency (FHFA), so we’re stuck with appraisal rules whether they’re good or not. We can blame our government for keeping home prices artificially low and preventing many qualified buyers from purchasing a home they wish to buy. I’m sure there are some good aspects to the rules, but the reality of the results is wrecking the market and changes should be adopted quickly. Rules should not dictate market value, the market should. These new rules will actually fuel further foreclosures from sellers who cannot sell.
Fort Myers-Cape Coral Sales Trends
The statewide average of home sale growth was 37%, and you can see Fort Myers/Cape Coral blew that average away at 104% The next closest was Miami at 64%. As you can see, many metro areas are experiencing home sale growth which is encouraging, and this growth would have been much better both here and statewide if the appraisal issues were corrected. We expect foreclosures to increase this year over last year. The good news is buyers have absorbed all the foreclosures and eaten into existing inventory. The sooner we fix the appraisal mess the government created, and complete the foreclosure cycle, the sooner our market will be back to normal. In the meantime, enjoy the higher sales volume and the bargains as our market heals itself.