It’s been a little while since we released the official SW Florida Real Estate Current Market Index. This index accurately predicts the near term forward direction of the local real estate market by analyzing current market activity against inventory levels and assigning a value. A lower index level indicates a hotter the market, and a higher number indicates a cooling market.
As you can see, the forward indicator heated up in February and we witnessed strong sales since that time. We have noticed a slight cooling trend since May. As we write this article official numbers haven’t been released yet, but we have spoken with several agents and loan officers who have also indicated a cooling trend since May.
At 4.94 the index still boasts very strong numbers; however the trend has been rising lately so we’ll want to keep an eye on it. One reason the market has cooled a bit is because bargain based foreclosure property inventory levels have fallen off which has cooled buying demand. SW Florida has been a price sensitive market and buyers are off the fence and buying because they perceive real bargains. The looming question has always been what will buyers do when the real bargains begin to dry up?
We have heard reports that banks will be unloading more foreclosures to the market soon, and already we are seeing that. Banks are not filing new foreclosures at the pace they once were, so we wondered how this could be true. The answer may be that the banks have not released the entire inventory they foreclosed upon in the past few years.
To give an example, we just pre-listed a bank foreclosure we’ll be bringing to the market soon. From the time an agent receives a pre-listing it can take 1-6 weeks or so before property is ready to bring to market. Several reports, valuations, and decisions must be made, and in some instances repairs, water hookups, etc before the property is ready for market.
This particular property had suffered some fire damage. The bank of course wanted a fire report from the fire department once they learned this new fact. Keep in mind, the banks don’t know what they’ve got on their hands until the appraisal and agent reports inform them. We obtained the fire report and determined the fire occurred back in 2007. It’s obvious the borrower has not lived in the property since 2007, and presumably hasn’t made a payment on a damaged property they weren’t living in.
So the question is, if the buyer wasn’t making payments, why did it take from 2007 until now for the bank to foreclose and/or bring the property to market. The bank is just now discovering there was a fire over 3 yrs ago in the property.
The answer is either the banks have held back inventory, or have just been too busy working their backlog. So just because foreclosure filings have been down in the past year doesn’t mean there couldn’t be more ready to hit the market.
In addition to the banks we’re dealing with, we’ve also been working on FNMA listings. We’ve been told by various sources to get ready for an influx of FNMA properties as well, and already we’ve been assigned several pre-listings.
Banks have been more diligent on short sales, but they’re still not quick enough. Short sale closings have been rising, but they’re still a drop in the bucket compared to the struggling homeowners out there.
With short sale closings rising, and the possibility of more bargains hitting the market, we could see the index drop again, but for now it is rising and we’ll want to monitor. Nationwide sales have slowed, so it’s not just a SW Florida trend. We’ll be watching sales volume and pricing trends closely in the coming weeks and update you.
Tune in to The Future of Real Estate Video Show.