As expected, SW Florida median single family home sale prices rose in February, up 4.1% over last year’s numbers and up 3.39% from this January’s numbers. Sales volume was down 12% from last year and up 3.17% from this January.
These sales numbers were not unexpected as we’ve definitely seen an uptick in 2nd home buyers from up North looking to secure their piece of paradise before prices go back up. Banks have also lowered inventory due to legal issues with the foreclosures which has dried up inventory at the lower end. Investors are finding it more difficult to find lower priced homes to flip. We’ve entered a period where the short term investor is being squeezed out and we’re left with long term investors who can purchase and rent the property with a positive cash flow, but can’t flip right now and make a guaranteed home run.
Actually the market is healthier and more balanced in this period than it has been since 2005. It’s always dangerous to buy something with the immediate expectation of a flip. This is all well and good when it works, but too many speculators didn’t have a plan B if the market turned, which it obviously did. Back in 2005 prices a property wouldn’t cash flow, so when the flip didn’t work, neither did the rent for cash flow. Today investors truly should focus on long term. Prices are still well below replacement cost and artificially too low, so there is automatic built-in price increases on the way, it’s just a matter of time.
Positive cash flow buys time, and a great investment provides cash flow and long term appreciation, not to mention possible tax benefits. For regular homeowners we always recommend buying a home that suits your needs and you can be happy in. Long term, a home is usually a good investment, but why suffer with a home that doesn’t meet your needs in the meantime? In the end the numbers work themselves out but you have to live with the home. You might rent a home you’re not crazy about, but why buy something you don’t like just because it appears to be a good investment?
Home affordability is high, although inventory selection has been declining. Unless banks start listing foreclosures again, we should see another decline in inventory levels this month as sales have been strong. The perfect opportunity for a buyer was probably between April 2009 when prices were at their lowest and December of 2009 when inventory was it its highest. Since then prices are higher by 7.02% and inventory countywide is down 8.70%
We’ve been hearing from banks and Fannie Mae that they could start releasing inventory again in the next month or two. We’ve seen listings trickle in, and we expect more in the coming months.
The market has always had a thirst for more inventory, so that won’t be an issue. The lack thereof will create price increases, so the true test will be how much more bank owned inventory is on the way compared to market thirst. The answer is prices will rise; the question is how high and how fast. We’ll be keeping an eye out for the inventory as that will be the leading indicator for the answer to how high and how fast.