It seems like everyone is reporting that prices are up in SW Florida, but prices only tell part of the story. Supply and demand usually influence prices. Even then there can be variables to this equation.
Here’s a little story that illustrates the public’s perception about how Hot a neighborhood is. There is a golf course community in South Fort Myers called Eagle Ridge. I remember back in the late 80’s people commenting that it seemed like the whole neighborhood was for sale. It seemed that way, when in reality about every third home was on the market. 33% of homes in a neighborhood on the market at one time is a big number, and homes weren’t particularly selling well at that time in Eagle Ridge either. It was just a lot to absorb, and 1989-1991 was a different market.
Fast forward to several years later, exact date unknown. Another consumer was questioning why they should buy a home in Eagle Ridge when there were very few sales in the past year to compare to. The buyer questioned why nobody wanted to purchase in there and if they were making the right decision.
The answer was many people wanted to buy in Eagle Ridge at that time. It just so happened that very few sellers wanted to sell at that time so there were no sales, simply because inventory wasn’t available to sell. We had a good market at that time and Eagle Ridge was desirable. In both instances buyers were questioning a neighborhood’s desirability. In both instances there were very few sales, and yet the reality of the situation was diametrically opposed.
While statistics can sometimes be deceiving, we try to provide pertinent stats and describe what is actually going on and what they mean. Aside from a few blips, listing inventory has been going down. This is due to the market absorbing and buying up available inventory so it doesn’t stay on the market long, assuming it’s priced correctly, and the lack of enough new foreclosures entering the market.
Just as the first waves of foreclosures drove prices down in SW Florida, the lack of foreclosures entering the market combined with a healthy appetite from buyers has propelled prices higher. Just reporting prices without going in depth doesn’t explain to a buyer or seller what’s really influencing the market.
Of course all real estate is local. What’s going on nationally doesn’t necessarily affect what’s happening here. The national market was doing OK back in 2006 while we began flat lining. Flat lining would actually have been good; however our prices were headed for more like a cliff. We’ve talked about those reasons in the past at length, and in fact many people on the ball who study the market were warning about what would someday happen with prices. We don’t see those factors in play today, so we believe we can be in for sustainable price increases going forward. In fact, our market may have over-adjusted to the downside as prices were artificially too low for awhile. Our market is correcting those errors now.
The market eventually gets it right. The real estate market isn’t as efficient as the stock market, but it does work over time. As prices rise we’ll begin to see more building and we’re already seeing signs of that. Builders have been able to cut costs to compete, as long as they are into the land at decent prices.
Closed sales are on their annual march upward. March and April tend to culminate in finishing of a strong season. By all accounts we’ve had a strong season so far, and when we look at pending sales we can see that March/April closed sales will be better.
We continue to look for higher prices than last year. Sales numbers would actually be higher if only we had more inventory to sell. The trend is the same even if the numbers of sales are down. This could put more upward pressure on prices going forward. We’ll report soon on pricing trends, and now you have the context ahead of those reports as to what’s moving the markets.