This week we’ll focus on freshly updated numbers for the distressed segment of the Lee County real estate market. It’s important to study this segment of the market as it has been responsible for a large chunk of sales, and has influenced pricing in the market.
As you can see from the chart, distressed sales in Fort Myers have fallen precipitously in the last 3 months, down from almost 73% in July to 58% in September. Short sales in Fort Myers have increased about 20% and foreclosures have dropped 35% while overall sales have remained relatively constant. This tells us that banks are working to sell properties as short sales in Fort Myers as opposed to acquiring the property through foreclosure and selling later on at much lower prices.
Cape Coral on the other hand has seen about a 15% drop in overall home sales since July. Distressed sales have remained relatively even, hovering around 70% all 3 months. Foreclosure sales have dipped almost 26% since July while short sales have increased 9%. This tells us that the demand in Cape Coral is directly tied to the bargain, meaning as the distressed inventory has fallen in the Cape, so have overall home sales. Statistically, buyers in the Cape are all about the bargain, and as home prices have increased in the Cape, home buyers have moved to Fort Myers and potentially Lehigh Acres for the bargains.
Lehigh Acres has seen a slight fall in distressed sales, down from almost 87% in July to 82% in September. Lehigh Acres is still far and away the distressed capital of Lee County. Overall home sales in Lehigh Acres have fallen almost 13% from July to September. Foreclosure sales in Lehigh Acres are down 18%, while short sales in Lehigh are down 17%. This is why home sales are down overall about 13% as Lehigh Acres, along with Cape Coral are both proving to be price sensitive markets led by first time home buyers and investors.
Fort Myers seems to be much more stable at this point in time. We are seeing a trend towards more expensive properties coming to the market via foreclosure, so it will be interesting to see where these properties are located and how it affects demand and pricing in each of the three major markets in Lee County.
Congress has extended the first-time home buyer tax credit to purchases made through April and closed by July, and added a provision for existing home owners who have owned their home for at least 5 years. Unfortunately, in this sagging market it doesn’t give them much time to sell their home and close on a new one to take advantage of this provision, so only a select few may be able to purchase a new home before selling the older home.
We think Congress could have done a much better job writing this bill. They did add to income eligibility limits, but again the bill limits who can take advantage by July. This may further fuel the bargain end of the market assuming the president signs this bill, which has not been done at the time this article was written.
We’re concerned that this bill won’t fuel a total real estate recovery and will continue to spur demand at the lower end of the market. To pull this economy out of the doldrums, a broad based real estate recovery would have served a better purpose, but I guess we’ll take whatever help we can right now.
We’ll also monitor the trend of banks accepting more short sales. To date banks have been ill equipped to deal with the magnitude of requests. Recently Bank of America adopted a policy to use its online foreclosure system of working with approved real estate agents called Reotrans and opened it up to short sales. This will allow approved agents to more efficiently move Bank of America short sales through the system.
Sellers wishing to sell their home via a short sale should seek out experienced short sale agents who are also familiar with Reotrans. Because they are adding more than just bank REO’s (Real Estate Owned) they are changing the name from Reotrans to Equator. This may revolutionize the way banks handle the massive short sale process and speed up many of these sales. It will also help that they are using agents familiar with the Distressed Sale process.
If you’re a seller considering selling as a short sale, it’s almost impossible to go it alone. We recommend hiring a seasoned professional familiar with the intricacies of a short sale. You might seek out a CDPE (Certified Distressed Property Expert). If you’re a current Bank of America customer, you might also seek out an agent who uses and is approved on Equator. This could be a trend that other banks go to as it will ease the communication stream and handling of the data among various agents, negotiators, and investors. This online system could do for short sales what it has done for bank foreclosures, which was to make an online system whereby many authorized people could all work on a file simultaneously and get things done instead of pushing paper from one desk to the next.
Stay tuned, as the market is always in flux, and we’ll report interesting changes and how they may affect the market.