We recently experimented with shooting our TV show in High Def. Previously we’ve used a mixing board much like a TV studio whereby we can mix camera shots, video graphics, etc, but it was standard definition TV. Because we have a high definition TV we use anyway, and we shoot the show with High Def cameras, we though it would be nice to make everything more clear and understandable.
Future of Real Estate Video Show SW Florida Goes High Defintion
Instead of having one track mixed in from a mixing board along with audio, we’ve gone to mixing each camera track and audio track and syncronizing them. The reason I spell all this out is because agents all over the country have asked how we produce our show, and now that we’re making the change I thought I’d spell it out. We then mix all the tracks together and produce one output and export.
Next week we’ll work on shooting the video so everything is in screen properly, or we’ll add another camera. Let us know if you like the new changes. View the latest show SW Florida Real Estate Market Update This week’s show covers pending home sales in Cape Coral Florida, Fort Myers, Bonita Springs, Estero, and Lehigh Acres. We also cover inventory levels in Cape Coral, Fort Myers, and all of Lee County as we’ve seen varying reports of inventory levels reported lately.
Official numbers were released last week, and as expected single family home sales dropped. As you can see from the attached chart, there is some seasonality to this, but there are more reasons as well.
Sales are still well above 2006-2008 levels, but they are down against 2009 levels which was a record setting year. Last year the market was filled with bank owned bargain inventory, and the trend this year has been less foreclosures coming to the market so we’ve been steadily selling off that bargain inventory. Actually the market never filled, but as foreclosure properties entered the market they were scooped up just as fast. The pipeline has slowed this year.
Combined with the expiration of homebuyer tax credits and high unemployment it’s quite predictable our market would slow. Median home prices even began rising as less bargain sales were occurring. In the last 3 months we’ve seen median prices decline from $101,500 in April down to $93,500 in July.
So if less bargain homes are selling, it must be true that less regular sales are selling as well, or else the median wouldn’t drop. This is also true, as distressed sales percentages in Lee County reached 64.18% in July vs. 54.66% in April. Now that season is no longer here, it seems mainly the bargain homes are selling, and there are less bargains, so home sales are down, and non-distressed homes aren’t picking up the slack.
Last year we predicted we’d see a No-Mans Land market when the foreclosure bargains dried up, and we’re seeing the beginning of this phenomenon now. There is no major upward pricing pressure due to the economic times.
Without rising prices, we won’t see increased builder activity, which means less tax dollars to the county government. With fewer sales, we’ll see less doc stamps revenue to the state. It’s a vicious cycle, so government better be prepared to make cuts because property tax values are also down which also cuts into county budgets.
Real estate agents are out interviewing now because they’ve noticed their leads are down and they’re looking to go where there are some leads. When the deals are gone, so is the investor interest, and we’re left with fewer residents looking to purchase. We’re not seeing move-up buyers because people are uneasy about the economy and many can’t afford to sell because they owe more than their home is worth, so they can’t take advantage of moving up even if they do have solid employment. The same goes with buyers looking to move-down. You cannot move down to save money if you can’t afford to sell at today’s prices.
This is Labor Day weekend and our market may be laboring, but it will be fine in the end. There are still good buys entering the market, and while we don’t see a lot of immediate upside pressure, we don’t see downward pressure either. Even with slowing sales, we’re still the 2nd highest year on record. Buyers looking to take advantage will have to be both quick and patient. The early bird gets the worm when it comes to fewer foreclosure bargains, and the patient buyer gets the short sale, which can be a bargain if the buyer is prepared to wait. And because 64.18% of current sales are distressed in some fashion, it pays to be both quick and patient. The educated buyer with resolve is the real winner in this market. The fearful buyer is missing opportunities and will kick themselves later.
Perhaps when the government gets its act together and figures out which way is the road to recovery, we’ll see increased sales and prices. Look for another homebuyer tax credit soon, or some other vehicle to spur the market, because real estate is traditionally 32% of GDP, and if we can kick start real estate, the economy may follow.
A few years ago we reported that listing agents were listing homes at ridiculously low prices to create buying interest simply because the home was being sold as a short sale. This is a bad practice for several reasons, and yet we’re seeing it continue today.
This past week I noticed two different homes, each located in a different subdivision, listed at far below actual values. This can cause many problems we’ll outline now.
The bank is not likely to accept a short sale on either of these homes. The bank will learn the actual value by ordering a BPO (Broker Price Opinion) or a bank appraisal. Once they determine the home is worth much more, typically they just kill the sale. Many owners and agents mistakenly believe that banks typically counter, but this isn’t normally true, especially when the offer is far below value. There also can be more than one lien holder involved, and both look into value, and either one can kill the sale.
If the banks were to accept such a deal, it creates a potential tax event or larger deficiency judgment against the seller. The bank could also ask for a promissory note against the seller, and that note would be significantly larger due to the under valued sale.
Even though the deal is not likely to be accepted, it also hurts the market in two other ways. Buyers mistakenly believe that artificial number is the new market, because they saw a home for sale for X amount of dollars, even though it has no chance of selling. Some buyers act quickly to tie it up, then wait months to find out the answer is No. All the while, some good bargains have come and passed and they’ve missed out. They may not have been the Steal they thought they were getting, but they were good bargains and suited their needs.
In addition to the misperception buyers have, banks must also make decisions on how to price foreclosure inventory. They do look at sold comparables, but they also look at what is on the market. If they’re not careful, they’ll notice a particularly low priced sale and price theirs too low, which has a domino effect on future foreclosure properties, and it snowballs from there.
The artificially low listing can influence future sales if people aren’t paying attention. The foreclosure process is far from perfect, and people from other states typically make decisions about local property, so there is no need to give them false ammunition for fear they may shoot themselves in the foot with it. When they do this, it hurts the entire market.
The market will go up and down as conditions dictate, but it need not move in a direction due to false hopes and misinformation. Sellers need to do a better job interviewing agents, and agents need to insure they know the local market, understand the short sale process, offer advice commensurate with what market conditions dictate. This can be challenging I know in a changing market, but we see False Listings everyday and it doesn’t help anyone.
The seller is let down when the bank rejects and it goes to foreclosure, the bank wastes time investigating a False Listing, and the buyer mistakenly believes they’ll end up the proud owner of a steal; all the while great bargains pass them by in the process. And the market is let down by false and misleading listings that really shouldn’t be on the market.
If you missed last week’s Future of Real Estate Show, you can tune in now. We interview Lee County Sheriff Mike Scott and ask him tough questions about Florida’s and Arizona’s immigration law and how that affect what he does. Additionally we ask him his views on controversial red light cameras, the upcoming tight budget process, school resource officers, the jail, traffic stops, and much more.
In addition to providing data on the SW Florida real estate market, we thought it would be nice to highlight some local Lee County communities and explore what is happening in that neighborhood today. This week we’ll focus on Reflection Lakes.
Reflection Lakes is conveniently located in south Fort Myers and boasts scenic lakes, special nature preserves, street lighting, community sidewalks and underground utilities all bordering pristine Lakes Park. The magnificent clubhouse sits on a lake and features a state of the art fitness center, billiards, administrative rooms, catering kitchen, heated community pool, children’s playground, 4 lighted tennis courts, basketball courts, sand volleyball court and a putting green.
Reflection Lakes is very close to Barbara B. Mann Performing Arts Hall, and is close to the beaches, US 41, and features easy access via Summerlin Rd.
Currently there are 30 properties for sale priced from $114,999 to $750,000. None on the market now are foreclosures. There are 4 pending sales currently priced from $134,900 to $329,900 and 3 of the 4 pending sales are foreclosures.
Because Reflection Lakes was built primarily in 2002-2003 before the boom in real estate sales, there wasn’t a lot of speculative investor activity, and this is why we haven’t seen a large concentration of foreclosures like we’ve seen in newer communities in 2005-2007. There are some foreclosures and short sales due to the downturn in the economy, as is normal throughout SW Florida.
So far in 2010 there have been 15 closed sales priced between $113,100 for a condo in Reflection Lakes to $350,000 for a single family home in Las Palmas, often referred to as the Estates II section of Reflection Lakes. This was a 4 bedroom, 3 bath home with 2,659 square feet of living area, a 3 car garage, pool and was lakefront.
All of the active, pending, and sold listings are posted at www.ReflectionLakes.com The floor plans are also provided, along with a site plan.
Maintenance fees for the single family homes are $159/mo and this includes cable TV, alarm monitoring, clubhouse, exercise room, pools, street lights, sidewalks, and all the amenities. Reflection Lakes even has it’s own TV channel for happenings and events inside the community.
A fact most people don’t know is Reflection Lakes has a private entrance into lakes Park. It’s not uncommon to see residents ride their bikes or take walks into Lakes Park, or enjoy kayak and canoe rides into the park as well.
The amenities, low HOA fees, floor plans, community activities, and superb location make Reflection Lakes worth looking into for buyers today. The community offers condos, town homes, villa homes, all the way to large estate homes, so there is a product to suit many lifestyles. Many people are surprised at just how much home they can afford these days, and with interest rates at all-time lows, now may be your chance.
Reflection Lakes is a gated community, so you’ll definitely want to call a Realtor to look around. Good luck, and happy house hunting.
Here’s an update to our SW Florida Real Estate Video Channel. The Top Agent channel has received 1,661 channel views and the videos have received 29,940 views. We have videos posted other places, so this is just the videos contained inside this channel.
It’s been 8 weeks since we last reported on short sales, and we’re happy to report short sale activity is up as we’d hoped it would be. Short sales make much more sense to all involved over a foreclosure as it helps preserve the sellers credit better, minimizes losses to the lender, and keeps the neighborhood in better condition.
I recently heard a funny quote “Why do they call it a short sale if it takes so long?” While I can’t remember who said it, it’s funny because it’s so sad. Hopefully with new initiatives in place we’ll see quicker turn-around times for short sales. As a CDPE (Certified Distressed Property Expert) we thought we’d share a few tips to help agents navigate this short sale process and make your deals quicker and smoother.
There is a clause in the Short Sale Addendum to Purchase and Sale Contract entitled #5; Multiple Offers which reads “Unless otherwise agreed by Buyer and Seller in writing, Seller may continue to market the Property for sale and accept other offers and submit those accepted offers to the lender.” We are not attorneys and we are not giving legal advice. This clause seems suspect though and we encourage listing and selling agents to amend or supersede this clause.
A purchase and sale contract is between one buyer and one seller, and once accepted you can request the lender to take less than what is owed via a short sale. In a normal transaction a seller wouldn’t enter into multiple contracts with multiple buyers, so why would you muddy the waters and try that on a short sale? Selling the property to multiple people just seems unethical and one buyer may have legal remedies against a seller for employing such a tactic.
Quite often we see sellers accepting any offer that comes down the road, but the lender certainly would not agree to the short sale because it is so far below market value. The lender wants to minimize their loss, and only agree to short sales if it makes sense. Sellers would be far better off negotiating or waiting for a reasonable offer than to accept any old offer.
When you submit multiple contracts to a lender they mistakenly think it must be a hot property and hold out for more, and many times each new offer starts the process all over again, further delaying approvals. And keep in mind when you submit more than one contract, the seller may be legally liable to more than one buyer.
You don’t submit offers to the lender, only accepted contracts. A seller should really only enter into one accepted contract. A lender cannot do anything without an accepted contract between buyer and seller as the lender is not a party to the transaction and can’t sell to anybody. This could change if they foreclose, but until then they are just the lender.
If you’re a buyer the last thing you want is the seller sending in other accepted contracts. It would be far better to move on and go buy another home and not waste any time waiting or investing in inspections, etc. As a seller, it should also be the last thing you want as well as it can hold-up or kill your sale. From a practical standpoint we don’t even know why this clause is in the addendum, or why agents or sellers would employ this tactic.
The other advice we would give is to have the sellers completely fill out a financial questionnaire upfront before taking the listing. There is no sense wasting buyers and sellers time if the seller isn’t going to qualify for hardship with their lender. You’ll need all this information with the accepted contract anyway, so it’s best to do it upfront and save everybody time. Not only will this speed up your short sale, but it will also help you skip doing deals that should never be attempted in the first place. Buyers are skittish enough on short sales anyway, so why attempt one if it has no shot at success? We’ll bring you more tips on short sales in upcoming articles. By educating the market on what works and what doesn’t, everybody wins. Good luck buying and selling. We’re all in this market together, for better or worse, and it pays to work together for success.
We just posted two new videos of our Future of Real Estate show. The first segment, Pricing Your Home to Sell – Future of Real Estate demonstrates the Pricing target, which shows homeowners how well their property is priced depending on the number of showings, drive-up, and drive-bys. This graph is very informative and has been tested across North America with many Star Power Stars and attendees, which are the highest producing agents in the country. Brett, Mike, and Sande of the Ellis Team are Star Power Stars and and enjoy learning and sharing great ideas with other high powered agents.
We also talk about the expiration of the National Flood Insurance Program for the third time this year and what that means for closings in SW Florida, as well as a new Condo and HOA law that was signed by Governor Charlie Crist this past week. Also information on banks participating in the HAFA (Home Affordable Foreclosure Alternatives). Stay tuned to Topagent.com
We’ve been talking quite a bit the past several weeks about HAFA (Home Affordable Foreclosure Alternatives) program and other programs designed to make selling a short sale easier. Going forward, these programs should provide some much needed relief for many sellers, and open up the market for more buyers.
We’ve noticed a trend this past year developing in the Lee County SW Florida real estate market. As we’ve reported, sales numbers hit record levels in 2009, and prices look like they may have stabilized. We’ve noticed that total distressed sales are down significantly since last May. Our definition of a distressed sale in either a bank foreclosure where the banks sells the property on the open market after they’ve foreclosed, or a short sale by a seller hoping to avoid foreclosure and protect their credit.
Fort Myers is showing the most strength with only 47.83% of sales being distressed in March 2010. Compare that to Cape Coral at 62.0% and Lehigh Acres at 74.19% Lehigh Acres is down from the whopping 88.5% set last June, even though they have leveled off about 75% the past 4 months.
Cape Coral has also declined, down from 78% last May to 62% now. This chart explains why prices have stabilized in Fort Myers and Cape Coral, and why Lehigh Acres is a little shakier at the moment.
Inventory levels are down in all three segments, and sales are up significantly over February in Fort Myers and Cape Coral, and up moderately in Lehigh Acres. Officially sales numbers have not been released at the time this article was written, and we believe going forward we’ll see some median price increases in Lee County, and especially in Fort Myers and Cape Coral.
We’re studying preliminary numbers, and we’re seeing an approximate 28% jump in sales over February numbers for single family homes. There was an increase in distressed sales, but the majority of the increase was regular non-distressed sales, and this is encouraging going forward in 2010.
We’ll be keeping our eye on the market after the home buyer tax credits expire on sales after April 30, and on interest rates which are creeping higher. Nationally consumer confidence is rising, and eventually that should trickle into job growth. SW Florida has been hit hard with high unemployment, and we really want to study these numbers as ultimately employment will be the engine that fuels SW Florida real estate prices in the future.
Always consult a CDPE (Certified Distressed Property Expert).
This past week we sat in on a meeting with the founder of RE/MAX, Laurie Magiano with the US Department of Treasury, Matt Vernon who heads the Bank of America Foreclosure and short sale department, and the president of Equator, the online transaction management platform for 7 of the 10 largest banks for foreclosures and short sales. The topic was HAFA, the government’s new initiative which stands for Home Affordable Foreclosure Alternatives Program.
The government’s new plan is voluntary for lenders, and it does not include Fannie Mae and Freddie Mac owned or guaranteed mortgages as they are working on their own solutions to assisting and speeding up the process. The government’s new plan allows for homeowners to receive $3,000 for moving expenses if the seller agrees to a short sale or deed in lieu of foreclosure. A short sale or deed in lieu of foreclosure is better on the sellers credit than a full blown foreclosure and will allow the seller to purchase a home much sooner than a foreclosure.
The plan also stipulates that the seller will not receive a deficiency judgment, so the seller won’t be bogged down with debt payments in the future resulting from the sale of the property. This is big as it’s been a stumbling block for many sellers in accepting a short sale. The seller’s housing expense ratio should exceed 31% or lender will believe seller can afford payment, and lenders will be particularly mindful of strategic defaults where seller has money saved but chooses to walk away anyway, especially on the higher loans.
The new regulations, if the lenders agree, stipulates that the 2nd mortgage holder will receive 6 cents on the dollar, which is far more than a foreclosure where they won’t receive anything, and much more than the 2-3 cents banks sell debt for on open market. The 2nd lien holders have held up many short sales, and now that the government has set guidelines, it should make it easier having a roadmap to negotiations.
The new guidelines also call for lenders to make decisions within 10 business days as to the viability of doing a short sale, and banks such as Bank of America are committing resources so that agents will now receive communications within 2 days, so the days of asking questions and not hearing anything for weeks or months may be over. Bank of America has put systems in place whereby an agent can contact a negotiator’s supervisor if the agent has not heard a response within 2 days, and the Treasury department has given us an e-mail address to escalate all inquiries no matter who the lender is so they can step in and help.
Everyone in the room agreed that short sale transactions could one day outnumber foreclosures, and that would be a good thing as sellers credit is better preserved, and lenders generally lose less money on a short sale versus a bank foreclosure, and 2nd lien holders get paid something. The property tends to remain maintained and require less fix up than an abandoned or vandalized property, which further upholds values in the neighborhood.
There is one other advantage few people think about to a quick process. Many short sales are priced too low and will never sell, but they subliminally drive values down in the market as some view the unsalable short sales as the new market value when in fact they’re artificial and won’t be approved. By speeding up the process, or issuing pre-approved pricing, this should help alleviate this phenomenon and improve the market almost immediately.
Stay tuned as these are lofty ideals, and we’ll report back on how well they actually work. Of course, this will depend on how many of the lenders and investors participate in the voluntary program. See our Future of Real Estate Show discussing new HAFA program on short sales.
This is the age old question everyone asks. How is the market doing? Have we bottomed? When will prices go back up? When will my home be worth what I owe? How long until we get back to 2005 prices? Should I sell or rent?
Actually we get more questions than this, like should I pay my mortgage, should I pay my homeowners association fees, etc. We’ll stick with the value questions for this article.
We’ve included a graph illustrating median prices since 2008. Median prices don’t tell the whole story, but they do tell a story. The definition of median price is half the sales are over and half under a certain price. As you can see, prices have fallen sharply since January 2008, and even more dating back to 2005. Ironically, home sales are up and setting records precisely because home prices have fallen. We’ve explained this in depth in past articles.
Average sales prices were approximately $365,000 back in January 2008 vs the median price of $225,000. We have been watching how the average and median price are related, and we have a chart in our annual State of the Market Report on Pg 4 that shows the relation over time between the two. This report can be found at www.Topagent.com
The average price gives us a little more depth to the market and helps us understand the overall breath of the market. As we’ve been saying for quite some time, we expect higher priced foreclosures and short sales to actually pull the median price up, and we believe this will occur. This past week official numbers were released, both statewide and nationwide. Prices actually fell 3.3% vs. last month, and were down 9.74% from last year.
Some might ask if we do all this research, when will our predictions come true. Our best estimates have been we could see year over year price increases as soon as March or April data. March data won’t be released until next month, but keep in mind these are only predictions about the future and nobody knows for certain. We are fairly confident this will occur; the question is more of when.
We have been looking at both median and mean average sales price data and it appears that prices for both dropped since December 2009 as official data would indicate, however were are seeing some price increases in March data that would indicate this trend has reversed, at least temporarily. Keep in mind we have many more closings that occur at the end of a month that could skew the data, but the trend looks good.
We would also expect sales this time of year to be higher as our Northern visitors are here and buying property as well, and many of these sales are in the higher than median price range. Many of these sales will occur past March into April and May, and many will come back and buy in the summer.
Ultimately prices will be determined by jobs and the economy. As more people get back to work, it should slow the foreclosures, and bring more people to the area. When will this occur? I think it’s so much easier to forecast prices in the short term than predict the overall economy. Congress has been focused on health care and the climate more than the economy, so it’s really hard to predict what’s coming out of Washington and how it will affect us and the economy, especially since we’ve largely been kept in the dark until something passes.
We would encourage our government to turn its attention to actually helping the economy, or get out of the way so small business can begin creating jobs and getting us back on our feet. Once the economy starts looking up, Main Street can begin to recover and prices can begin to rise. Our prices are artificially low, and they won’t stay that way forever. Prices are well below replacement cost, so builders are on the sidelines now as they don’t wish to build at a loss. Our market will increase in value perhaps 40-50% before this occurs, and this is why buyers today have a chance at building substantial equity quickly.
Once the dust settles and our market reaches price equilibrium, builders will be building again, bringing more jobs to the area and sustainable price appreciation. Good times await those who buy now and ride the coaster on up to equilibrium.