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. 

Foreclosures Vs. Short Sales in SW Florida Real Estate

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

The second video  Featured Hot Listings – Future of Real Estate SW Florida features four new listings, one in Daniel’s Park which is a gated community in South Fourt Myers for $165,000, and other in Brandywine in Myerlee for $20,000, one in Carillon Woods and another in the Forest Country Club.  We also tell you how to view virtual tours of all the Ellis Team Listings, as well as search the entire MLS for free.

It’s been a little while since we’ve reported on inventory levels and pending sales in SW Florida.  We’ve been reporting on record sales levels all of 2009 and into 2010, and increasing prices the past few months.  So how has this affected inventory levels, and how are pending sales doing which reflect future sales activity? 

Enclosed is a chart that illustrates Fort Myers and Cape Coral inventory levels over time.  It does not include the entire county, and while countywide numbers would be higher in total, the graph looks very much the same. 

Fort Myers Cape Coral Single Family Inventory Levels 2010

As you can see, back in 2005 we had about as many pending sales as we did active listings in MLS.  We all know what happened about September of 2005, and the graph perfectly illustrates this.  By tracking these numbers it was easy to predict what was going to happen in 2006.  Then something happened again about December of 2007.  We noticed inventory levels peaked, and within a few months pending sales picked up steam, an indication the market was on the move again.  Since February 2008 we’ve seen a steady increase of pending sales, and this has led to much higher sales levels in 2008 and record sales levels in 2009. 

Sales activity has remained strong in Fort Myers and Cape Coral.  We have noticed a decline in foreclosure properties entering the market, and also an increase in short sale closings in SW Florida.  Normal sales have also increased.  Total distressed sales declined in April from March, while all sales increased slightly. 

So what does this all mean going forward for SW Florida?  That’s an interesting question.  One would think prices would continue to increase, and this is a distinct possibility.  We wouldn’t be surprised to see a slowing in actual sales as prices rise.  Prices today are still near bargain basement prices, but a dwindling foreclosure supply may lead to higher prices. 

As we see higher prices, investors will either be more motivated to scoop up everything they can, or less motivated because properties won’t cash flow as easily, and future capital gains are lessened with each price increase. 

This leads us all back to first time home buyers, move-up buyers, and vacation or 2^nd home buyers.  We don’t see many move-up buyers today, presumably because local buyers don’t like the sales price they’ll receive, even though they love the new price on a home they may be seeking.  We also don’t see a lot of confidence in the local employment market.  We believe jobs will ultimately fuel real estate growth once we move past these bargain basement prices, and it is for this reason we could see lower sales volumes as prices rise. 

We probably won’t see a full blown real estate recovery in SW Florida until the economy improves and jobs return.  The answer to this situation is likely the answer to the previous question.  Our local real estate market is riding the wave of investors and northerners looking for their piece of sunshine at sale prices, but once the sale is over, this wave will only last so long, and this is why we’ll need job growth to sustain the recovery after this wave.  

Inventory levels have been holding steady, and buyers have been ready, willing, and able to absorb the entire inventory the banks could throw at the market.  It will be interesting to see if buyers are willing to absorb more now that foreclosures are slowing down.  This will be an interesting supply vs. demand match, and we’ll report back on which side takes the upper hand.

Last week we reported showings and phone calls were down for a few weeks after Easter according to several agents we spoke with, but that all changed about a day after writing the story.  Phone calls and offers picked up significantly last weekend, so it’s very hard to judge the market on a daily basis.                   

This week we decided to step back and analyze April 2010 vs March 2010.  Official numbers won’t be released until next week, however we believe we’ll see a year over year increase in home sales about 9-10%, and we believe prices will up again over last year as well. 

Single Family Home Sales in SW Florida March-April 2010

We’ve created a graph illustrating sales numbers for March-April of 2010.  Sales for single family homes increased ever so slightly over March.  We then wanted to know the mix of foreclosed homes and short sales.  Foreclosure sales actually fell 10.43%, while short sales rose 12.96%.  This coincides with our predictions back in March that we may see a rise in short sales as bank gear up to handle more short sales. 

Foreclosure filings have been down, so 6 to 12 months in the future it’s reasonable to assume there may be less foreclosure properties for sale, especially if banks continue to increase their short sale efforts. 

Our numbers are close to but not identical to official numbers that will be released next week for one reason.  We use data from multiple MLS’, but there is the potential for some listing overlap if a property is listed in more than one MLS.  Statistically that runs about 5% give or take.  We’d rather have a little overlap than miss a lot of listings and sales. 

Condo sales were up in April over March, and that would be expected as condo sales tend to build throughout the season and culminate in April.  Condo sales are increasingly difficult to finance with new regulations on approving not only the borrower, but also the association itself.  Many March closings were pushed back to April, and we suspect many April closings may get pushed back to May, so May could be a good month due to high sales and delayed closings, both in the condo and single family markets. 

Headlines next week should read home sales up somewhere around 10% +/- depending on what the official figures are, and home prices up as well.  Last year’s April median home price dipped to $85,500.  March 2010 median figures shot up to $95,100 up from $88,000, so even if prices hold steady from March we should be reading about price increases. 

Next weekend is Memorial Day weekend, so sales activity will drop-off as people plan their time off.  It will be interesting to note people’s perceptions of Florida and their willingness to book vacations here in advance due to the oil crisis in the Gulf.  Many visitors come back in the summer and buy.  Additionally, the Euro is now worth less, so it will be interesting to see if that affects foreign visitors this summer with less buying power.  Hopefully once we sort out the Gulf oil spill, our Chambers of Commerce will promote the area as a great place to visit.  We count on many of these visitors to buy property in Florida each year, so we do want them to visit and spend money in Florida and help our economy. 

In the meantime, let’s enjoy some positive publicity next week.  Our market is due for positive news, and it helps buyers to understand that prices are rising and inventory is shrinking little by little, and the time is now to step up if they want in on today’s bargains.

It’s a fact that 7 out of 10 distressed home sellers go into foreclosure without visible intervention to improve their situation.  We speculate that sellers do not realize there is help available, and that doing something about their situation is better than just walking away. 

Many sellers we talk to are embarrassed about their situation, while others are simply depressed and don’t wish to speak about it, hoping their financial situation will improve in time to change things.  The sad reality is once a homeowner falls behind; it’s very difficult to ever catch back up, even if their job situation improves. 

We’ve been reporting about the new government HAFA (Home Affordable Foreclosure Alternatives) program announced on April 5 designed to improve short sales.  We’ve also told you that 2010 will be the year of the Transaction, either a short sale or foreclosure as loan modifications have not worked. 

This past week we’ve met several large banks who have all committed to diligently approving short sales in a quick fashion.  Many agents and buyers have been reluctant to offer on Short Sales because the truth was they were really Long Sales.  This has changed and may now be a viable alternative for sellers and buyers alike.  If your loan is with Bank of America, Wachovia, or Wells Fargo, it may now be possible to streamline your short sale.  Other banks are following suit depending on who the end investor is on each loan. 

We’ve provided a chart for sellers to illustrate the financial advantages of considering a short sale VS.  foreclosure.  Some of the details may affect you well into the future.  You may wish to discuss this with your attorney as well, especially if you’re considering bankruptcy. 

Why a Short Sale May be better Financially Than a Foreclsoure

The good news is the short sale process has just improved dramatically, and while still very complicated, can provide relief for struggling homeowners and help them restore their credit so they can move on with their lives much sooner.  This economy will improve one day, and it will be nice when current distressed homeowners can look back and not be held down by circumstances of the past.  The short sale is one such tool to accomplish this.

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. 

SW Florida Foreclosure Versus Short Sale Graph

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 2^nd 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 2^nd 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 2^nd 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.

A few weeks ago we wrote about attending a recent bank foreclosure and short sale conference.  We told you that banks and the US Treasury department have learned that home retention and loan modifications are not working, and that 2010 will be a year of “The Transaction” either by short sale or foreclosure.  More banks are actually pursuing both simultaneously. 

We’ve been illustrating graphs showing the percent of distressed sale activity in Fort Myers, Cape Coral, and Lehigh Acres for months now, and this week we decided to update Short Sale activity.  While analyzing MLS data this week we noticed foreclosure sales have dropped in January and February to about 579 per month, down from approximately 700 or so the previous 5 months.  This can be attributed to a backlog of foreclosures in process and a moratorium in place early in 2009. 

Closed Short Sales in SW Florida

We also noticed a stabilization and recent up tick in short sales, reversing a decline in December 2009.  Will these trends continue?  Let’s start with the foreclosures.  We believe foreclosure sales will increase in 2010 as the backlog comes to the market. In fact, we’ve received a large volume of foreclosure listings we’re working to bring to market.  It typically takes time to secure the property, assess the condition, the value, workup a Broker Price Opinion, compare that against the bank’s new appraisal, and meet with the investor to develop a marketing strategy on each property.  All of this is done through the use of a bank asset manager, either an employee of the bank or 3^rd part asset manager.  Either way, asset managers specialize in disposing of REO (Real Estate Owned) bank foreclosures. 

Once the value and strategy is determined, the property goes from a pre-listing to an actual listing complete with instructions.  The agent then lists the property in MLS and solicits offers.  Many times the property elicits multiple offers, and the agent presents all offers that match the bank’s criteria.  For instance, we are not allowed to present any offers where we have not personally verified cash funds to close on all cash deals, nor are we allowed to present any subject to financing offers without pre-qualification from that bank’s in-house loan officers.  Banks do not want to take properties off the market simply because a buyer presents a pre-qualification letter from an unknown or out of town bank or mortgage broker.  Speaking from experience, banks and agents have had bad experience with pre-qualification letters.  They are easy to get, and are rarely worth the paper they’re written on, so it is quite natural the bank wants their own people to look at the qualifications of the buyer if they are getting a mortgage.  The borrower doesn’t have to use that bank, but the bank will not look at the offer unless they are offered their pre-qualification letter with the offer. 

So we know 2010 will offer more foreclosure properties that have been initiated in 2009.  What about short sales?  Banks are not offering loan modifications as much as they have proven that they do not work long term.  Politicians still promote the idea as it sounds politically correct, but it further exacerbates the problem.  We are seeing large banks making a push to go online.  Bank of America for example now negotiates their short sales online through a system called Equator.  We have been using Equator to handle Bank of America foreclosures for years.  We hear that banks such as Wells Fargo and perhaps others are in the process of adding their short sales to Equator.

This online venue will allow greater efficiency and allow more people to touch the file, reducing the time it takes to approve a short sale.  The short sale is still a complex transaction and homeowners should not attempt it alone.  In fact, your bank will refer you to use an agent who is familiar with the process.  Short sales are not for every agent and should only be tackled by agents who are committed to learning and operating in a very rigid and complex process.  Buyer agents regularly interview listing agents to make sure the listing agent knows what they’re doing, because if they don’t, the process will fail. 

Look for 2010 to see rising foreclosure sales throughout the year, and perhaps rising short sale numbers as well.  The banks are committing resources to it. We’ll keep reporting the numbers we track, so check back often.

Printed in the News Press, News Press Online, and Ellis Team Blog.

This is the time of year agents are busy selling properties.  If you look at the last two years, historically you will see that sales begin to build each month heading into summer.  The last two years are fairly typical as to how our local market works.  April and May closed sales are results of deals put together in March.  There is typically about a one month lag from contract to closing.  Some closings occur in the same month, and some take longer, especially short sales. 

We think everyone who possibly can buy is attempting to right now for several reasons.  Interest rates are headed higher.  The Treasury Department’s phase-out of buying mortgage backed securities on FNMA and Freddie Mac expires this month.  The last time this happened rates shot up about ¾% in a week or so, so we’re keeping our eye on rates in April and what if anything the government does when they shoot back up. 

We also have the Home Buyer tax credit in place for sales through April 30.  Buyers have a few months after that to actually close these sales, but essentially it allows first time home buyers a credit of up to $8,000 and repeat home buyers a credit up to $6,500.  This is real money, and buyers are acting to receive this money. 

Single Family Home Sales by Month Lee County Florida

Additionally, inventory in certain price ranges is drying up, and prices are low.  Buyers from near and far and reaching to scoop up these bargains.  Because these homes are so far below replacement cost, these prices won’t last once the economy improves and builders start building again.  Many of these homes are 40-50% below cost, so there’s a built-in profit for buyers willing to buy now and hold until market improves. 

We know why the market is Hot, but let’s go behind the scenes and explain some things that are affecting the market many people might not know about.   The first major obstacle is appraisals.  Appraisals have been coming up short up to 30% of the time as appraisers not familiar with the neighborhoods are using comparables that are not the best for the subject property.  They are not taking the time to discern if the two neighborhoods are similar, or if the comparables condition is similar.  We’ve seen appraisers use comparables from other neighborhoods that just don’t measure up while ignoring a good comp 2 doors down that closed last week.  We’ve also seen appraisers only use the foreclosures, but they don’t tell the whole picture.  The foreclosures can need lots of work and be in poor condition, and if the appraiser wants to use them as a comp, they need to research its actual condition when property sold. 

The next big issue is we often have multiple offers on each property, and buyers are bidding against each other.  Cash is king, and buyers wishing to finance have a hard time competing with cash buyers.  The seller doesn’t have to worry whether the buyer will get financing when a cash buyer is involved, nor worry about a bad appraisal.  Many of these properties are selling well over asking price, and many buyers are frustrated no matter what they do they can’t land a property.

We also have out of town buyers who believe they can bargain down these homes, and wonder why they lose home after home when the sellers accept someone else’s offer.  Many buyers have said they don’t pay full sticker price, and yet they’re downright frustrated when the seller accepts another buyer’s offer.  Agents I speak with say they are educating buyers right upfront about our market, but buyers often times have to try for themselves.  A buyer can find out the hard way and miss out on their first 6 choices or take their agent’s advice and have a chance at getting choices 1-3.  Even if you offer $10,000 over asking price all cash, there’s no guarantee you’ll get the home, but at least your chances are better.  It pays to study each submarket and determine how each home fits in that puzzle. 

Lastly, title can be an issue.  If you’re buying a foreclosed home, it’s not uncommon for a title issue to creep up and extend the closing out.  Banks don’t always complete the full title process until a contract is secured, and that’s when it could be discovered some outstanding liens, or homeowner associations trying to collect more than the law allows to issue an estoppel letter.  We’ve even experienced a home that needed to be re-foreclosed as it wasn’t done properly the first time. 

If our market wasn’t so challenging, we’d see even higher sales reported.  This market is more complex than ever, but at least it keeps people on their toes and moving.  That’s often little solace to those caught up in a deal when things are going wrong, but I guess it beats having a dead market.  There’s nothing dead about the SW Florida real estate market.

Recently we attended a class with the Five Star Institute which is the premiere resource for educating bank asset managers and real estate agents on effectively handling bank foreclosure transactions.  The class we attended was the REO/Short Sale Summit which focused on bank foreclosures and the short sale process.  The Five Star Institute brought in asset managers for us to talk to, appraisers, banks, and 3^rd party asset management companies so we could gain a thorough understanding on how to best deal with foreclosures and short sales, and insight into the back-end servicing agreements that control what the banks can and cannot do on behalf of the investor when approving a short sale or placing a foreclosure.

Short Sales and Bank Foreclosures in Cape Coral, Fort Myers, Lehigh Acres

We learned that the Treasury Dept has agreed that mortgage modifications are not working, and most loan modifications and workouts still end in default.  It was further agreed that 2009 was a year of home retention intended to keep people in their properties, and 2010 will be a year banks collect money, either through a short sale or a foreclosure and re-sale. 

Nationwide it is estimated there is 33 months of foreclosed inventory that has not been released.  Dave Liniger, founder of RE/MAX International told a group of banks a few weeks ago to release the inventory as holding it back is only harming the markets.  In the most distressed markets like Las Vegas, Phoenix, and SW Florida, there is actually a shortage of properties and holding back inventory only prolongs the recovery time of the market. 

A lawyer who handles nationwide short sales and REO properties addressed the audience and said that in many markets such as Florida, it takes over 1 year to get them through the foreclosure process, and 2010 will see many begin this process if short sales don’t succeed.  All agreed that politicians’ running for office like to tell voters they’ll keep them in their homes, but this is actually harming the system instead of helping.  Most blamed president Obama’s initiatives as short sided and designed to score points with voters, but largely ineffective contributing to the problem.  The entire panel feared that politicians running for office this year may further try to prolong the inevitable in hopes of scoring points with voters, but that would further exacerbate the problems today. 

In the last few months we’ve been able to help sellers sell through the short sale process, and from what we’ve heard we may see more of that in 2010 as banks pursue a simultaneous sale; short sale and foreclosure process.  Banks are stepping up their efforts by hiring more people, and moving their platforms online so agents, appraisers, banks, investors, attorneys, etc. can all work on the file together and streamline the process. 

We expect to see more short sales in 2010, and more foreclosures in 2011, depending on how successful the 2010 short sales are.  Agents increasingly are becoming better trained, either from getting their CDPE (Certified Distressed Property Expert) designation or their Five Star designation to handle foreclosures for the banks.  The process has become very complicated.  Even an agent that never wants to list a short sale or do all the required work an REO agent does to sell a property would benefit by taking these courses as it educates agents on what is truly involved in the sale, and it will help them represent their buyers better by helping their buyers structure their offer better so the bank is more likely to accept.  Of course, sellers should select someone strong in this arena, as success with the bank is determined by the seller meeting certain criteria, and the agent properly presenting that criterion. 

Only about 25% of all short sales actually sell, and yet this number can be increased substantially with education.  We are all for the industry getting better educated and increasing this closing ratio, which will help more sellers, help more buyers, and relieve frustrations by all.  The short sale process isn’t for everyone, but for those willing to be patient and properly work the system, the rewards are there.  And we’re for the banks improving their processes to make communication better.  We would actually be for loan modifications and home retention if they actually worked, but unless the banks and government will consider loan reductions instead of short term rate and term modification, we think this is a waste of time and is further harming everyone involved.

Last week we focused on the overall State of the Lee County real estate market, and this week we’ll continue with that theme, but zero in a little bit on how certain price ranges are doing. 

Much of our inventory has decreased in the last year as buyers have been scooping up properties faster than the system can bring them to the market. This is the reason inventory levels in certain price ranges have shifted to a seller’s market.  Last year at this time inventory level in the 0-$100k range was 20.26 months.  Today that number is down to 4.23 months.  Last year we talked about market equilibrium being somewhere in the neighborhood of 6-9 months.  6 Months seems about right to us.  As you can see, this price range has fallen from nearly 2 years to less than 6 months illustrating it has swung from a buyer’s market to a seller’s market. 

Home Inventory by Price Range 2009

Buyers many times read national headlines and don’t realize they’re competing with other buyers for the best properties, and most of these properties are on the market only a few short days.  Practically any property in the 0-$100k range will have multiple offers and sell at or above asking price.  In fact, last year 8,051 single family homes sold at or above asking price.  That’s simply an amazing statistic. 

The next hot price range is of course $100-200k. Last year we had 12.06 months supply of inventory.  This was the hottest price range last year, and it’s still hot this year.  Today it stands at 6.23 months, almost half of last year.  As you can see, the 0-$200k range is on fire.  Last year we had a lot of Canadians coming down and buying properties in SW Florida.  In the 2^nd half of 2009 we noticed more interest from Americans from up north, and this season we’re already seeing many baby boomers arriving and seeking out their piece of paradise.  Combining that with the brutal winter our northern friends are experiencing and we think this season stands a chance to eat into the $200k+ price ranges going forward. 

Last year the $200-300k range stood at 15.33 months, and this year it’s down to 10.03 months.  The $300-400k range last year stood at 18.05 and this year it’s at 15.65, so its better, but the changes aren’t improving as much the higher we go.  The $400-500k range improved by 3 months, down from 24.17 last year to 21.3 this year. 

What’s interesting to look at in this hot market is the $500-1 Million price range, and the $1million+ range.  Inventory levels actually went up in both ranges, and up dramatically in the $1 million price range.  This suggests to us a few things.  Sellers in the higher ends of the market have held out longer than most as the affluent have had the means to ride out a poor economy longer.  However, the drag on the economy may be catching up even to the highest of income earners.  Secondly, there are fewer buyers in the higher ranges, with lots of inventory to choose from. 

To put this in perspective, in the 0-$100k range, there are 3,530 active listings on the market, but there were 10,021 sales last year in that range.  In the $1 Million+ range there are 697 active listings, but only 124 sales all last year. 

Top end sellers may “Need” more out of their home, but as we’ve seen with the foreclosure crisis, what a seller needs is irrelevant to what buyers will pay.  Higher end sellers may not qualify for a short sale because they have other assets, so they may not be motivated to take losses and are testing the market.  Oh, they surely may wish to sell, but not motivated to sell where the buyers are.  Affluent sellers may have the ability to wait the market out longer, even if a property is draining them financially. 

So, $500k+ buyers are in the driver’s seat and can buy the best value properties, and buyers in the lower price ranges are competing against each other to snap up today’s lower prices.  Prices across the county have begun to rise, and buyers are responding by studying the market and moving off the fence.  2010 should be an exciting year to watch.  Download the entire 2010 State of the Market Report free at http://www.topagent.com/