SW Florida real estate market numbers released today by the Florida Association of Realtors show a continuing decline in the real estate market, which comes as no surprise as we posted our Ellis Team CMI Index numbers back on October 16 that suggested this would be the case.

Single family home sales fell to 327 in September, down from 520 in August, and 693 last September.  Single family home prices fell to $231,600 this September, and was down 7.7 percent from August’s $250,800 and down 11% from last September’s $261,400.

Single family home sales were the good news.  Condo sales fared worse, also predictable due to the CMI Index numbers released a few weeks ago.  Condo sales were 102 this September 2007, up from 96 in August, but down from 168 last year.  Prices for condos were up to $224,000, up from $218,800 in August, and down from $231,600.  The bad news for condos isn’t the prices or sales levels, it is the sales levels as compared to the level of inventory on the market.

Even with the poor numbers, they can partially be explained by seasonality, and partially by overall weakness.  See SW Florida single family home sales graph 2005-2007. To view sales prices , see SW Florida single family home price graph 2005-2007.

The Outlook going forward actually is brighter than the numbers indicate.  For the first time in a long while buyers are getting excited again, and are venturing out looking at homes.  For some, it is simply becuase home prices are back in their affordability range.  For others, it’s the sense that now may be the time to buy as prices have come down so much, and they’re feeling confident again going forward.

 

Not surprisingly, foreclosures in SW Florida are on the rise.  This can be caused for several reasons, most notably investors who should not have been in the market, marginal buyers who bought with an adjustable rate mortgage so they could qualify and the adjustments are adjusting right now and they can’t afford the new payment, rising insurance, and rising property taxes.

All combined have put pressure on the people who could least afford it.  Some agents have speculated that when the foreclosures happen, it will make for sweet deals for investors and home buyers.  I respectfully disagree, and I’ll explain why.

Many people bought with 100% or 95% financing at the top of the market.  The market has dropped around 20%, and the sellers are now upside down on their loan.  They don’t have the cash reequired at closing to offer the home at today’s market value, so they cannot sell.  No deal for a would be investor/buyer.  Many foreclosed homes are also in need of much repair, so you wouldn’t want to pay full market value on a property that needs money thrown at it.

Most people who buy foreclosures want a deal.  The deal just isn’t there from the seller.  You’ll get a better deal waiting for the bank to take it back.  Banks are no dummies, they get BPO’s (Broker Price Opinions) and appraisals.  They limit what they’ll lose by selling it for as much as they can get.  Some banks actually try to make a profit because it was insured with PMI (Private Mortgage Insurance) so the bank’s exposure is only 80% of the original market value.  Coincidently, that’s about how much it may have gone down, plus repair costs, attorneys fees for the foreclosure, and lost interest.

Boiling this all down, it’s usually better to purchase from a seller who has priced their home at today’s market value, not what they owe, what they paid for it last year, or what they think it was worth last year.  There are many sellers out there who are listening to the market, and pricing it at market.  Those sellers are selling.  The backlog of inventory is from sellers who either won’t listen to the current market, won’t listen to their Realtor, have the wrong agent who also doesn’t know, or have a property that’s really hard to judge what the real value is.

If the seller doesn’t know the real value, the buyer isn’t likely to gamble on it either unless it’s a unique to what a buyer is looking for, or is simply irrestible.

Bottom line is, there are good values out there, just don’t count on the foreclosure market to provide them.

Single family home sales in the Fort Myers Cape Coral real estate market dropped 36% from 2005 levels in September, down from 1,075 sales last year to 693 sales this year. SW Florida Real Estate Market Report shows median prices dropped 9% since last year from $288,700 down to $261,400

Sales actually increased since August 2006 from 691 to 693 sales.  Prices remained relatively steady since August 2006.  September prices came in at $261,400, down from $264,100 in August.

Single family home sales and prices in Lee County seem to have leveled off, and this could be a silver lining.  Many national experts predicted sales prices would fall in SW Florida about 18% from it’s all-time high.  We’ve already seen a 15-20% price drop, so then end may be near.  Inventory is still rising, and pending sales have dropped slightly, not encouraging news.

What is encouraging is the rate of homes coming on the market is dropping, and the decrease in pending activity is dropping as well, signaling a leveling off may occur sometime in the future.  Showings have also actually increased, which could lead to an increase in pending sales down the road.

Additionally, pending sales are picking up in other parts of the country, which may affect home buyers looking to purchase here.  We still have a lot of inventory, but there are some really great buys out there now awaiting home buyers, and we think now is the time for buyers to pounce.  We won’t know exactly when the market has hit bottom and starts to go back up.  What we can say is that there are definite signs a leveling off maybe close at hand.  Until that leveling off actually occurs and we start eating into existing inventory levels, we can’t officially say we’re at the bottom.  Stay tuned.

Condo sales in Lee County were off 52% from 126 sales in September 2005 to 61 in 2006.  Sales prices of condos in Lee County were down 3% from $314,800 in September 2005 to $305,600 in 2006

Collier County single family home sales were down 37% from 377 in September 2005 to 236 in September 2006.  Sale prices were down 8% from $487,500 last year to $446,900.  Naples condo sales were down 62% from 456 condo sales last year to 173 this year.  Sale prices were actually up 4% from $365,700 last year to $378,600

We think this is partly the reason sales in Naples are down because sellers haven’t reacted as quickly to changing prices as sellers have in Lee County.  We believe sales are much closer to leveling off in Lee County than they are in Collier County because of this fact.  Affordability and price are a much larger issue in today’s market.  It’s total cost of ownership, not just the price.  As homeowners insurance goes up, property taxes goes up, interest rates, gas, etc it eventually weighs down on buyers.  There is too much price disparity right now between Naples and Fort Myers.  Soon you will see another rush of buyers purchasing in Lee County because Collier County is just so expensive.

Naples is a beautiful place to live, as is Fort Myers,  The address won’t matter as much going forward as price will.  Collier County is poised to lose buyers to Lee County, just as Lee County will lose some buyers to Charlotte County for the same reasons.  Housing affordability.

Traditionally, past sold data has almost always been better than current and pending inventory.  Many times today the past sold data is outdated, predicated on a market we had last year.

In some subdivisions, there may be 80 homes on the market and 0 or 1 pending sales.  There may be 0 sales in the last 4 months, making it difficult to use past data.  And the new inventory may be priced less than the past sales, guaranteeing future sales will be at a lower price point.

Experienced agents must account for all of this and make a recommendation.  In the end, the free market will always determine the value.  Which buyers and sellers get there is another story.

The seller sets the price, and the market determines the value.  If the price is out of line with the value, nothing good can happen for the seller.  If it’s too high, it just sits there, perhaps going down in value as the market falls.  If it’s too low, the seller just gave all the equity away to the buyer.

Correctly setting the price takes skill.  No computer model has been able to do it.

For a computerized Valuation of your home, check out The Ellis Team Home Value Model.

2006 State of the Market Report

The real estate market is much like a finely tuned jet airplane. To fly at optimal speed and efficiency, the pilot sets the course at optimal altitude, which provides for greatest speed and least resistance. The SW Florida real estate market flew at high altitude from 2001-2003. In 2004, the jet airplane transformed itself into a space shuttle and left the earth’s atmosphere. For two years the shuttle flew at super sonic speed, at altitudes never experienced before.2005 was a year where nothing could stop the shuttle. It was flying faster than the engineers said it could, and seemed unstoppable; until the oxygen sprung a leak. Suddenly, the shuttle was forced to return to earth as there wasn’t enough oxygen to sustain this altitude. Like all re-entries, it can be bumpy and chaotic. The 4th Quarter of 2005 wasn’t bumpy or chaotic. It was as if the world had stopped, and we were flying in slow motion. Speed and altitude dropped quickly. Once the shuttle emerged on radar, it didn’t fly like a loud and confident jet airplane. It felt more like a hot air balloon, drifting slowly, silent and quiet, awaiting word on its future course from the tower. The tower didn’t answer. The flight became choppy in the 1st Quarter of 2006 when everyone realized we were back to flying at earthly speeds and altitude. Sellers began to grasp the gravity of the situation, and made adjustments.

The final altitude has not been set. Once our market finds its optimal altitude, it will once again be in balance. Once our market reaches balance, it will again rise, fly at great speeds and take us all to new heights. No one can say for certain what the correct altitude for this market is, or exactly when we will reach it. One thing we can say with certainty is that the market is balancing itself right before our eyes, and quickly. We are starting to see activity pick up again, either from pent-up demand or price corrections, or both. Once the plane levels we believe we’ll be in for another long and smooth ride. This plane will never land.

Download the full State of the Market Report

 

If you purchased a home in Florida in 2005, you’ll want to file for the Florida Homestead Exemption. Not only will you save approximately $400/yr in taxes, you’ll also cap the amount your taxes can go up each year. If you do not file, there is no cap.To be eligible you must have purchased the home by December 31, 2005 and use the home as your primamry residence. Lee County Florida has a Homestead Exemption Form you can download. Florida is very strict about the property being your primary residence, and they will prosecute you if you cheat. Lee County hires investigators who search for rental listings on the Internet, etc. They even invite the public to tell if they suspect a neighbor is cheating on the exemption, so you only want to fill out this form if you really qualify.

If you purchased in 2006, you’ll have to wait until next year to file. If you purchased prior to 2005 and have not filed yet, you still can. If you qulaify, it’s a wise decision to file. Do not wait as it can cost you much more than the $400/yr because you won’t get the cap.

Florida has two bills pending in the legislature regarding Homestead Exemption Portability. We’ll cover what these bills mean to you in a future post.

 

The annual Cyber Star Summit is being held this week in San Antonio Texas. The Cyber Stars are the Top 200 agents nationwide out of more than 1.5 million Realtors. The Cyber Stars are discussing the latest trends in technology, improving communications with buyers and sellers, and evaluating the latests products to better serve the Real Estate community.Brett Ellis is is a Cyber Star and was asked to speak at this years Summit. Not only was it a pleasure speaking to such a powerful group, I also enjoyed learning from some of the brightest minds in the business today. We look forward to bringing some of the latest trends to the Fort Myers, Southwest real estate market. Technology, along with real estate is developing at lightning speed, and those that adapt and change with it will become more efficient and prosper.