Last year we told you 3rd quarter sales were very strong, which led up to an almost record 4th qtr in 2008.  Official numbers are in, and 3rd qtr sales in 2009 blew past last years big numbers and surpassed 2005 record numbers by a mile.  To put this in perspective, last years sales numbers were up 72% over 2007 numbers.  This year’s numbers were up 109% over last year.  2005 was the biggest sales number year we had ever seen, and 2009 was up 35% over 2005.

All you read or hear about is how bad the market is, and there is some truth to what you hear.  Rarely though do you hear the whole story, and sales numbers tell a compelling story.

Our market has gone through a predictable healing process.  It’s a process nobody looked forward to, but sometimes you have to hit bottom before you can go back up.  Simply put we had too much inventory and phantom demand.  The demand we thought we had was investors flipping to other investors like musical chairs, until one day the music ran out.  We had high employment because builders were building at warp speed, and we needed mortgage brokers, closing agents, not to mention appliances, carpet, etc.

Then one day when it became apparent the demand was phantom, building stopped as speculators stopped buying from one another.  That led to a severe market correction that was inevitable, which further led to job losses throughout SW Florida.  These further job losses created a downward spiral, which increased foreclosures from not only investors who walked from deals, but regular people who lost their jobs.

The only solution unfortunately was to begin a healing process of selling these homes, which of course was going to be at a price much lower than the high’s of 2005.  The prevailing questions were always, how low would prices have to go, and how long would it take.  And the answers are related.  The higher the prices, the longer the process would take.  Because SW Florida led the state in price drops, it also led in the healing process.  Our prices dropped faster than any other area as evidenced by pricing reports on our website at under housing statistics.  Thus we have set record sales levels even surpassing the 2005 levels.

Single Family Home Sales By Qtr Lee County Florida Real Estate Market
Single Family Home Sales By Qtr Lee County Florida Real Estate Market

Many people think that because we’re setting record sales levels, prices should rise, and they are partially correct.  However, we’re not done yet with the healing process.  Prices coming down from unsustainable levels was only the beginning of the process.  Prices won’t rise dramatically until we bring back employment to the area.  Oh, we’ll see some rising prices as snow-birds flock to the area this season not wanting to miss out on a great deal.  This won’t lead to massive price increases though because we still lack a driving economic force, which are jobs.  And jobs is not just a SW Florida problem, it’s a nationwide problem.

We’ll also see some price increases as less entry level foreclosures enter the market and we swing more to mid and upper tier foreclosure price points.  Again, these are just statistical numbers.  Median prices may rise, but prices in certain neighborhoods can actually fall due to more foreclosures and distressed sales at higher price points.

The good news is SW Florida has cleansed itself pretty well comparatively speaking.  It’s kind of like a company with lots of inventory in a down economic cycle.  The company can place the inventory on sale and blow out the old inventory, and when the economy rebounds that company is well positioned to capitalize as they are not saddled with high inventory coming out of a recession.

Our market has done a good job of discounting and selling the inventory.  What’s out of our hands is the national economy.  We have sunshine and good weather, but we’ve always had that as an advantage.  We either need the national economy to improve, or we need to steal some jobs from another city and have them relocate to SW Florida.  This may sound bad, but it’s done all the time.  GM just relocated some plants from one state over to IN.  Indiana’s gain was another state’s loss.

So let’s pray the economy gets better soon as it’s good for our real estate market and good for jobs.  And if our local leaders have a few tricks up their sleeves to lure businesses to our area it would be great.  I think our area has suffered and we deserve some good news.  If a company is looking to relocate, it might as well choose SW Florida vs. some other state.  It would be good for their employees to move to a nice place like SW Florida where we have a good work force, decent schools, great weather, and wonderful things to do year round.  If you’ve ever been cooped up for months during a miserable winter, you know the advantages of living here.

So let’s hope our Economic Development Council will be announcing some exciting news soon.  We could all use some good news.  Until then, let the healing continue.

It’s been a few months since we’ve reported numbers for the Current Market Index, so here is the update.  The Fort Myers-Cape Coral area index now stands at 4.02, up slightly from 3.86 in September and 3.81 in August.  The lower the index numbers the better the market for sellers.

This is a result of slightly rising inventory numbers, but very much in line with inventory numbers back in August.  We’ve seen continuous dips in inventory for quite a few months leading up to October, and this is the first month we’ve seen a slight increase.  Pending sales are down ever so slightly as well, however nothing that is statistically significant.

Current Market Index SW Florida Real Estate
Current Market Index SW Florida Real Estate

Existing sales are holding up nicely and still showing healthy gains over last year.  Buyer interest from around the country is strong.  In fact, our team has so many buyer leads coming in that we need to hire 4 more buyer agents to keep up with the activity.  We think season this year is going to be very strong.  Temperatures up north have been unseasonably cold this fall and it’s looking like they could have a long and cold winter.  Traditionally this is always good for the Florida market as snow-birds look for a tropical escape and potential property purchase.

The snow-birds we’ve talked to are already motivated to purchase.  They witnessed first hand that some properties are up about 20% in price over last year as the pickings are getting slim in certain segments.  They realize this season may be the last season to pickup many of these bargain basement priced properties.

We’re seeing waterfront properties in the Cape for example bouncing off their bottom last year for entry level direct access properties.  We’ve also seen a bottom in Cape Coral for entry level homes, especially pool homes.  This has fueled an increase in sales in the Fort Myers and Lehigh Acres market. Fort Myers home sales in September increased by 6 sales. Cape Coral lost 35 sales versus the previous month.  Lehigh Acres gained 7 sales versus September.

As sales potentially shift from the Cape over to Fort Myers and Lehigh Acres, we could see a bottoming in prices there as well.  You’ve heard the term that water seeks it’s own level.  As prices get too high in a given area, buyers shift their focus to other more affordable areas.  Many have preferred to live in Cape Coral over Lehigh Acres, but in the run-up back in the early 2000’s, prices in the Cape got so far ahead of Lehigh Acres that buyers shifted to Lehigh for the value, and thus a boom began in Lehigh.  As foreclosures hit hard, many buyers scooped back into the Cape for the bargains and preferred the Cape over Lehigh all else being equal.  Because we’ve sold many of the Cape foreclosures, the bargains are not there like they used to be, so we’re seeing this shift to wherever the bargains are.

We’re still in a bargain market for the time being, but that could change.  Northerners are starting to fear that the bargains are drying up and they don’t want to miss out, so this season could get very exciting.  It’ll be interesting to watch where the money goes, and what happens when the foreclosure well starts to run dry.  How will that affect the overall market?

Speaking of foreclosures, it appears banks are cranking up the process on a whole new batch of foreclosures.  Some have speculated that banks purposely waited until the end of 4th qtr which ended Sept 30 to file these new lawsuits so their books would look better.  Wall Street has a history of doing this for earnings and results.  A friend of mine has even speculated banks are keeping losses off their books this year to pad their earnings so they can collect bigger bonuses.  There may be some truth to that.

Last year we saw a spike in Lis Pendens filings for precisely the same theory.  We’ll have to watch the November and December filings to get a feeling if this is another Wall St accounting trick of holding back what they can, and thus the October spike, or if this is a long-term trend.  If this is a long-term trend, then it will stall increase in prices.  If this is merely a short-term blip like last year, we could see fewer bargains and more actions from northerners fearful for missing out on one of the best buying opportunities in awhile.

Just like back in 2005, you cannot calculate the absolute top of the market until it’s in your rear view mirror.  Timing the bottom of the market is much the same way, and in fact we’ve seen a bottom already in certain segments.  The entire market doesn’t always move in unison.

Our advice to buyers is simple.  Regardless of whether this is the absolute bottom, we’ve already seen the bottom, or we have a little bit more to go, prices are bargains right now.  You may not want to miss this general time period, because one day soon we may look in the rear view mirror and kick ourselves for missing the buying opportunity of a lifetime.  All the bank’s misery and misfortune can now become your gain.  Somebody is going to capitalize on this misfortune.  Why not you?

A few weeks ago we stated here that we believe there will be more mid to upper priced foreclosures coming to the market in the next year, as more Alt-A mortgages are foreclosed on as scheduled interest rate resets take effect. We’ve seen most of the sub prime loans already come and go from the market. So the next wave should be the Alt-A and the economy driven foreclosures as regular people who have lost their jobs due to the falling economy begin to stop paying.

We based this upon a graph in our State of the Market Report published last January. You can view this graph in greater detail and in color on our Blog at or visit our Fan Page on Facebook at As you can see by the chart, Option Arms are scheduled to reset at their highest point about August of 2010.

Reset Schedule of Mortgages by Type
Reset Schedule of Mortgages by Type

A feature of the Pay Option Arm is that borrowers are allowed to pick a payment, meaning they can pay any one of several payment options.  These loans began with low teaser rates, and one of the ways they allowed borrowers to minimize their payment was by allowing the buyer an option to make a payment less than the “Interest Only” portion of what the loan would have been.  These types of loans are called “Negative Amortization” because each month the borrower is losing equity.

Pay Option Arms were used primarily by borrowers who wanted to maximize their purchasing power by leveraging as much as the banks would lend with the absolute minimum payments.  These buyers didn’t worry that they were getting further behind each month as they figured the home would appreciate faster than the negative equity would accrue due to the loan.  Most of these borrowers planned to “flip” the property and make a fortune, then repeat the cycle all over again.

In this cycle of irrational exuberance, few thought about when the musical chairs would run out.  It seemed like that crazy market would last forever, until one day when the music died.  You could see the train wreck that would one day ensue.

Simultaneously, the value of the property is in free-fall and the loan amount is increasing by the month.  You’ve heard the terms “Upside Down” and “Getting Hit at Both Ends”.  This pretty much sums up what happened to Option Arm borrowers in heavily concentrated investment areas like many new subdivisions here in SW Florida.

Have you ever wondered why certain established neighborhoods held their value fairly well through the downturn, while newer communities seemed to take it on the chin?  The answer is investors and speculators flocked to newer construction, as this is where the perceived pre-construction deals were back in 2003-2005.  The problem is we had too many speculators.  Investors can be quite healthy for a market, but a speculator just drives up prices for the sole purpose of Flipping to another buyer.  The only useful purpose this would serve is providing the capital to speed up construction to provide much needed supply due to high levels of demand.  The problem is, we had phantom demand.  Our market sped up the supply side without real end users.  There’s something not quite right when the end user is another speculator buying to flip same property for a 3rd or 4th time to another speculator.  Eventually the music dies and the musical chairs run out, except this is real life and not fun and games.

The rest of us have been picking up the pieces from this sad game, and we’ve all paid a price.  Construction jobs have left, values have plunged, banks have failed, taxpayers have paid for a bailout, and just about everyone that played the game is sorry.

Many of these Option Arm’s have already defaulted as the speculators learned early on they couldn’t flip the property for a profit, so they quit making payments.  We do believe there are some regular buyers who also used the Option Arms to purchase more home, and some have been hanging on for as long as they can because they can’t afford to sell their home.  Once these payments reset, we could see another round of foreclosures hit the market.  These buyers tended to buy the mid and upper tier homes.  This is one reason we predict you’ll see more higher priced homes coming out of the foreclosure pipeline.

We’ve seen the foreclosure pipeline growing in the past few months, and due to processing delays, we expect several foreclosures to start hitting the market this month.  Filings are down, so the foreclosures coming out now were backlogged from back in December and January.  The resets in 2010 and 2011 will also take awhile to work their way through the system, so bottom line is we’ll see a certain amount of foreclosures for the next several years.  The sooner we clean them up and ship them out the sooner we’ll be on our way to a normal market, so I say bring them on without delays, so we can all get back to listening to the music.  Leave your chairs at home.

This is another question we get asked a lot and the quick answer is value is in the eyes of the beholder.  It also depends on who you ask.

If you ask the seller, they’ll tell you about how they personally built the house, what kind of insulation is in the attic and walls, how many screws are holding up the shelves in the kitchen pantry, how they clean the solar panels on the pool twice per month for maximum longevity, how they just cleaned out the dryer vents, the fact that they imported fruit trees from Malaysia for maximum fruit yield, and the date and time each fruit tree was planted.  All of these things carry emotional value to the seller and should equate to monetary value in the seller’s eyes.

Value is in the Eye of the Beholder
Value is in the Eye of the Beholder

The lender wants to know how sound the buyer is, if the homeowners association is fiscally sound, and the opinion of value from the appraiser.

The property appraiser looks at value from last year and tells you what they think your home used to be worth last January 1 based upon sales from last year.  This is done on a mass-appraisal system because the property appraiser cannot possibly do a full-blown appraisal on all parcels in the county.  While this is a monumental task, the property appraiser is at a big disadvantage ascertaining actual value on any one particular property because of the scope of the task.  While we would never rely on the property appraiser’s assessment of value due to these issues, we are amazed at how many times they do a good job of getting in the ball-park or close to value, but they are subject to error because the values are based upon a previous time frame and done on a mass scale.

This brings us to the last two people in the equation; buyers and appraisers.  Buyers look at several homes and size them up against one another.   Buyers are always on the lookout for property that meets their needs, and presents the best value to them.  Typically they’ll make an offer on the best value property that meets their needs.  They don’t often waste time by offering on over-priced properties; they go straight for their favorite and offer there.  Only when negotiations fail on their favorite do they typically move on to their second choice, so over-priced sellers remain the bridesmaid instead of the bride.

Lastly the appraiser becomes involved.  Since May 1 there has been a new governmental rule in effect called the HVCC (Home Valuation Code of Conduct).  It was intended to improve the appraisal system and provide more accurate appraisals, but as is anything government related, it’s been a disaster.  Appraisals have been far from accurate, and you could easily argue that the mass appraisal system the local property appraisers system uses has been far more accurate than some of these appraisals.

The HVCC setup a management company to act as a middle-man so to speak.  Costs to consumers have gone up, and turn around times have increased.  The lowest priced appraisers have gotten many of the orders, so consequently many appraisals have been handled by out-of-town appraisers unfamiliar with our local values.  The management companies give appraisers little time to do their work-typically 2 days, but appraisals take sometimes weeks to receive back because the middle-man has to review them.

FHA accounts for 70% of the financing today, and if you get a bad appraisal you’re stuck with that value for 6 months under FHA.  We’ve seen many properties under-appraising by $70,000 and more.  The sad thing is the buyer wants to buy the property, and the sellers wants to sell, but the faulty appraisals are preventing not only the current buyer, but also future buyers from purchasing the property.  It is literally forcing many properties into foreclosure.

You can literally blame the Federal government since May 1 for wrecking our market.  Oh, we can’t blame them for all the faults leading up to May 1, but we’re in serious recovery mode right now and the new HVCC system is preventing prices from moving when they should, and sales from occurring when buyers and sellers want to do business.

The banks are powerless.  Even though they want to lend money to a qualified buyer, the faulty appraisals are preventing it, and appealing the process is almost futile.  A loan officer cannot speak with an appraiser, and the appraiser has total control, even when facts are presented clearly showing value is present.

We recently had an appraisal done where the appraiser would not use a comparable two houses down, but preferred to use a foreclosure two neighborhoods over.  The neighborhoods were not the same.  The appraisers are so afraid a bank may come back on them later that they’ve gotten too conservative, and many times use poor condition and gutted properties against good condition properties.  Appraisers should be worried buyers could sue them to level the playing field, and in fact one state has introduced a law stating just that.

Congress really needs to step in and fix this mess.  The government created it through additional regulation, and the unintended consequences are wrecking the market, and this market needs help, not an outside entity kicking it when it’s down and trying to get up.

You’ve heard the expression Tis the Season, and in real estate season can mean many different things depending on where you live, and what type of product you’re referring to.  Let’s talk about the Seasonality of the SW Florida Real Estate Market. For many years in SW Florida condo sales were highly dependent on seasonal sales, and in many tour developments that is still true.  However, even with condos there are differences.  Some condos are located at the beach; some can be rented weekly Vs monthly, and so on.  There are only a few golden rules in real estate; Location, Location, Location, and Price.  If you over price a home in this market, chances are good it will not sell, and we all know location makes a difference, although some would argue it’s still a function of Price.  The better the location, the better the price, but that’s the old chicken and egg theory we’ll stay away from today.

Today we thought we’d illustrate some seasonal trends in single family home sales throughout the years. For many years we’ve told people single family home sales traditionally peak in the summer months, perhaps because kids are out of school and that’s when the relocations tend to take place, and perhaps that many of our buyers over the years were move-up buyers and they had more time to look after the Season their business just had.  For years we didn’t have large companies employing hundreds or thousands of people, so many of our buyers worked for or owned small business, and they were busier in Season than out of season.


Seasonality of the SW Florida Real Estate Market
Monthly Sales Graph since 2005 Showing Seasonality of SW Florida Real Estate Market

We have attracted a few large employers, although a few more would be welcomed by all here I think.  Our market has been in turmoil since 2005, so we weren’t sure the charts would show the traditional rule of thumb that home sales tend to peak March through end of summer.  Upon further study of the home sales graph, it does seem to hold true even in this time of change that home sales peak in the March through Summer time frame, and as we enter the fall one might expect home sales could decline.

This year may or may not be like recent past years as we have a first time home buyer tax credit in play that expires November 30, artificially low interest rates as the government has been buying treasuries at least through October, and artificially low property values due to the distressed nature of the market.  Put all this together and you’ve got a Perfect Storm for record sales, and we’ve seen that for the past year.

So what could speed this train up or slow it down going forward?  In a few weeks interest rates could head up if the government doesn’t decide to keep them lower.  If so, rates could shoot up over 6% almost overnight like it did a few months ago last time their decision was about to expire.  Additionally, the first time home buyer tax credit could go away, thus taking some motivation out of new buyers in the market.  How the public reacts to the overall economy, health plans, stimulus money, bailouts, etc. could also affect public confidence about the direction the country is headed, and affect purchasing decisions.  All these could slow the train down.

The train could also gain momentum if the government enacted a tax credit for all buyers, not just first-time home buyers.  Nationwide we’ve been lacking the move-up buyer, and that’s certainly true here as well.  A tax credit for everyone would spur a recovery in the overall market, and may decrease pressure on banks.  As tax payers we either spend it here or spend it there, however if we help save the banks and spur home sales we also help the economy and increase jobs at the same time.  It would also help if the government keeps interest rates low by buying treasuries allowing the market more time to heal itself.

A reform of the newly enacted (May 1) appraisal rules would also help the market, as new rules intended to help have actually hurt, and have not increased quality of many appraisals.  We would argue the new government program has increased costs, increased inefficiencies, and spurred out of town appraisers who don’t know the market’s intricacies, but what would you expect when you put the US government in charge of local property valuation rules?

Some banks are getting better at evaluating and approving short sales when they make sense and some have gotten worse.  How banks make decisions today will affect future foreclosure inventory.  We believe foreclosures coming to the market may increase in the next year, which will help sales because inventory has been shrinking, and this will bring more affordable housing to the market to replace dwindling inventory.  We don’t see rapid price increases on the horizon until we see job growth, and even though we have artificially low sales prices, we are seeing sales because they are bargains.  I’m not sure we’d see anywhere near the sales volume if these bargains went up significantly in price overnight, and this is why I don’t think prices will jump dramatically when inventory contracts until the overall economy heals with the housing market.  And this is why we are in favor of a home buyer tax credit for all, so we can heal both simultaneously.

Official real estate sales numbers were recently released so we decided to take a look at how the Fort Myers/Cape Coral market fared against the top markets in the state.  Cape Coral/Fort Myers is considered a metropolitan statistical area (MSAs) Our MSA includes Bonita Springs, Estero and all of Lee County Florida.
Let’s start off with the bad news and get that out of the way, which will lead us to the good news.  The bad news is the Cape Coral/Fort Myers MSA led the state in median sales price decline year over year for July.  Lee County was down 43% to $89,000 in July 2009, down from $154,900 in July of 2008.  This isn’t new news as we’ve led the state all year as SW Florida was perhaps the most over supplied market in the state for single family homes.
This leads us to the good news. Our area also leads the state in sales increases in transactions.  Because SW Florida was quicker to react than other markets, we were quicker to post sales gains.  The Cape Coral and Lehigh Acres areas have been the focus of news reports on NBC Nightly News, the Today Show, Wall Street Journal, and many other worldwide media outlets which has led to an awareness of the bargains available in SW Florida.  You’ve heard the old saying, “Even bad press is good press.”  Well, it’s certainly true as Lee County has drawn the attention of northerners, Canadians, Europeans and Germans among others looking to buy a piece of paradise at a decent price.
While we have seen many northerners buying second homes in our area, most of the single family home sales have been first time home buyers and investors.  My friend Jeff Tumbarello with the SW Florida Real Estate Investors Association recently did a study and found recent sales were 64% cash buyers, which is an indication investors have found SW Florida and realize it is a bargain.
Cash buyers can also be a sign that the new government appraisal rules are not working and are limiting many home sales.  The new program is called HVCC and stands for Home Valuation Code of Conduct.  This new program creates a middle man and increases costs to borrowers, and it prohibits communication from loan officers and appraisers.  At first glance this may sound good, but in reality it has increased pressure on appraisers to turn around appraisals quickly, while at the same time slowing down appraisals getting to the lender.  Imagine that, a government program increasing costs, increasing pressure and slowing things down.
The worse news is buyers are shopping these bargains, finding them, making offers and applying for financing only to be told that an out of area appraiser doesn’t think these homes are worth it.  The buyer wants to buy, and the seller wants to sell, but neither can, so it goes back on the market and is sold to a cash buyer for less because regular buyers can’t get financing.  Many of the foreclosures go to cash buyers because bank asset managers know it’s tough to get financing buyers through due to appraisal issues.
Fannie Mae and Freddie Mac back most of the loans other than government FHA and VA loans, and both have adopted the HVCC which was put together by regulator Federal Housing Finance Agency (FHFA), so we’re stuck with appraisal rules whether they’re good or not.  We can blame our government for keeping home prices artificially low and preventing many qualified buyers from purchasing a home they wish to buy.  I’m sure there are some good aspects to the rules, but the reality of the results is wrecking the market and changes should be adopted quickly.  Rules should not dictate market value, the market should.  These new rules will actually fuel further foreclosures from sellers who cannot sell.

Fort Myers-Cape Coral Sales Trends
The statewide average of home sale growth was 37%, and you can see Fort Myers/Cape Coral blew that average away at 104% The next closest was Miami at 64%.  As you can see, many metro areas are experiencing home sale growth which is encouraging, and this growth would have been much better both here and statewide if the appraisal issues were corrected.  We expect foreclosures to increase this year over last year.  The good news is buyers have absorbed all the foreclosures and eaten into existing inventory.  The sooner we fix the appraisal mess the government created, and complete the foreclosure cycle, the sooner our market will be back to normal.  In the meantime, enjoy the higher sales volume and the bargains as our market heals itself.

A new video has been released that explains the First Time Home Buyer Tax Credit. It is called RE/MAX Agents Know $8k Tax Credit

It explains what the following:

  • Definition of a first time home buyer
  • The difference between a credit and a deduction
  • How to get up to $8,000 refund on your taxes
  • Income Limits to Qualify
  • If you don’t owe taxes, Can you get the credit back?
  • Deadlin Coming up Soon
  • Time is Running out, so call a Realtor today

You’ve heard reports that listing inventory has been coming down for many months.  This is true, and not only have buyers absorbed all new inventory coming onto the market, they have also helped to purchase a backlog of existing inventory as well.  We wondered if inventory levels relative to home sales were declining in all price segments, so the first thing we did was looked at what the month’s supply of inventory was back in January in our State of the Market Report.
We decided it would be interesting to compare inventory levels from about 8 months ago to where they are today and sort them by price range to see which price ranges are hot and which ranges are not.

SW Florida Real Estate Inventory by Price Range
The results are in and you can tell by the graph that the most dramatic changes are in the 0-$100,000 range and the next one up at $100-$200,000 ranges.  Months supply of inventory fell dramatically in the entry level markets, down from over 20 months to just over 4 months.  First time home buyers and investors are scooping up these bargain properties as quickly as they enter the market.  The 100-$200k range has also done well, declining from 12 months supply to 7.82 months supply just since January.  As we reported last week, the first time home buyer tax credit is helping first time home buyers in the entry level market and this graph supports that. However there is nothing in the tax code that helps the broader market and perhaps this is why we haven’t seen the move-up buyer.  In fact, we have seen many first time home buyers buying short sales and foreclosures. As we know the banks won’t be buying anything after the foreclosure sale and short sale sellers won’t be buying for a while until their credit is repaired.
This is why we’ve advocated an across the board tax cut for all buyers.  The real estate market is 26% of GDP and has led the economy out of each recession. Our economy would be better served if we invest in strengthening the entire real estate market and it will lead us out of this recession.  We’re not in favor of all these government bailout programs. However, if we are going to invest money it would make sense to spend it in areas that actually may work vs. what our government has been doing.  We’ve seen TARP money for the banks, a stimulus package that so far hasn’t produced jobs as advertised, and a bailout for auto companies.  The cash for clunkers was a success in that it spurred car sales. If spurring across the board home sales helps get our economy back on track, it might be worth looking at.
Once we get to the $200k+ range the numbers begin to look eerily similar to what they were in January.  There is improvement, and I’m sure all SW Florida home sellers will take improvement where they can find it.  We are not seeing improvement in sale prices and in fact sale prices are still falling in the $300,000 + ranges.  We have seen a bottom form in the entry level home prices, and certain waterfront property seems to be holding its own as well.
One bit of good news is we are seeing northerners buying second homes in SW Florida as prices have dropped to affordable levels.  Northerners are afraid these bargains may not be here in a few years when they’re set to retire and in many cases they may be right.  Prices are below replacement cost and this will not last forever once inventory is absorbed.  While there is pent-up demand for bargain properties, there could also be pent-up supply from home sellers who would like to sell but just can’t today due to the prices.  Once the market levels out across the spectrum, it will be interesting to watch and study those forces.
For now, we see another year of banks shedding bad loans.  We expect several of the large banks to essentially double the foreclosures.  All you have to do is study their SEC filings to see that this coming year most banks are budgeting twice as much in write downs as they did last year then do the math.  The good news is our market is absorbing that inventory.  The bad news is that pent-up supply of home sellers who would like to sell may be put off in time.  Let’s just hope enough can hold on until we adjust through this next wave, and let’s hope Congress addresses strengthening the entire real estate market, not just the entry level.  As you can see by the graph, home sales aren’t trickling up.  If we strengthen the entire market, there will be less bank foreclosures, more families will stay in their homes, and the economy recover sooner, thereby creating jobs again.

We’re doing something new this week for the Future of Real Estate Radio Show here in SW Florida.  This week’s special guest is Lee County Property Appraiser Ken Wilkinson, and this week we video taped the show as it was being broadcast and we’ve decided to bring it to you in video format as a test.  We’ve separated the broadcast into 6 parts so you can watch any and all parts that interest you.

Ken Wilkinson Property Appraiser Lee County Florida
Ken Wilkinson Property Appraiser Lee County Florida

Future of Real Estate July 4, 2009 Part 1

  • Cape Coral water and sewer assessments effect on valuations
  • Mass appraisal system Vs. Fee appraisal system
  • Property Appraiser must assess 604,000 properties annually
  • Chinese Drywall and it’s effect on value
  • Mold and it’s effect on value
  • Functional Obsolesence
  • Economic Obsolesence
  • Cost to cure
  • Property Appraiser assessment Vs. Property Taxes

Future of Real Estate Part 2

  • Property Appraiser assessment Vs. Property Taxes Continued
  • 92 Taxing Authorities countywide
  • Property Appraiser’s office provides analysis of market January 1 to each taxing authority
  • Taxing authorities set their tax rates
  • Truth in Millage (Trim)
  • Rollback Millage
  • Gut feeling of what politicians will do with tax rates
  • Federal stimulous money effect on taxes
  • County budget’s being evaluated
  • Property appraiser’s office being defended by County Attorney’s office beginning July 1,2009 to save money

Future of Real Estate July 4, 2009 Pt 3

  • New Technology at Property Appraiser’s office
  • AVM-Automated Valuation Models
  • Multiple Regression Analysis
  • 2D 3D Line of Sight Model
  • View and Floor Height’s effect on value

Future of Real Estate Pt 4

  • Assessed Values down in 2008
  • Pockets of fluctuation
  • North Cape and Lehigh Acres went down fastest
  • Countywide average down over 25%
  • $27 Billion Less taxable value From $110 Billion to $83 Billion
  • Lehigh Acres Ground Zero
  • 80% of sales in some neighborhoods short sales or after foreclosures sales
  • 2009 taxes reflect 2008 sales
  • Weighted sales-4th quarter
  • Department of Revenue

Future of Real Estate Pt 5

  • Tax Referendum
  • Governor Crist
  • Property tax ammendments Nov 2010
  • Recapture
  • 3% or CPI, whichever is Less
  • 2008 recapture rate .1%

Future of Real Estate Pt 6

  • Bill signing Tallahassee Florida
  • Aerial Technology to substitute visiting each property (Desktop Review)
  • Electronic Permits
  • Lee County Lowest Cost per parcel in Florida

Below is a graph of inventory levels in just Fort Myers and Cape Coral since 2004.  The blue line is the active inventory listed in MLS and the orange line is the pending sales listed in MLS.  As you can see, back in 2005 there were as many buyers in the marketplace as there were sellers trying to sell.

Listing Inventory in Fort Myers and Cape Coral MLS
Listing Inventory in Fort Myers and Cape Coral MLS

 These figures do not include all of Lee County Florida, but rather just the Fort Myers and Cape Coral areas of Lee County.  At the end of the graph you’ll see a slight increase, but this is due to us switching MLS systems and including slightly more data.  We’ll watch this trendline from here on out but we can say inventory has been decreasing for months and foreclosures have not been keeping pace with the record sales we’re experiencing here in SW Florida.

Bank foreclosure agents we’ve spoken with all are noticing a decrease in bank foreclosure inventory.  The Ellis Team has sold much of it’s bank owned foreclosure inventory and have just about 6 left.  We expect more in the future, but as of right now first time home buyers, second home buyers, and investors have scooped up all but 6 we just received.  The 6 bank foreclosures have bank financing available at 4% interest with a 7 year balloon and 5% down for a primary buyer, and 6% interest and 20% down for an investor, or buyers can obtain their own financing.