Pending Sales Increase

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Pending sales lead to future closings, so studying pending sales over time offers a glimpse of what may occur in the 30-60 day future.  Obviously not every home closes, but it is a good barometer of what may close.

Nationally numbers were released this past week and pending sales increased 5%.  The SW Florida real estate market pending sales increased 4.11% over the previous month which is pretty much in line with national numbers.

Pending Home Sale Graph Fort Myers-Cape Coral
Pending Sales Fort Myers Cape Coral Florida Area

Pending sales are down 18.67% vs. pending sales last August, and this is in line with official sales numbers.  In July, sales were down 27% vs last year, so maybe when official numbers are released for August we won’t be down as bad as we were for July.

We’ve noticed a trend the last few election cycles whereby when people are uneasy about their jobs or the economy real estate sales tend to fall off just a bit in anticipation of the next election cycle.  Suffice it to say the November elections are on people’s minds, and how could they not be with all the ads on television during the primaries.  It is an encouraging sign that pending sales picked up in August over July.  Last year August sales were down slightly over July, so August isn’t always a month where we expect them to increase.

Interest rates are at record lows, and we’ve seen buying power in the $150-$300,000 price ranges increase substantially.  We believe sales could increase in this price range going forward into the next year as buyers realize they can buy much more home for far less money than they thought they could, even 1-2 years ago.

Inventory Levels in Fort Myers, Cape Coral, and Lee County Florida
Single Family Home Inventory Levels - pending Sales

As you can see from the attached chart, inventory levels in the Fort Myers and Cape Coral areas have been holding steady, and this is also true countywide as well, although the numbers are larger.  We’ve included a detailed pending chart as well showing pending sales from last year to present.  We’ll keep reporting what happens going forward on current real estate trends in SW Florida.

Be sure to check out our SW Florida Real Estate Market update for September directly from our Future of Real Estate Channel.

SW Florida Real Estate Market Update

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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. 

Fort Myers Cape Coral Real Estate Closed Single Family Homes
SW Florida Real Estate Single Family Home Closed Sales

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.

View our newly revamped website Topagent.com

Artificial List Prices Affecting the SW Florida Real Estate Market

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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. 

Misleading Short Sales Distort Actual Values
Misleading Values in SW Florida Real Estate

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.

Lee County Florida Sheriff Answers Questions about Arizona Immigration Law and More

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We interviewed Lee County Florida Sheriff Mike Scott on this week’s show.  Sheriff Scott answered tough questions on Arizona’s controversial immigration law, how his officers conduct traffic stops and how they handle possible illigal immigrants.  We also asked Sheriff Scott his thoughts on terrorism, border control, patrolling SW Floridas’s waterways, the manatee, red light cameras, school resource officers, working with ICE, and recent reports his office may need to cut 5% of his annual budget.

Lee County Florida Sherrif Mike Scott and Brett Ellis
Lee County Florida Sheriff Mike Scott and Brett Ellis

Sheriff Scott answered every question asked by Brett Ellis.  The show is broken up into 3 segments, and you can find all 3 here along with descriptions of each segment. Future of Real Estate Video with Lee County Sheriff Mike Scott.

Distressed Sales on the Rise in SW Florida

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We just pulled up sales numbers for Lee County for July 2010 and we see a trend continuing that began about 4 months ago in many areas. Except for Cape Coral, the percentage of sales that are distressed is rising throughout the county.  Cape Coral has remained relatively steady at about 62% of all single family home sales the last few months, but even that is up from 54.57% in April.

Single Family Distressed Home Sales in SW Florida
SW Florida Distressed Home Sales

Lehigh Acres is leading the county by far with approximately 3 out of every 4 sales being in distress.  This number has risen from 71.31% back in April.  Lee County numbers have risen about 10% in the last 4 months, which is an interesting sign.  Is this troubling? 

Foreclosure sales are going down, as are short sales, but regular sales are falling even faster, which leads to a higher distressed sale percentage.  To that extent, this is troubling. 

Some would argue that more short sales going through is a good thing, and it would be if this were true, but short sales have been going down in recent months.  Banks have not been easier to work with on short sales overall, while in some select instances they have been. 

Foreclosure sales have fallen as a backlog has been slow to enter the market.  We’ve been told there are still many homes in backlog, while some dispute that fact. We’re also noticing new foreclosure proceedings starting on failed short sales and people who’ve managed to hold off this long but no longer can due to employment and the economy. 

Heading into the fall elections, it’s safe to say things are not better with the economy, and the housing market is not finished cleansing itself.  The good news is we have a market, and the market is absorbing new bank foreclosure listings, but nothing is being done to help the economy and prevent them in the first place. 

Mortgage modifications have largely been a failure, and government efforts have been a joke.  Back loading a mortgage modification with extra principal and interest to the back end of the loan doesn’t help the homeowner when given a 6 month reprieve on payments.  At the end of 6 months, they still cannot afford the loan, and now the payment is higher than it was before when they couldn’t afford it. 

If a bank is willing to short sale to a new buyer, maybe they should consider a principal reduction to an existing owner who is in Real trouble.  I know banks are afraid to do this as every homeowner would ask for the same thing regardless of need, and this is a valid concern.  It is, however, probably one of the few tactics that would work.  

The other is to provide meaningful employment, and it’s clear that the stimulus plan hasn’t worked.  The government has failed at both ends of the spectrum.  All mortgage solutions have been voluntary on the banks part, and the banks haven’t always behaved nicely when dealing with distressed sales.  It’s time for a plan with teeth to compel the banks to cooperate, and a plan to get the economy moving again. 

Housing plays a big part in the economy; approximately 32% of GDP, so it makes sense to kick start the economy on Main Street.  Wall Street will respond once Main Street is stabilized.  November is only 3 months away, and I have a feeling the voters are going to vote with their pocket books this year, or perhaps with their pink slip.

Where are Prices Headed

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This is the question most often asked, by both buyers and sellers.  The truth is nobody knows for sure, but the market usually leaves clues.  Sometimes the market leaves strong clues a kindergartner can figure out, and sometimes they’re more obscure only a tea leaf reader might understand. 

So what clues is the market leaving right now?  Median single family home sale prices are up about 10% over last year in June.  July numbers haven’t been released yet.  Prices are down .31% over last month, so we’ll call that about even.  Home sales are down 12% over last year, but home sales are up 2.81% over last month. 

SW Florida Real Estate Sale Prices
SW Florida Median Sale Prices 2009-2010

As you can see by the attached chart, last year home prices rose steadily in 2nd half of the year, perhaps due to the home buyer tax credit, low interest rates, and bargain buys in the SW Florida market. 

Prices continued to rise this year right up until the home buyer tax credit ran out.  Is this coincidence?  We don’t know.  Some speculate it is due to the expiration of the tax credit, others speculate it could be effects from the oil spill, while still others wonder if it’s not the economy and the job situation.  Perhaps it’s all three, or perhaps its simple supply and demand at equilibrium in this new economy. 

Banks have slowed down bringing bargain homes to the market, and we’ve long wondered what will happen to our market when the bargains are gone.  Because we don’t have sustained employment opportunities, it seems almost impossible for prices to shoot up drastically once the distressed sales are gone. 

The distressed sales are not gone; it’s just that foreclosure listings have slowed recently.  We’re hearing that FNMA has more properties coming to the market soon, and we have seen a slight jump in pre-listed foreclosures we’re working right now.  We’ve also seen a slight increase in short sale transactions, although not enough to make a dent. 

HAFA, the government program designed to make short sales easier to sail through with the banks has been a huge flop.  It’s almost to the point the government should stop trying, because they’re making things worse.  Last year the government intervened and tried to instill loan modifications and workouts, but it was a flawed theory and failed miserably.  Because of this, we said 2010 was the year of the transaction either a short sale or a foreclosure.  Short sales have not worked like intended.  It was a voluntary program and had no teeth or real chance.  It was just an arbitrary deadline designed to make the politicians look good, but now they just look bad. 

Right or wrong, this all leads up to more eventual foreclosures.  We believe more are coming, and they take time to work through the process.  The Lee County Clerk’s office has been working down the backlog of files lis pendens, and this is a good sign.  Unfortunately, there are more to come.  The stimulus has not worked, nor has the governments plan to revive housing.  It’s time for a new plan, a plan that can actually work.

 We invite local, state, and federal officials to sit down with those on the street and think about the big picture.  Theory should align with reality, and implementation should be realistic, and have teeth.  Otherwise politicians are kicking the can down the road, prolonging the housing crisis, and adversely affecting the economy.  Housing is 32% of GDP, so it makes sense to work on a comprehensive solution that helps both, not one that sounds good for votes but does nothing. 

Where is our market headed?  We’ve identified some clues, and maybe there are others.  You can read the tea leaves and decide for yourself which elements will win out.  We can say we have record low rates, below replacement cost prices, and affordability is at an all-time high.  So if a buyer has a job, has good credit, and wants to buy, now is a good time.  I just want to get more people good jobs so more people can take advantage of this market.

Watch this week’s The Future of SW Florida Real Estate Video Show August 13, 2010

Spotlight on Whiskey Creek

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Whiskey Creek is one of Ft Myers long standing prestigious communities established back in the early 80’s era. Before Whiskey Creek, the prestigious areas of Fort Myers were off McGregor, Ft Myers Villas, and Tanglewood to name a few. Back in the 60’s and 70’s smaller homes were prevalent with shag carpets and lime green or yellow counter tops. 2 Bedroom homes were very common. Povia Ballantine was a builder here in SW Florida and you could always spot one of their homes by the door knobs which were usually yellow speckled, and many were in the Villas, Cypress Village, and other communities.  

Spotlight on Whiskey Creek in Fort Myers, FL
Whiskey Creek Subdivision, Fort Myers FL

As the economy and market emerged, McGregor area continued to build up south of Colonial, and the high end dollars transitioned to Tanglewood with the bigger yards and larger floor plans.  After Tanglewood, Whiskey Creek emerged. 

Whiskey Creek is divided by Whiskey Creek Dr, and one side featured custom homes by various builders and the other was predominantly US Homes.  This is why there was a difference in values based upon location and features which still exists to this day. 

Whiskey Creek Home Listed bu The Ellis Team
Whiskey Creek Home

What’s really interesting is the amount of interest Whiskey Creek receives to this day, which could be a function of owners maintaining their yards and landscaping so well, the mature trees, the oversized yards as opposed to today’s newer subdivisions, or the central location to everything via McGregor, College Pkwy and Summerlin Rd. 

It’s amazing to me when young families call us and only want to look in Whiskey Creek to raise their family because one of them grew up there as a child and wants that same location to raise their children. 

Currently there are 31 homes on the market priced from $160,000 to $849,000.  There are 4 pending sales priced from $169,900 to $279,000.  Since the beginning of the year there has been 26 closed sales priced from $108,000 to $875,000. 

Of the 31 homes on the market, 9 are short sales, and 2 are bank foreclosures.  Of the 4 pending sales, 2 are bank foreclosures and none are short sales. 

Of the 26 closed sales year to date, 3 are bank foreclosures and 1 was a short sale. 

These numbers indicate a stable market with a reasonable number of distressed properties given the current climate.  Some of the newer subdivisions have much higher rates than this.  This may be another reason as a whole the neighborhood is maintained meticulously, and why it is so desirable.  It also breaks the mold of today’s newer, cookie cutter communities. 

Whiskey Creek offers what today’s newer communities don’t, which is yard size, mature landscaping, and that established feel.  Combined with a perfect south location, we believe Whiskey Creek will remain a favorite for home buyers for years to come.

Watch the Future of Real Estate Show July 20, 2010 for updates on what is currently happening ine SW Florida Real Estate market.

2nd Qtr SW Florida Real Estate Sales 2nd Best on Record

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As we’ve been telling you in these articles, we expect sales to trend downward once official numbers were released, and that is the case.  We still have some pretty good numbers though, and as you can see by the chart, the 2nd quarter of 2010 is the 2nd highest on record.  2009 was the highest on record.  We’re still topping 2005 levels by a large margin. 

SW Florida Single Family Home Sales by Quarter
Lee County Single Family Home Sales

Home sales fell 12% in June over last year, down from 1,705 last year to 1,501 this year.  Last month sales were 1,460, so we actually picked up a few sales.  Single family home prices were also up about 10% over last year.  Median price this year is $96,600 in June compared to $87,900 last year.  Prices were roughly even in May 2010, so prices pretty much held steady. 

Condo prices also held steady, holding at $131,400.  They were $131,900 in May, and $125,300 last June.  Condo sales were up 11.11% 

So what does all this mean?  We have seen an increase in phone calls lately and an increase in buyer activity in the higher price ranges.  This is a departure from last year when buyers only wanted the bargain basement homes.  Buyers in the higher price ranges still want value and are not willing to overpay by any means, but at least activity is picking up.  This can be attributed to the higher priced homes coming down in value and entering the buyer’s radar screen on where they perceive values should be. 

Buyers don’t always have a realistic view of what properties are worth, just as many sellers don’t.  The exciting time in the market is when buyers and sellers perception become closely aligned.  It is precisely then that transactions can occur. 

We would have more transactions occurring if more sellers could afford to sell.  Many sellers just owe too much to sell at these bargain prices.  Of course, if more sellers could afford to sell it would add inventory, so the market has a way of balancing itself out. 

We don’t think prices are going back to 2005 levels any time soon, but at least prices are on the rise, and home sales are faring well.  I’ve spoken with a few lenders who have said mortgage applications are down.  This is true in SW Florida and nationwide.  We have seen an influx of cash buyers again as banks are sometimes stingy with the money.  We have seen some lenders loosening some of their lender requirements.  There are some 100% financing loans out there and interest rates are down to about 4.25% 

Some buyers have backed off because they lost out on the $8,000 tax credit.  The interesting thing is, rates were 5.5% back when this program was in effect, so by waiting, a buyer would now save $54,612 in interest on a $200,000 loan.  Not bad for waiting just a few months. 

Will we ever see interest rates this low again?  Will we ever see home prices this low again?  Will we ever see them this low again together?  I think the answer may be No to questions 1 & 2, and definitely NO to #3.  Never before have we seen this much buying power in the market, and perhaps this is why home sales are still hanging tough.  If you‘re a buyer, their really isn’t a better time to buy than now, and that is a fact!

State of the Southwest Florida Real Estate Market

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It’s been a little while since we released the official SW Florida Real Estate Current Market Index.  This index accurately predicts the near term forward direction of the local real estate market by analyzing current market activity against inventory levels and assigning a value.  A lower index level indicates a hotter the market, and a higher number indicates a cooling market. 

Current Market Index-Southwest Florida Real Estate
Ellis Team SW Florida Current Market Index

As you can see, the forward indicator heated up in February and we witnessed strong sales since that time.  We have noticed a slight cooling trend since May.  As we write this article official numbers haven’t been released yet, but we have spoken with several agents and loan officers who have also indicated a cooling trend since May. 

At 4.94 the index still boasts very strong numbers; however the trend has been rising lately so we’ll want to keep an eye on it.  One reason the market has cooled a bit is because bargain based foreclosure property inventory levels have fallen off which has cooled buying demand.  SW Florida has been a price sensitive market and buyers are off the fence and buying because they perceive real bargains.  The looming question has always been what will buyers do when the real bargains begin to dry up? 

We have heard reports that banks will be unloading more foreclosures to the market soon, and already we are seeing that.  Banks are not filing new foreclosures at the pace they once were, so we wondered how this could be true.  The answer may be that the banks have not released the entire inventory they foreclosed upon in the past few years. 

To give an example, we just pre-listed a bank foreclosure we’ll be bringing to the market soon.  From the time an agent receives a pre-listing it can take 1-6 weeks or so before property is ready to bring to market.  Several reports, valuations, and decisions must be made, and in some instances repairs, water hookups, etc before the property is ready for market. 

This particular property had suffered some fire damage.  The bank of course wanted a fire report from the fire department once they learned this new fact.  Keep in mind, the banks don’t know what they’ve got on their hands until the appraisal and agent reports inform them.  We obtained the fire report and determined the fire occurred back in 2007.  It’s obvious the borrower has not lived in the property since 2007, and presumably hasn’t made a payment on a damaged property they weren’t living in. 

So the question is, if the buyer wasn’t making payments, why did it take from 2007 until now for the bank to foreclose and/or bring the property to market.  The bank is just now discovering there was a fire over 3 yrs ago in the property.  

The answer is either the banks have held back inventory, or have just been too busy working their backlog.  So just because foreclosure filings have been down in the past year doesn’t mean there couldn’t be more ready to hit the market.

In addition to the banks we’re dealing with, we’ve also been working on FNMA listings.  We’ve been told by various sources to get ready for an influx of FNMA properties as well, and already we’ve been assigned several pre-listings. 

Banks have been more diligent on short sales, but they’re still not quick enough.  Short sale closings have been rising, but they’re still a drop in the bucket compared to the struggling homeowners out there. 

With short sale closings rising, and the possibility of more bargains hitting the market, we could see the index drop again, but for now it is rising and we’ll want to monitor.  Nationwide sales have slowed, so it’s not just a SW Florida trend.  We’ll be watching sales volume and pricing trends closely in the coming weeks and update you.

Tune in to The Future of Real Estate Video Show.