A few weeks ago we did a story called “Riding Low” about real estate listing inventory falling is SW Florida. We had May data to work with and at that time listings were lower than they were all last year and we speculated based upon pending sales they would most likely go lower when June data was released.

Listing Inventory in Southwest Florida Down

Well, June data was just released and indeed listing inventory fell again to its lowest level in quite awhile. Last year agents from Cape Coral to Fort Myers to Bonita Springs to Naples were all complaining about lack of inventory. It is putting pressure on buyers in 3 ways.

Prices are going up rapidly. Median prices are up about 30% over last year. This doesn’t mean all homes are up in price as some ranges have lots more inventory than others. Buyers today are being squeezed by rising prices, that’s for sure.

Secondly, interest rates are going up and this is causing the cost of ownership to rise. It’s a double whammy. Prices are going up and so is the cost to finance. Throw in some insurance rate increases and even a tax millage increase and you’ll see that some buyers are quickly being priced out of the market.

Lastly, when there is a shortage of homes on the market buyers are in fierce competition with other buyers. It’s very frustrating to look at homes and select a favorite only to find out the seller just accepted another offer, or worse is in a multiple offer situation and a bidding war ensues.

We just listed a short sale that had interest from several buyers because it has been kept up very well. We had to wait 5 day including a weekend because the seller’s loan was a FNMA loan and they now require a waiting period before signing contracts. We did that and a few buyers were very disappointed. We see this quite frequently on our listings and our buyer agents deal with this on a daily basis with our buyers.

This is the market we are given. It does no good to complain, although complaining sometimes makes us feel better. The best solution to having success in a market like this is accepting the market we’re given and educating our customers on how to succeed in this market.

Setting reasonable expectations upfront means educating our customers with facts, data, and logic. Facts help overcome emotional objections and get us in the mindset to make an informed and intelligent decision rather than a seat of the pants knee jerk reaction.

Women might appreciate and notice that they’re male significant other will study their fantasy football team until the cows come home but when it comes to using that same diligence on studying the housing market the motivation isn’t there. Some people are into fantasy football and some people are into studying the market, and neither way is right or wrong. I’m just saying as a buyer or seller it pays to either study the market as if you want to win your league or hire someone who knows.

Buyers and sellers who try to go it alone sometimes make some costly mistakes. Real estate is a complex transaction. Pricing is just one component. Taxing, deed restrictions, title, survey, financing, transfer protocols, HOA and condo associations all play into things you need to know about, and this is just the tip of the iceberg.

If you’ve got questions on buying or selling real estate in SW Florida, don’t hesitate to call someone who can guide you. If you’d like to search the MLS and have a look around, feel free to do so on our website www.Topagent.com If you’d like to get a valuation on your property go to www.SWFLhomevalues.com

Feel free to view our Virtual Tours as well.

Good luck and Happy Buying/Selling!!! Listing Inventory in Southwest Florida Down.

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It seems like everyone is reporting that prices are up in SW Florida, but prices only tell part of the story.  Supply and demand usually influence prices.  Even then there can be variables to this equation.

Here’s a little story that illustrates the public’s perception about how Hot a neighborhood is.  There is a golf course community in South Fort Myers called Eagle Ridge.  I remember back in the late 80’s people commenting that it seemed like the whole neighborhood was for sale.  It seemed that way, when in reality about every third home was on the market.  33% of homes in a neighborhood on the market at one time is a big number, and homes weren’t particularly selling well at that time in Eagle Ridge either.  It was just a lot to absorb, and 1989-1991 was a different market.

Fast forward to several years later, exact date unknown.  Another consumer was questioning why they should buy a home in Eagle Ridge when there were very few sales in the past year to compare to.  The buyer questioned why nobody wanted to purchase in there and if they were making the right decision.

The answer was many people wanted to buy in Eagle Ridge at that time.  It just so happened that very few sellers wanted to sell at that time so there were no sales, simply because inventory wasn’t available to sell.  We had a good market at that time and Eagle Ridge was desirable.  In both instances buyers were questioning a neighborhood’s desirability.  In both instances there were very few sales, and yet the reality of the situation was diametrically opposed.

Single Family Home Listing Inventory
SW Florida Residential Listing Inventory

While statistics can sometimes be deceiving, we try to provide pertinent stats and describe what is actually going on and what they mean.  Aside from a few blips, listing inventory has been going down.  This is due to the market absorbing and buying up available inventory so it doesn’t stay on the market long, assuming it’s priced correctly, and the lack of enough new foreclosures entering the market.

Just as the first waves of foreclosures drove prices down in SW Florida, the lack of foreclosures entering the market combined with a healthy appetite from buyers has propelled prices higher.  Just reporting prices without going in depth doesn’t explain to a buyer or seller what’s really influencing the market.

Single Family Home Sales in SW Florida
SW Florida Residential Sales

Of course all real estate is local.  What’s going on nationally doesn’t necessarily affect what’s happening here.  The national market was doing OK back in 2006 while we began flat lining.  Flat lining would actually have been good; however our prices were headed for more like a cliff.  We’ve talked about those reasons in the past at length, and in fact many people on the ball who study the market were warning about what would someday happen with prices.  We don’t see those factors in play today, so we believe we can be in for sustainable price increases going forward.  In fact, our market may have over-adjusted to the downside as prices were artificially too low for awhile.  Our market is correcting those errors now.

The market eventually gets it right.  The real estate market isn’t as efficient as the stock market, but it does work over time.  As prices rise we’ll begin to see more building and we’re already seeing signs of that.  Builders have been able to cut costs to compete, as long as they are into the land at decent prices.

Closed sales are on their annual march upward.  March and April tend to culminate in finishing of a strong season.  By all accounts we’ve had a strong season so far, and when we look at pending sales we can see that March/April closed sales will be better.

We continue to look for higher prices than last year.  Sales numbers would actually be higher if only we had more inventory to sell.  The trend is the same even if the numbers of sales are down.  This could put more upward pressure on prices going forward.  We’ll report soon on pricing trends, and now you have the context ahead of those reports as to what’s moving the markets.

 

One of two things will happen, and possibly both. Banks may start releasing more inventory in the coming months, and home prices could begin to rise as inventory levels drop off.

Listing Inventory
SW Florida Residential Single Family Home Listing Inventory

We’ve been noticing a distinct pattern the past few months. Inventory levels have been dropping just as pending sales have been increasing. We can thank the banks for this as they’ve withheld inventory due to legal concerns over title and the foreclosure process. We’ve also seen an increase in closed short sales. Lastly, we’ve seen a rise in regular sales, all leading to a decline in inventory levels. County-wide levels were down 4.32% from last month, and yet we’re seeing sharper declines like Cape Coral which had a 7.18% drop, or Lehigh Acres which experienced a 10.22% drop in available listings.

Combine this with season and buyers from up North scooping up bargains and it would be easy to jump to the conclusion that home prices have to rise. In fact, we predict they already are. Last month’s numbers showed a drop in prices, but we’re not too concerned with that. Next week official numbers will be released and we believe they will be higher. Sales may be down from last year because the inventory isn’t there, but prices could very well be up. We wouldn’t be surprised to see prices gain close to 10% from last year’s numbers.

If you read this article weekly, or our blog, you know that we’ve been predicting a decline in sales transactions combined with price increases at some point in the future. That point could be now. We would say definitively, however there are still some external wildcards that can influence transaction volume and prices in the short term.

Those wildcards are banks releasing backlogged inventory once the title issues are worked out, and every indication is banks will start releasing again in the next month or so. The question is how much do they have left in SW Florida. We believe nationwide there is much left, however nobody knows about SW Florida as we’ve been in this crisis the better part of 4 years now. Possibly we’ll emerge as the rest of the country deepens, but something tells me we still have more to work through as well.

Other wildcards include the US economy, oil, and Mideast stabilization as it pertains to energy. If the Mideast settles down and oil returns to normalcy, there are signs the US economy is headed for a modest recovery. Combine all this with the fact we believe we’re in about the 7th inning of the SW Florida foreclosure crisis, and we could be on our way to higher prices. We’re not predicting a return to 2005 prices, but rather a sustainable march to replacement cost prices. Once we reach replacement cost, builders will start building again, which will further fuel our local economy.

Should the governor be successful in landing some companies to relocate to Florida, this could be a wildcard on the positive side. Bottom line is many factors are at play, but for the past year or so investors and Northern friends have realized Florida is on sale, and they’re buying.

If we don’t see the negative wildcards, prices almost certainly have to rise. The reason we don’t believe they’ll double or triple anytime soon is because appraisals won’t support that, consumer spending may not support that, and we have hidden inventory that may enter the market. No, we’re not talking about the shadow inventory of banks, but rather shadow inventory of regular sellers who would sell if they could, but can’t because they’re currently upside down on their mortgage and do not want to suffer financial implications of a short sale. Once prices rise, we could see more sellers test the waters and attempt to sell.

That’s a lot of variables influencing the market, and the most likely outcome we believe will be modestly rising prices, at a sustainable and healthy level. Once this becomes well known, more buyers will line up because they will have seen we’ve hit bottom and bounced back up. They will have missed the bottom, but this will be close enough to make them feel good and jump back in.

We also believe banks will loosen credit standards this year. They’ve been too tight with the money looking for any reason not to lend, and this will change in 2011. Combine this with buyers realizing the bottom has passed, and we the conclusion we jump to is modestly rising prices. Let’s watch for the numbers next week. What conclusion do you reach?

Each January everyone seems to ask what the new year will bring to the SW Florida real estate market.  While nobody has a crystal ball, experience and detailed analysis lends clues to what the future may hold.  Each year we release our annual State of the Market Report, which consists of the most detailed and current market stats around combined with our 20+ years of experience in the local real estate market. 

We pull these stats in January after agents have a chance to enter all their year-end transactions.  We pull from a variety of MLS databases then merge the data together and eliminate duplication of data.  Some listings are input and marketed to Realtors in multiple Boards, and we want the most current but accurate data free of duplication.  This all takes time, and then the real analysis can begin. 

Single Family Home Inventory in Fort Myers-Cape Coral Florida
Single Family Home Inventory in Fort Myers-Cape Coral Florida

Fortunately we do provide a significant amount of data all year round to our readers and viewers of the weekly Future of Real Estate Video Show, so we can offer some preliminary data combined with experience and make some educated guesses as to what 2010 might bring. 

As you can see from the attached graph, listing inventory has been rising recently, and pending sales have started to fall again.  We think this may be due to the anticipated expiration of the home buyer tax credit at the end of last November, but that has recently been extended and expanded into 2010.  Not only can first time home buyers take advantage of this credit up to $8,000, now people who currently own a home and plan to but a new primary residence can also take advantage up to $6,500.  Contracts must be in place by April 30, 2010 and must close by July 3, 2010. 

Add to this that our Northern friends are now here, and they are searching for homes.  Word has gotten around up North that Florida is on sale, and prices have begun to rise in some sectors, especially the bargain buys.  The Snow Birds realize 2010 may be the last “Season” to get these bargain basement prices, so they’re bringing their checkbooks looking to purchase.  We wouldn’t be surprised to see pending sales rise in the next few months and inventory to fall again as Northerners help scoop up even more of our inventory.  Investors have been hard at work in 2009 competing with first time home buyers, and we believe Northerners will be buying 2nd homes that they may one day move into, or vacation to at the least. 

The US Treasury Department has just issued new short sale guidelines which may make it easier to get short sales through for primary homeowners who are in trouble.  This may help add sellable homes to the market, which could help increase sales and relieve some of the strain on foreclosures. 

Speaking of foreclosures, we believe much of the entry level speculation inventory is now gone, and we expect higher priced inventory to enter the market, which will make 2nd homes and move-up homes more attractive.  As this occurs, look for more sales in the higher than median price range, which currently stands around $95,000.  These new bargains at the higher price levels will help raise the median sale price. 

Speaking of sales prices, we’ve seen 5 straight months of median price gains, and we look for that to continue.  In fact, early on in 2010 we may start to see year over year price gains, something we haven’t seen in about 4 years.  In other words, February or March of 2010 may see higher prices than February or March of 2009.  We can’t state the actual month it will occur, however if you study the graphs and data you can see that day looks like it’s coming fairly soon. 

Tune in to our weekly video show “The Future of Real Estate” at www.Topagent.com and stay tuned for our upcoming State of the Market Report which we’ll be releasing soon which will detail which areas of the county are moving, changes in averages sales prices, single family homes and condo data, and so much more.  We’ll even break it down by zip code and graph it out so you can see how your area is doing, and what the future may hold.  Stay tuned.