It’s been almost 2 months since we covered the SW Florida housing supply and even longer since we covered the traditional sales versus distressed sales with breakdowns by month. Since both affect our market and tell a story, we thought we’d revisit the issue which may lead to clues on where the market is heading into season.

Months Supply of Inventory SW Florida

Listings for single family homes and villas has increased by about 500 in the past month which has increased the months supply of inventory to 3.8 months, up from 3.5 months the previous month. When new inventory hits the market there is a lag because we calculate past sales into existing inventory to derive this number. Since the inventory wasn’t available to sell until now, there’s no way it could close. Because properties are being scooped up almost as fast as they hit the market, the months supply will come down, all else being equal.

When we look at the breakdown of sales by month, we see traditional sales rising by 96 sales over last October. Short sales are roughly the same, but you’ll notice a big difference in foreclosures, or REO’s (Real Estate Owned). Foreclosures are less than half of what they were last year, and traditional sales are rising as prices increase. More sellers can afford to sell as the prices rise.

Breakdown of SW Florida Traditional Sales, REO, and Short Sales

Banks have worked hard at accepting short sales in lieu of having to sell at foreclosure months later. Because the SW Florida real estate market was artificially too low, there has been upward pricing pressure. This is why median sale prices jumped $10,000 in October over September. Heading into season we could see more of the same.

We know prices fell too far because they were far below replacement cost, which essentially cooled the jets of the building industry for a several years, however now that prices are rising builders have found ways to build again at lower cost points.

With each rising price point it becomes feasible for builders to build again. Building bolsters our local economy in so many ways, so it’s nice to see that, especially since building was such a large component of the SW Florida economy.

The SW Florida real estate market is set to take off even further once the overall economy improves. We’re seeing price gains now simply because we were undervalued. We’ll see more once traditional demand picks up. We think there is pent-up supply and pent-up demand just waiting to attack our market. Both will rise as the economy improves, and each may temper the other. We have many sellers who would like to sell once prices rise enough to cover their mortgage. They are current on their payments but strapped in their home.

We have buyers who’d like to buy but need to sell a home first, or are just waiting until they feel better about business. You’ve heard the term a rising tide will lift all boats, and the same is true with the economy. Once that happens, this market could blast off.

Good luck and Happy House Hunting!!!

Official sales numbers haven’t been released yet, so we study inside the numbers to see what the market is doing.  Our analysis shows single family home sales in December shot up 32% over November, and condo sales shot up over 54%.  We’ve been reporting the past few months pending sales have been building which could lead to a surge in closings.  December began that surge.

Single Family Home and Condo Sales in SW Florida
SW Florida Home and Condo Sales

Foreclosure closings in Fort Myers proper almost doubled from 65 to 123.  Short sales climbed from 49 to 68.  57.19% of the Ft Myers single family home market was distressed, up 10% from the previous month.  This tells us banks allowed more short sales to close, and we were finally able to close some of the foreclosure sales that were tied up.

Cape Coral experienced a 35.81% rise in home sales.  All facets of the market rose, foreclosures, short sales, and regular sales.

County wide foreclosure sales were up 55.19%, while short sales were only up 13.33%  So of the 32% increase in overall sales, a large part was due to an increase in foreclosure sales.  Like it or not, foreclosure sales are not only leading the market, they’re almost dictating it.  Distressed sales county wide last month accounted for 59.90 of all single family home sales, and foreclosures accounted for 41%.

So here’s the breakdown.  Traditional sales 40.1% Foreclosure sales 41.3% Short sales 18.6%.  Distressed sales are driving this market, and probably will for some time until employment rises in the area.  Many national news outlets are running with stories that Florida and our area will see further declines.  This is a case where the authors really don’t understand the market.

We’re not ones to fluff up the market.  In fact, we predicted declines in prices, and most would say we’ve been pretty spot on in our price and volume predictions.  While nobody can be perfect about something that hasn’t happened yet (The Future) we believe SW Florida was the first in crisis and our crisis may last longer because it was more widespread, but we’re in the later innings of the foreclosure crisis.

Most of our investors have already folded their cards and ran.  Today we’re left with more foreclosures, but they’re due to people losing jobs and income versus legacy investment choices.  Oh sure, there are some investors still losing their properties, but the debt issues (Resetting Adjustable Rate Mortgages) set to reset later this year isn’t much of a factor here as those investors are already gone.  This will be an issue up North more than here.

I hear people say today’s foreclosures are a result of bad loan decisions.  Again many of the early defaults were, but today’s defaults are more from average people losing one or more incomes.  These loans were a good decision at the time, but things change when unemployment exceeds 14%.

We look for solid sales volume going into season as visitors realize our prices are bargains and they’re trying their best to scoop them up.  A few are going for blood and are realizing they’re not in competition with the bank, but other buyers and they’re losing out in multi-offer situations.

Buyers in this market are wise to listen to local experts rather than national experts who haven’t studied our market and what factors are influencing it right now.  If I had a dime for every buyer who said they should low-ball because our market is going lower I’d probably have more money in my pocket than I do now.  Those same buyers would have a nice home at a nice price and wouldn’t be on the outside looking in wondering how they’re going to buy their little piece of SW Florida paradise.

Sellers are the last to realize a market has topped and buyers are last to realize a market has bottomed.  While all segments of the market may not have bottomed, many have, and the wise buyer will reset their expectations and go get their piece of paradise before someone steals their gem right out from under them.

In case you missed it, be sure to check out our  SW Florida Real Estate December 2010 Video Update