The News Press held their annual Market Watch last night.  Presenters Frank D’Alessandro and Denny Grimes presented their opinions on where the market has been and where it is headed.

Both presenters offered a grim outlook for the residential real estate market in SW Florida for 2007.  Denny said "Needy or Greedy, the Market doesn’t care" and "Keep out the Ginsu knives, more slicing is needed" in regards to pricing. 

Denny also said the affordable housing crisis is over, a fact we also pointed out on Pg 2 of our 2007 State of the Market Report, and in our 2007 State of the Market Supplement.

We agree with about 99% of the facts the presenters made at the News Press Market Watch, and we agree generally with their overall assessments.  We might point out however, a few topics for discussion.

In Denny’s mind sellers need to get realistic in price.  It is true we have many sellers who are in Denial (See PG 2 of our report).  We have however found that there is a market at the right price, and many sellers have set that bar.  The sellers who are there are selling.  So not all sellers need to reduce their price, only the over-priced sellers.

Secondly, we feel it is also incumbent that buyers get realistic as well.  Many buyers want to low-ball everything, and we know that some properties are actually priced correctly.  Those properties need to be bought, because they are valued properly, and they are being bought. 

Because buyers are reading sensational statements, buyers are afraid to step up, even though many can now afford to buy again.  Nobody wants to overpay, and nobody wants to buy now if they think the market is headed for a crash.  We don’t believe the market is headed for a crash, quite the contrary.  Denny correctly pointed out that it will be impossible to know when we’ve actually hit bottom.  We’ll know after it’s already occurred, and then it will be too late.

We believe in many cases the market has set a bottom, and only when more sellers reach that level will they be successful in selling.  Because many sellers actually are selling, we know there is demand, and much pent-up demand at that.  That demand will grow much stronger once buyers regain confidence.   The headline from the News Press paper "Show at Harborside Event Center presents grim outlook on slumping housing sales" will do nothing to renew that confidence anytime soon. 

We don’t have a grim outlook.  We think buyers are asking for permission to buy, anything to validate their feeling that now is the time to jump back in.  Headlines like this are sensational and don’t ease fears, and perpetuate a slumping market.

Facts are facts, and nobody is hiding the fact that we have an excess supply of homes and condos on the market in the SW Florida real estate market.  Yes, many sellers need to reduce prices to be successful, but not all.  We’re selling many homes quickly because sellers are pricing their homes correctly the first time.  Aggressive marketing, and aggressive pricing is a formula for success in this market.

Denny was absolutely correct in two areas.  1.  Sellers need to take responsibility and stop blaming their agent, their neighbor, etc for the fact they can’t get a price more in line with 2005 prices.  2.  Real Estate agents need to start standing up to sellers and telling them what they need to hear, not what they want to hear.

Unfortunately, some agents who haven’t been around through up and down cycles don’t know how to do this, and really don’t understand what is happening.  Lastly, many sellers shop around for an agent who agrees with them on price, and eventually they’ll find one who will take the listing at their price.

Sellers might want to save themselves a lot of time and hassle and hire an experienced agent the first time instead of the third time.  A home usually sells for a better price if it is priced correctly and doesn’t become stale on the market.

Our hats go off to Denny and Frank for delivering a bitter pill.  While our outlook on the market may differ somewhat, we find that we agree with them much much more than we disagree, and they did a fantastic job presenting facts.

Brett Ellis

Real estate showings were up tremendously in SW Florida, doubling December’s figures.  We expect February and March figures to increase further and sales to pick up as we enter the heart of the real estate selling season in SW Florida, especially for condos.

January 2007 Statistics:

Total Number of Showings December 2006 945
Average Number of Showings Before Selling 6.0
Average number of Showings During 1st Week of Listing .3
2nd Week of Listing .4
3rd Week of Listing .5
4th Week of Listing .3
5th Week of Listing .3
6th Week of Listing .5

December Statistics:

Total Number of Showings December 2006 478
Average Number of Showings Before Selling 6.9
Average number of Showings During 1st Week of Listing .5
2nd Week of Listing .4
3rd Week of Listing .3
4th Week of Listing .1
5th Week of Listing .3
6th Week of Listing .23

November Statistics:

Total Number of Showings November 2006 561
Average Number of Showings Before Selling 6.3
Average number of Showings During 1st Week of Listing .3
2nd Week of Listing .4
3rd Week of Listing .4
4th Week of Listing .3
5th Week of Listing .4
6th Week of Listing .3

October Statistics:

Total Number of Showings October 2006 599
Average Number of Showings Before Selling 6.5
Average number of Showings During 1st Week of Listing .5
2nd Week of Listing .5
3rd Week of Listing .3
4th Week of Listing .4
5th Week of Listing .3
6th Week of Listing .2

It will be interesting to see the January


Showings have picked up considerably, and buyers are making offers with increased confidence.  We believe by mid-year 2007 the single family home market may bottom.  We’ll look for inventory to stop increasing, and pending sales to pick up (See Pg 7).  Combine these trends with further month over month price increases as seen on Pg 12 in the report, and we’ll have a pretty good idea we’ve hit bottom.

Once we can officially call a bottom to the single family home market, we think buyers will jump into the market even more than they are now with renewed confidence.  There is pent-up demand.  We would caution buyers not to wait too long though, because we can usually only pronounce a bottom only after we’ve already hit it and we start back up.  Once this happens, it’s too late to perfectly time a bottom as you’ve already missed it.

As a buyer, if you believe we’ve very close to the bottom, it’s probably best to buy now while interest rates are still low, and just before all the other buyers jump on the bandwagon and start competing with you for the best value properties.  We know buyers tend to jump at once, in unison, so you might wish to beat that crowd.  Even if prices have slightly lower to go, the bottom will quickly bounce right back up, so there’s little risk in moving now.  The risk may be in waiting for the absolute bottom you’re sure to miss, because procrastinators always miss the absolute bottom.

Condos on the other hand are another story.  Because we have a 3 year supply of condos on the market right now in Lee County Florida, and because condo owners haven’t lowered prices to the extent single family home owners already have, we believe there could be more future price pressure on the condo market. 

We also know that 66% of condos sell in the first 6 months of the year.  We expect many unhappy condo owners to lower asking prices, tired of paying increased condo fees and insurance costs, once season ends and their unit isn’t sold.  And for the tower condo owners, we’re even less optimistic as tower units tend to be the most expensive, and the least end-user owned.  Without end users, condo sales just aren’t sustainable at these lofty prices.

Many condo owners will grow weary of the increased carrying costs.  They also will not be able to cash flow an expensive condo unit to come anywhere close to the actual carrying costs each month.  Quite simply, some unit owners will either sell at sacrifice prices, or face foreclosure.  Even financially able unit owners of expensive condos will grow weary of high carrying costs with little hope of recouping costs via higher asking prices anytime in the near future.  The future just doesn’t look bright for some condo owners.

Additional in-depth analysis:

Builders have stopped buying finished lots like they did in 2004-2005.  Because builders have stopped buying lots, and because investors (Flippers) have stopped speculating on lots, prices on lots have been falling monthly (See Pg 16).  Lot prices give an indication of where the overall market is headed.  Builders have also felt pressure on pricing in the final sale price to consumers, and have been forced to pay less for lots, or not buy at all.

On that note, builders have slowed down tremendously their building of speculation homes as many builders have been caught with finished homes from investors who refused to close on contracted pre-construction homes because they could no longer flip the home and make a profit.  In many cases it was cheaper for the investor to forfeit the escrow deposit than consummate the sale and take the loss on resale.  Builders have been forced to resale these homes at lesser prices, hence their reluctance to build new spec homes into a price sensitive market.  Don’t also forget that impact fees have risen dramatically too.

Because builders have slacked off building more homes, it will eventually help the resale market and this is why we’re forecasting a bottom mid 2007.  Be careful not to focus on the exact date, as we’ll describe later.

We know that Lee County is adding about 13,000 jobs each year, and about 30,000 people are moving to Lee County each year.  They’ll all need housing.  Because building has backed off, it leads nowhere else but to the resale market.  Buyers don’t have to wait for a house to be built, and they can get better deals in the resale market now that builders have unloaded most of their inventory at lower prices.  There is hope for single family home sellers in the future.

The bottom of the resale market looks fairly flat from here.  If we’re not there today, we’re fairly close.  Once we bounce, don’t look for dramatic price increases after that until possibly 2009.  This is why you shouldn’t worry what date we actually hit absolute bottom.

We also know that there is a market at the right price.  Some sellers will need to reduce prices, but not sellers who are already priced where the buyers are.  Only the sellers priced above where the buyers are need reduce asking prices, which lead us to an interesting dilemma.  What would happen if all sellers (not realistic) reduced their prices down to where the buyers are at same time?

Either sales would hit all-time records, or we’d see additional price declines, or both.  Because we don’t believe the latter, the average list price may come down whereas the average sale price may not move much as only sellers who are priced where the buyers can buy are actually selling.  Because these are the only sales, they are the only ones affecting the average sale price, and because of this we don’t expect much pricing pressure to occur.  It is an interesting economics question though, and food for thought.

Be sure to tune into The Future of Real Estate, a weekly radio show dedicated to talking about the SW Florida real estate market.

Brett Ellis

The Ellis Team at RE/MAX Realty Group

Fort Myers, FL

Today we are releasing our annual SW Florida real estate 2007 State of the Market Report. 

 Click on the link to the actual report itself, along with analysis and predictions that did not make it into the report.  The report is approximately double in size from last year, and quite frankly we couldn’t fit everything we wanted to say in it.  It is packed with powerful information that will help you understand the local SW Florida real estate market.

If you’re buying or selling real estate in SW Florida, you won’t want to miss this report.

The Ellis Team at RE/MAX Realty Group is hiring experienced buyer agents who are aggressive and customer oriented to join our growing team.  We have leads, and we’re looking for someone to help us who exemplifies what we stand for. We’re looking for agents with experience in SW Florida, so if you’re looking to move here we’re not interested.

If you think you’ve got what it takes to become an Ellis Team Buyer Specialist, please contact us.