A recently released index put out by PMI Mortgage Insurance of Walnut Creek CA, which is a national Private Mortgage Insurance company, announced that Naples (Collier County) is the #1 overpriced market in the country, and Fort Myers/ Cape Coral (Lee County) is the #6 overpriced market and prices are the most likely to fall during the next two years.

LaVaughn Henry, director of economic analysis for PMI, said the forecast is based largely on how sharp past price swings have been in a particular market. “Florida’s had a high probability assigned to it because historically it’s had a high price volatility. What goes up will, at some point, come down.”

The issue we have with this faulty report is is the basis for their forecast.  First off, Florida traditionally has not had huge price swings, in fact quite the contrary.  Florida, and especially SW Florida real estate has been amazingly stable for decades.  We just did not see large price swings.  See Year end Price chart for SW Florida real estate prices.  While we saw wild price increases recently from 2003-2005, and some major price decreases since 2005, over time Florida has been one of the more stable markets in the country.  Florida only recently experienced the Flipping Frenzy.

Secondly, just because something goes up does not mean it Must come down.  The SW Florida real estate market was undervalued for many years, especially the Fort Myers and Cape Coral areas.  Waterfront properties in other areas of the state were selling for much more than our area, and without good reason.  SW Florida was discovered.  Eventually land prices will even out across the state, and there will not be large disparities in prices.  Obviously the weather in SW Florida is more tropical than in northern Florida and may warrant higher prices.  We agree that while we were undervalued for a long time, we became overvalued as well.

Thirdly, prices in SW Florida have already come down since 2005 significantly, and the median price has actually improved over 2006 levels.  In fact, the median price has risen 4 out of the last 5 months.  See SW Florida real estate prices 2005-2007 chart.  To say that prices must come down simply because they went up lacks scientific and statistical basis.  It does not take into consideration the undervaluation, or the underlying principles or dynamics of this market.

Was the study wrong?  Only time will tell.  If they are correct on prices it will be by shear luck.  We have many forces in play right now affecting prices.  We’ve discussed at length on our radio show "The Future of Real Estate" and in this blog what those forces are and the impacts they will have on the SW Florida real estate market.  We’ll mention a few of note here.

Property tax reform may go a long way to unlocking a frozen segment of demand.  Many Floridian’s have been shut-out from buying because they’ve been locked into staying in their current homes because of the Save Our Homes Ammendment tax Disadvantage.  If a property owner moved, and even bought a similiar priced property, their property taxes could triple or quadruple in some cases.  There wasn’t much incentive to ever move.  Voters will be asked to approve a new Super Exemption to help out Floridian’s trapped in their own homes by Save Our Homes.

We also have a lot of buyers on the sidelines due to low confidence.  Everytime they pick up the paper or turn on TV some Expert proclaims the market has to drop.  We agree that over-priced sellers need to lower their asking prices if they wish to sell.  What’s not widely reported is there have been a number of sellers who have been successful this year, and that’s because they priced their home At The Market.  The enitire market doesn’t need to fall, only the over-priced portion of the market.

Lenders may face a difficult time for the next two years.  Traditionally lenders are the slowest to move.  When the foreclosures hit the market, buyers get their best deals from sellers who have equity and can afford to sell because they are quicker decision makers.  Lenders react slowly and look at old appraisals.

Recently we’ve been showing properties, and in a certain price range it seems every home we showed was subject to a short-sale with the bank.  The listings agents have had to disclose that the bank will take 6-8 weeks to respond on these short-sales due to the varying departments an offer must go through before acceptance, counter-offer, or out-right rejection.

Lenders may be in for a rough two years as it takes awhile to foreclose on properties, and the legal issues of acquiring back homes partially under construction with liens on them, but the market is recovering and is much more healthy than the banking industry who lent money to investors when they should not have.

Lenders might be better off making predictions about the banking industry’s health, or at the very least, doing their homework before making predicitions about real estate markets across the country.  At least recognize what has already ocurred.  Had this company made this prediction as we did a few years ago, we could give it credence.  Making it now after the fact without sound basis or facts is reckless, but perhaps not as reckless as the lending practices that put some of these banks and PMI companies in the the predicament they are in now.

For buyers, there are some real buys out there.  This is the best time we’ve seen in decades to buy property as there is excellent selection, renewed affordability, and low interest rates.  Many homes are available below re-production cost.  Call us today before you read in 2-3 years from some Expert that you missed the market.

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