For about two years we’ve been telling people that we can’t call a bottom to this market until we see median prices level off, combined with a pickup in transactions.  August home sales witnessed at 22% rise in transactions and a modest 1.91% rise in median sales price over the previous month.

One month doesn’t signal a bottom to the market; however it is a positive sign that we’re now seeing both indicators rising in one month.  Both occurred during a time when we traditionally don’t see a rise in transactions, so seasonality cannot be blamed for this rise. If we continue to see a trend over the next few months, it will indeed be encouraging news for a beleaguered real estate market.

The media will most likely focus on sales levels Vs. the previous year, although the sooner we recognize that this market isn’t at 2005 or 2006 levels and is more in line with 2001-2002 levels, the better off everyone will be.  Sales are up over the previous month and that’s a trend we’d like to see continue.

The reason transactions are up is twofold. Sellers have finally reacted and priced their homes where the buyers are actually buying, and buyers have recognized a buying opportunity and are getting back into the market now that they can afford to again. 

Affordability is back into the market, and it was needed because the average person was getting priced out of the market.  Sellers grudgingly responded, and sales are picking up.  Price, supply, and demand always have a way of dictating sales.

Are all sellers priced correctly?  That answer is no!  The sellers who are priced correctly have a good chance at selling, and many are selling.  Over pricing a property is nothing new, in fact even in the hot 2005 market not all properties sold as we did have some greedy sellers.  Our 20 years of selling experience tells us there will always be over priced sellers, regardless of whether it’s an up, down, or sideways market.  The key is determining where you need to be and then being there.

Inventory Levels rose for the first time in 5 months, as did the Current Market Index.  The Current Market Index has proven to be a valuable indicator as to the future direction of prices in SW Florida real estate.  The Current Market Index for single family homes is at its all-time high at 18.81 while the condo index sits at 22.06

This would help explain why meidan prices have fallen over 13% in just three short months.  What is selling in Lee County is the lower end of the market, which is skewing the median price down.  However, we are seeing price corrections at virtually all ends of the market, so we won’t dispute it’s representation of the overall market.

Mortgage disruptions have affected the mid and higher end of the market.  Going forward, the mortgage market is settling down and credit is slowly becoming available again to buyers who can legitimately qualify for a loan.  We still contend that the buyer is in the drivers seat, affordability is back in the market, and now is a great time to be a buyer.  It’s not a great time to be a seller.  Our advice is buy if you need a home, and sell only if you need to sell.  If you need to sell, you must price it aggressively to attract a buyer.  Homes are selling, but you must price your property where the buyers are.

New home construction has fallen off significantly, which will help the resale market in the coming months.  Resales will not have to compete with builders new product at below cost prices.  Resales will compete with foreclosures from investors with new product who walk away from their mortgages.  It will be interesting to see how the banks market and price the foreclosures that are looming.  History tells us banks are usually slow to price correctly, and the properties typically fall apart due to lack of upkeep, vandalism, and theft. 

We’ll report on the REO (Real Estate Owned by the Bank) as they influence the market and the effects they exhibit on the market.

The higher the CMI Index, the more supply we have relative to demand.

September 15, 2007 Active Pending CMI
Single Family 15,215 809 18.81
Condo 8,141 369 22.06
August 15, 2007 Active Pending CMI
Single Family 14,919 955 15.62
Condo 8,190 417 19.64
July 12, 2007 Active Pending CMI
Single Family 15,095 975 15.48
Condo 8,380 443 18.91
June 14, 2007 Active Pending CMI
Single Family 15,164 1,014 14.95
Condo 8,761 485 18.06
May 17, 2007 Active Pending CMI
Single Family 15,607 1,107 14.10
Condo 9,205 560 16.44
April 15, 2007 Active Pending CMI
Single Family 15,896 1,152 13.80
Condo 9,660 569 16.98

January 23, 2007 Active Pending CMI
Single Family 13,769 1,016 13.55
Condo 9,002 529 17.02

November 27, 2006 Active Pending CMI
Single Family 13,186 1,031 12.79
Condo 8,344 535


SW Florida homeowners wishing to sell often find out they don’t much like the number they can sell their property for.  Some sellers want more money, or simply owe more than the property is worth, so to protect their investment, cash flow, and good credit, they opt for renting instead of selling in a down market.

Renting sounds like the perfect solution, until they speak with a rental agent.  Thousands of other frustrated owners have also faced this decision, and have flooded the rental market.  Rents have gone down significantly in SW Florida, to the point where it barely covers just the property taxes and maintenance fees and leaving little to cover the actual mortgage.

I spoke with a seller today who just closed on a condo he owned and took a $60,000 loss.  He said rents in that community went down from $1200-$1300 to $800/month.

I know of some downtown river district condos that were purchased for $800,000 and are renting for $1,350/mo.  This does not cover the mortgage, and wouldn’t even cover the maintenance fees and property taxes either.  Some owners are glad to cover whatever expenses they can, while other investors cannot absorb a negative cash flow.

The other thing sellers may wish to consider is what are their expectations after they lose money for a year.  Even if the property is still in perfect condition, will prices be the same, more, or less than they are now.  Nobody knows this answer for sure, and it most likely depends on what typre of property you have and the price point.

Some investors have come to the sad conclusion that it’s best to bite the bullet today and sell now, if they’re financially able.  Whatever you decide, consider all the facts before making such a difficult decision.  If you decide to rent it, ask fair market value and get it rented to good credit worthy people.  If you’re going to sell it, ask fair market value and get it sold, leaving this decision to others.