It’s been a little while since we’ve reported on inventory levels and pending sales in SW Florida.  We’ve been reporting on record sales levels all of 2009 and into 2010, and increasing prices the past few months.  So how has this affected inventory levels, and how are pending sales doing which reflect future sales activity? 

Enclosed is a chart that illustrates Fort Myers and Cape Coral inventory levels over time.  It does not include the entire county, and while countywide numbers would be higher in total, the graph looks very much the same. 

SW Florida Real Estate Inventory Levels June 2010
Fort Myers Cape Coral Single Family Inventory Levels 2010

As you can see, back in 2005 we had about as many pending sales as we did active listings in MLS.  We all know what happened about September of 2005, and the graph perfectly illustrates this.  By tracking these numbers it was easy to predict what was going to happen in 2006.  Then something happened again about December of 2007.  We noticed inventory levels peaked, and within a few months pending sales picked up steam, an indication the market was on the move again.  Since February 2008 we’ve seen a steady increase of pending sales, and this has led to much higher sales levels in 2008 and record sales levels in 2009. 

Sales activity has remained strong in Fort Myers and Cape Coral.  We have noticed a decline in foreclosure properties entering the market, and also an increase in short sale closings in SW Florida.  Normal sales have also increased.  Total distressed sales declined in April from March, while all sales increased slightly. 

So what does this all mean going forward for SW Florida?  That’s an interesting question.  One would think prices would continue to increase, and this is a distinct possibility.  We wouldn’t be surprised to see a slowing in actual sales as prices rise.  Prices today are still near bargain basement prices, but a dwindling foreclosure supply may lead to higher prices. 

As we see higher prices, investors will either be more motivated to scoop up everything they can, or less motivated because properties won’t cash flow as easily, and future capital gains are lessened with each price increase. 

This leads us all back to first time home buyers, move-up buyers, and vacation or 2nd home buyers.  We don’t see many move-up buyers today, presumably because local buyers don’t like the sales price they’ll receive, even though they love the new price on a home they may be seeking.  We also don’t see a lot of confidence in the local employment market.  We believe jobs will ultimately fuel real estate growth once we move past these bargain basement prices, and it is for this reason we could see lower sales volumes as prices rise. 

We probably won’t see a full blown real estate recovery in SW Florida until the economy improves and jobs return.  The answer to this situation is likely the answer to the previous question.  Our local real estate market is riding the wave of investors and northerners looking for their piece of sunshine at sale prices, but once the sale is over, this wave will only last so long, and this is why we’ll need job growth to sustain the recovery after this wave.  

Inventory levels have been holding steady, and buyers have been ready, willing, and able to absorb the entire inventory the banks could throw at the market.  It will be interesting to see if buyers are willing to absorb more now that foreclosures are slowing down.  This will be an interesting supply vs. demand match, and we’ll report back on which side takes the upper hand.

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