Monthly Archives: January 2011

SW Florida Home Sales Rise in December

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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

SB 550 What Went Wrong

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SB550 has not been well received in Florida.  That is an understatement.  Some of the published comments regarding the bill affecting septic systems or Onsite Wastewater Treatment Plants were:

“I hope they flush this legislation…”
“Something smells here.”

The most onerous piece of this bill is that many of those  who had an older septic system were required to bring it to code.  Why fix it if isn’t broke?

A coalition comprised of members of the Florida Association of Realtors, the Florida Homebuilders Association, the Florida Chamber of Commerce, Associated Industries of Florida and the Florida Onsite Wastewater Association have been meeting to address the situation.  Repeal or amend SB550 and simultaneously propose legislation addressing the issues of clean water and a good mechanism for wastewater treatment. The hope is to get a sponsor of the new bill at the same time SB550 is repealed.
On Site Wastewater Treatment Plants (septic system) basically treat where generated.  How efficient is that?  The other choice would be to just “sewer the world,” said Bob Himschoot.  Bob is indeed an area expert on the issues.  He has a degree in forestry and is a member of  more than one of the groups in the coalition. Those who know Bob know that he has the credentials.  He ran the family business Gulf Disposal and developed Gulf Coast Landfill before he sold them to Waste Management, Inc..  He is a Rotarian and past president of the Fort Myers Chamber of Commerce.  Bob  formerly served on the board of the National Onsite Wastewater Recycling Association and currently serves the Florida Onsite Wastewater Association.  He is president of Crews Environmental which he acquired 30 years ago.  His son and daughter are involved in the day to day operations.  When Bob isn’t driving to Tallahassee to promote clean water he is actively involved in the management of Crews. He has raised his family here and probably is good to his dog.  I don’t even know if he has a dog.  And, he isn’t running for public office so it doesn’t matter.  The point is that he is a person passionate about clean water in the state of Florida and has spent his adult life in that pursuit.

Bob advocates the onsite wastewater treatment plants. Without septic sytems there would be many more “non buildable” lots in the state of Florida. He says there are many nuances and unintended consequences to “sewering the world’.   His philosophy is “know what you have and maintain it.”  He is not opposed to some sort of requirement to pump and check the system every 5 years.  The cost per homeowner would be something like $500 or $100 per year maintenance.  Those of us on a central water system (sewer) pay at least $350 per year for maintenance of that system.  Look at it this way.  The system is permitted so it must meet the code when it is installed.  The buyer of the property is generally not involved in selecting the system or the workings.  Many move in to the property and expect a “happily ever after” with no thought of maintenance of the system.  Sometimes the septic survey and how a septic system works are never conveyed to the buyer. A buyer of a property with an onsite wastewater treatment plant must don the role of sanitation engineer. There are many measures that will prevent septic failure.

A county health official in the state of Florida has coined a phrase for raw sewage on the bathroom floor.  It is the “Ten Phone Call Failure” and what is better known as the Class I Failure.

Class II Failure is evidenced by raw sewage in the yard.  I recall a property management company giving me a tour of a duplex that the owner wanted me to list.  The backyard could not pass the “sniff” test. I was wearing sandals (I usually am) that day and slipping and sliding in stuff you don’t want to slip and slide in.  I did not know where to step next.  I just wanted to be sure that I did not slide and lose my balance.  When I got to my car I threw my shoes in a bag.  I disposed of the bag at the next receptacle. Adjacent to this wet area in the backyard  was an incredible vegetable garden with some of the best looking greens and plants I have ever seen.  I was so relieved that there was not a vegetable stand at the curb.  When the owner indicated no interest in repairing the septic or disclosing the issue, I did not list the property.  As always, “If you can smell it; you can’t sell it.”

Class III failure has no smell and no excess moisture around the drainfield.
Class IV failure  described as long term, environmental  degradation is the hardest failure to prove as it is determined by computer modeling and may provoke the cynics among us looking for at least some proof.

We should all be aware of things that will plug a septic system sooner. According to the local based plumber contractors, a garbage disposal is hard on any plumbing.  It sends larger pieces through the system.  Grease and even salad oil, coffee grounds, paper towels, cigarette butts are but a few of the items that will clog the system and can damage components if trapped.  Doing all of your laundry in one day might make you feel efficient; but, might be harmful to the system.  The new Energy Star clothes washer is said to use 50% less water than a standard model.

Limiting the amount of water that we use is not only beneficial to the water supply; it limits the amount of water that must be treated.  All Floridians have a responsibility to use our resources sensibly and to pass on a legacy of clean water to our children and grandchildren.

For more information:
www.thesludgereport.org

When the legislature meets again to consider this issue, let’s hope they pay attention to the likes of Bob Himschoot and the various members of the coalition.

Written by Sande Ellis

 

New Years Resolutions

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One thing is for certain.  Every year about this time two things occur.  Real estate experts begin prognosticating what they think will happen in the New Year, and most Americans profess what their new resolutions are for the New Year.  (Well, at least for the first few weeks)

SW Florida Real Estate Market New Years Resolutions

You know, we hear the usual stuff.  I’m going to join a gym, quit eating sweets, lose 10 pounds, quit smoking, attend church regularly, make an effort to spend time with somebody, or change some type of behavior.  Some stick, and some don’t, but we all seem to do it every year.

Maybe we do it in our personal lives, and maybe we do it in our professional lives as well.  I always wondered if the real estate market had a voice what it’s resolutions would be, so for fun I came up with a few.  Like any resolution, some will never happen, but wouldn’t it be nice if in some magical way all our resolutions stuck all year.  Here’s an idea on what we think the market’s resolutions might be:

  1. Short Sales-Banks would speed up short sale
  2. Less Foreclosures-In part because homeowners who cannot afford to stay would successfully navigate and close a short sale
  3. Economy-Jobs is what will pull us through.  May 2011 bring a better economy and jobs to SW Florida
  4. New Construction-Brings jobs, and will be a sign prices are recovering to the point people choose to build again
  5. Prices Increase-Prices may be artificially too low right now, but one day they will recover.  Wouldn’t it be nice if this happened this year?
  6. Lee County would attract outside business to relocate to SW Florida-We know the county and Chamber is working hard on this.  Results in 2011 sounds like a great resolution
  7. Commercial rebounds because economy improves and new tenants fill empty buildings
  8. Red Sox Stadium pays for itself-Lee County is saturated with new fans seeking warmth and sunshine
  9. Homeowners Associations cooperate and help us close properties faster
  10. Cities like Cape Coral and Fort Myers code enforcement worry less about every little dime and work with banks to actually get properties closed so we can get new buyers into property.
  11. Government goes on a diet-Property taxes decline again and more people can afford to move here.

I know, not all of these things will happen.  Just like in the real world, it’d be nice to have a perfect wish list.  I’m sure you have others.

May 2011 bring more prosperity than 2010 did, and hopefully we’ll see some meaningful improvement we can build upon.  Together we’ll all get through this.  Don’t forget, it’s always darkest just before the dawn.  If you keep your head in the sand, you might miss the sunrise.  With a little luck and hard work, may 2011 bring that sunrise and a beginning to a new day.

Happy New Year

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Many SW Florida residents will happily ring in the New Year and say good riddance to 2010.  Others will wish it was Groundhog Day and would like to wake up to 2010 all over again. Your perspective today probably depends on where you sit on the housing fence, and what your expectations are for the New Year.

So let’s set the table and give you some reasonable expectations of what to look forward to in the coming year.  Experts disagree on where the market is headed nationwide.  For instance, we noticed a recent Case Schiller national housing report that said October prices fell .8% year on year.  Only Denver and Washington D.C. saw small price gains, and cities like Las Vegas fell 57.8% and Dallas 8.6% from their peak.  Some cities have hit their lowest levels since 2006.  Case Schiller and Standard and Poors only tracks 20 major markets.  In their opinion, markets may not have bottomed, but they have stabilized.  This study concentrated on the past.

Standard and Poors Case Shiller Real Estate Home Price Index
S&P/Case Shiller Home Price Index

On the other hand, Fannie Mae believes the economic and housing outlook for 2011 is brighter.  Falling unemployment claims and an uptick in consumer spending this holiday season are reasons cited in the December 2010 economic outlook.  FNMA is a player because they insure many of the mortgages on the secondary market.  This essentially creates the financing that fuels the real estate market and the economy, and FNMA plays a large role.

For 2011 growth was upgraded to 3.4% from 2.9% due to changes in the economy.  The report assumes an improving labor market, which we’ve long said is the key to any housing market recovery.

Fannie Mae Chief Economist Doug Duncan was quoted as saying “Despite rising mortgage rates, our forecast for home sales is stronger than the previous forecast, given our brighter economic growth and labor market outlook. We expect modest increases in home sales, despite recent interest rate rises, due in part to modest additional declines in home prices, and we expect people to take advantage of affordability as their employment and income outlook brightens”.

So two top forecasters are predicting declines in home prices nationwide in 2011, but what does that mean for SW Florida? Many believe SW Florida was the first to react and our prices have already fallen.  Our prices have flattened and some believe we’re on the upswing.  This could be true as foreclosures seem to be falling.  We’ve cleared out seemingly all the investors from the 2004-2006 frenzy and now we’re dealing with foreclosures from regular folks who just can’t hold out any longer.  If this is true, inventory could continue to lessen, and eventually we’ll see upward pricing pressure.

SW Florida real estate prices are artificially too low and will at some point increase.  The real question is when, and at what rate.  If we’re setting realistic expectations, a full blown recovery could still be years away.  If we’re looking at statistics, 2011 could be a better year for sellers price wise, but nothing that will be earth shattering.  SW Florida is almost 100% dependant on investors, 2nd home buyers and the like until our job growth rises again.  Construction is almost non-existent and isn’t coming back strong anytime soon.  Until we get real investment and job growth going in SW Florida, there won’t be major upward pricing pressure.  For the near term, our upward pricing pressure will be the sunshine and all the great things SW Florida has to offer.  Our sunshine, beaches, and nature surely must look appealing to anyone stranded in an airport for 3 days, and each blizzard up North can’t but help make our outlook a little brighter.

Florida took its lumps in 2010.  We had an oil spill, high foreclosure rate, bumpy economy, and high unemployment.  The oil spill is over and we came out largely unscathed, our foreclosures are declining, and the economy may have started improving nationwide.  When this economy trickles down to SW Florida, all the pieces are in place for a brighter 2011.  The investors may wake up and wish it was Groundhog Day so they can continue to buy at 2010 prices, but the rest of us will be glad 2010 in behind us and we can all start moving down that road of recovery and progress.  Now if someone could just tell us definitely how long that road is, that would be nice.  At least now the table is set, and maybe realistic expectations will be met.