Median SW Florida single family home prices in December 2008 stood at $106,900 and were on their way down. In fact, the very next month in January 2009 prices stood at $94,900 and bounced around in the $80’s and $90’s until April of 2010 when prices jumped unexpectedly to $101,500 before settling back down in the $90’s for the rest of the year.
2011 is a bit different as we’ve been predicting prices could rise. Back in 2010 we had some equilibrium in that inventory was almost keeping up with home sales, so there wasn’t room for prices to jump much. This all changed in the latter part of 2010, and that trend has accelerated in 2011. Pending sales are strong, inventory is way down, and prices jumped 7.15% over last year.
Median prices jumped 11.37% last month alone, and are up 15.14% from January. So what is driving these price increases, and why were they so predictable? Two reasons stand out. Inventory has been shrinking because demand is high and buyers are scooping up properties because Florida has been on sale and they realize the train is leaving the station for the best buys.
The second reason is banks have had difficulty bringing foreclosures to the market in light of investigations into bank practices submitting proper documentation in the foreclosure process. Many of these mortgages were sold as securities and banks must prove that they are the owner of the mortgage and have the authority to foreclose. Banks don’t always have to produce the original note, but they do have to comply with certain procedures. Now the courts are even under fire for their role in pushing these through so quickly. Lee County adopted the Rocket Docket which included hiring additional judges for the sole purpose of hearing foreclosure cases. There was a huge backlog facing the court and the Rocket Docket helped ease that pressure.
Were some of the past foreclosures rushed and fully documented? We’ll let the legal professionals answer that one, but it’s fairly safe to assume these processes are being followed much better now as banks, attorneys, and the courts are taking their time and crossing the T’s and dotting the I’s.
We do know more foreclosures will be released. The question is when, at what rate, and how many more? We’ve been hearing starting in about May or June to get ready for more. We don’t believe it will be a slammed pace like it was back in 2009. We also don’t believe it will be in those quantities, unless the economy deteriorates further leading to more foreclosures.
Under these assumptions, prices should hold steady and/or continue to increase going forward, at a sustainable pace. We don’t believe prices will skyrocket back to 2005 prices anytime soon, nor should they. They were artificially too high back then, just as they are artificially too low now.
Additionally, the initial foreclosures were at the lower end of the price spectrum. Newer foreclosures have tended to be larger homes at higher price points, which should also lead to higher median prices as these properties sell. It’s getting very difficult to find homes under $100,000 in Cape Coral or those $30,000 Lehigh Homes we used to see. The only $30,000 homes we see now have defective Chinese Drywall or other problems. So don’t be surprised if prices stay where they are, or bounce along with a general trend higher in the coming year.