Most people refer to 2005 as the boom times for SW Florida real estate, and ask when we’re going to return to those days. I guess the partial answer is we’ve not only returned top those days, but we’ve far surpassed the boom times, at least in terms of transactions.
2009 was our busiest year on record followed closely by 2010, not the year 2005 as many people would guess. 2005 produced 12,273 single family home sales compared to 15,205 in 2010 and 16,260 in 2009. In the 1st quarter of 2011 we had 3,819. As you can see by the attached chart, 2nd qtr almost always produces the highest sales volume, followed by quarters 3 and 4. Most people mistakenly believe that season results in the highest number of sales.
Season may lead to some of the sales that result in the 2nd quarter, but that wouldn’t explain the strong 3rd quarter sales. Remembering back to the 1980’s our biggest closing months were generally in the summer. We usually found a lot of lookers in the season and many of those would come back and purchase in the summer. Additionally a lot of locals had more time to shop and buy in the off-season.
SW Florida real estate isn’t as seasonal as many would think, although condos do still lend themselves to more seasonal traffic, especially 2nd home purchases.
Depending on inventory, 2011 is on pace to place in the top 3 for all-time sales. Prices have risen 15.14% since January, and Lee County is one of the few markets actually gaining in price. It could be that Lee County was hit so hard due to high concentrations of investor homes that banks liquidated so much in the early years, and prices fell too far and too fast. Prices have fallen so far below replacement cost that virtually all building has ceased, and that’s a sign that the market has been artificially too low.
As the rest of the nation enters a housing pullback, SW Florida is showing signs of bucking that trend. Will it last? That answer ultimately depends on jobs and the economy, as well as future foreclosure inventory that may come to the market.
Foreclosure inventory can appear in two ways. First off we have a backlog of homes that began the process but were held up due to legal concerns in the foreclosure process. A few large foreclosure mills were processing foreclosures and collecting big sums of monies from the banks without doing the proper paperwork, and banks have had to start all over again on those proceedings.
Secondly, Florida is a tort state, or what is referred to as a lien theory state, so it takes longer to foreclose than other states. As the economy has deepened, it has affected more people who weren’t investors, but got caught up in the bad economy and perhaps lost a job, had trouble collecting money from people who owed them money, etc. Because Florida has high unemployment, it’s natural to believe it will have higher foreclosures than other states.
The big wave of foreclosure has already occurred, and Florida has largely worked through this, except for perhaps South Florida in the Miami/Ft Lauderdale areas.
The wild card will be how many foreclosures hit the market. Right now we’re not seeing many and its forcing prices higher. At our current sales pace, we will eventually run out of inventory. The question and always has been, how many more listings will we see when banks are able to release inventory, and how many would be sellers will sell once prices reach the point where they can afford to sell. Inventory and the economy will drive this market, and nobody knows the answer to both these issues. As soon as these issued become apparent, so will the height and velocity of our market. Stay tuned and we’ll watch it together.