A few weeks ago we provided preliminary statistics which suggested single family home prices in Lee County had risen to $135,000. Official numbers are out and the number is actually $137,000 which is an 11% rise over last year and a 2.24% rise over the previous month. As you can see, prices have been rising in 2012 and the trend looks good heading into season.

I thought it would be good to look inside the numbers just a bit and compare November 2012 with November 2011. As you can see, sales over $500,000 are roughly the same. Where we really notice a difference is in the $100-200k range and even more significantly in the 200-500k range. You’ll notice from the graph that foreclosure sales are down in both ranges and short sales are down in the higher range.

The decrease in short sales and foreclosures combined with a dramatic increase in traditional sales is helping the market recover in price. The 11% increase in price is not surprising given the sales mix.

One might look at the under $100k price range and notice the drop-off in sales and wonder if there is trouble in that market. The reality is there are less sales in that market because prices have risen and fewer homes fit into that market. Inventory under $100k is nothing like it was 3-4 years ago, so it’s impossible to pull those kinds of sales numbers from that price range because the inventory just doesn’t exist.

After the height of the market in 2005 we watched home prices tumble and higher priced homes creeping back down to much lower price brackets. You can see from the graph we really started an upward trend in 2011 that continued in 2012.

This will be good news for the county as tax assessments have been much lower forcing the county to cut budgets and spend from reserves. While there may still be some financial misery at the county level, it’s easy to see that price drops have abated and we are on our way back up which should help a bit.

Rising prices will also help more homeowners sell their homes. Many have waited out the market in hopes prices would rise enough to cover their mortgage. We assume many home sellers would like to sell but just couldn’t due to prices relative to their mortgage amount. The rising market will help a certain number of sellers each year meet that goal.

We’ve seen a large amount of investors and baby boomers buying second homes for retirement over the last few years. What’s been lacking are the locals who move up, down, and sideways. Consequently this has been an out of the area buying experience in large part.

While we may not be quite there yet, we are getting closer to seeing locals up-sizing, down sizing, or trading lifestyles. Things change in life as kids grow up, move out, and sometimes back in with parents. Some people think they want a condo in a golf community only to change their mind later on and decide on a waterfront home where they can have their boat in the back yard.

Some want space and privacy, while others decide they want a community with activities. People learn that what interests them today can change over time as people age, relationships change, and employment changes. Having a real estate market open up where less people are under water opens up new possibilities for many in SW Florida, and that is a change I’m sure many here welcome.

As the market continues to improve I think we’ll begin to see more of that. We’ll also see more building which opens up more inventory, and more jobs. And if we can just get our national economy back on track, SW Florida could be in for some great times ahead.

Brett Ellis bio

Sellers around SW Florida should be happy. Actually buyers should be too, which is a rare thing indeed.

Official numbers weren’t released as scheduled due to the holiday week, so we ran our own numbers which should be pretty close. Once official numbers are out we’ll revise our charts to reflect official data, but in the meantime we’ll analyze why people should be happy in SW Florida.

As you can see, median single family home prices in SW Florida continued their upward trend in 2012, rising to $135,000 in November. Each month traditional sales have risen which means less percentages of distressed sales. Sellers will like this because not only are prices rising, but more people can afford to sell with the rising prices without having to sell as a short sale or foreclosure.

Buyers surely love this market as well. More traditional sales means less buyers have to wait months and months for an answer on a short sale. That’s always a scary proposition because market inventory is light anyway. It’s never fun to have a bid in on a house waiting patiently for an answer from the seller’s bank while more homes come and go on the market, never knowing exactly what the bank will do with your offer.

Buyers are also happy with prices. Sure, they’re not at their lows in 2009-2010, but many buyers didn’t buy back then anyway because they were afraid it wasn’t the bottom. Investors propped up the market back then and bought most of the homes traditional buyers were afraid to buy. Regular buyers rarely purchase at the bottom because they’re too afraid prices might dip lower.

Rising prices prompt buyers to say “Darn, we missed the bottom, but we better jump in now before things go higher. We can still get a good deal.” Buyers actually like the confidence of knowing other buyers feel strongly about the market too. It’s called the herd mentality, and it’s true on Main Street and Wall Street.

So buyers have their confidence. They also have very low interest rates. Home affordability is high which means buyers have purchasing power.

Heading into the New Year we have a wish list for the SW Florida real estate market. They won’t all come true, but we can wish can’t we?

1. More Inventory
2. Repeal of Dodd-Frank Act
3. Extension of Mortgage Interest Deduction
4. Improving Economy
5. More Jobs for SW Florida
6. Budget Fix by Congress-President

We don’t control many of these factors here locally. If by chance we were able to do several things on this list, the local SW Florida real estate market is poised to take off like a jet. Our market has seen some pain over the years and has been recovering nicely. We are starting to see the fruits of that recovery this past year or more.

How fast this jet takes off is due in large measure to how fast we address the 6 issues. So sit back and enjoy the fruits of our market, and with any external luck, those fruits could turn into treats.

Here’s to a great New Year to your family from ours!!!! Cheer Cheer!

Last week we brought you an article about Grading Period Ends Friday with a focus on days on market.  So many people called or wrote to us that we thought we’d keep the ideas flowing.

Since this past week students had mid-term exams, it’s too early to get all the grades in, but we are seeing some preliminary numbers.  SW Florida is doing pretty well overall, however we do see a few falling short in Math.  Math is a subject some do well in and others struggle with, so we decided to give some helpful advice.

Sometimes 2 + 2 doesn’t equal 4.  If you bought a home for $250,000 back in 2005 and put $50,000 of improvements, upgrades, and maintenance in it, simple math would tell you your cost is $300,000.  Cost doesn’t equal value.

If I had the money and built a home in SW Florida for $50 million dollars, it would be fairly easy to prove that I had $50 million in cost.  However, most people would quickly recognize I could never sell it for $50 million.  Depending on where it is, maybe I could get $2 million, $3 million, o possibly $10 million, but $50 million might be a little over the top for this market.  This isn’t Dubai or Hollywood.

What you paid for a home has little to do with its value today.  Buyers know this, and that’s why they scrutinize their purchase so heavily, because they don’t want to overpay.  The other fact is that markets change.  What you paid years ago has little to do with value today.

It’s funny, because sellers often times tell Realtor how much they have in the property as if that’s a baseline to begin valuing the property.  Let’s say a seller has $200,000 in property and thinks they deserve $100,000 profit after owning for 10 years.  The seller might want $300,000 plus selling costs.  This logic right here is what’s holding the class back.  Some students get it, but some are using funny math.

To these sellers I would ask a simple question.  Let’s say your grandmother died and left you with a property that is worth $500,000.  How much are you going to ask for it?  They typically answer $500,000, that’s what you said it’s worth.  I answer, why would you ask $500,000, you got it for free.  Isn’t that a bit greedy?

They then proceed to tell me if it’s worth $500,000, that’s what they should get.  If they still don’t get it, I might add another qualifier. What if I told you this home cost your   grandmother $800,000 to build?  Now how much do you want?   When it’s someone else’s cost, they typically get it and realize the answer is $500,000.

It’s amazing that if you’re given something for free people accept they have to sell it for today’s market value, but if it was your own blood, sweat, and hard work, they become emotionally attached and feel they deserve more.  The problem with that math is that the buyer doesn’t feel that same emotional attachment, and they won’t pay more than market value.

So we’ve established cost doesn’t equal value.  Another equation we might want to address is the principle of substitution.  Buyers will look at several properties before making an offer.  They may have a wish list of things they’d like in a home and go out and find several properties that meet that wish list.   Then all of a sudden out of nowhere another home presents itself.  It doesn’t quite match everything the buyer wanted, but it meets their basic needs and it offers value.  Buyers love to buy value.

I’ve heard many Realtors complain that “Buyers are Liars” because they said they wanted one thing and bought another.  Buyers are not liars.  You just have to ask more questions and go deeper.  When you do that you uncover true motivations.

I’ve seen situations where a buyer and seller are counter-offering back and forth.  The seller mistakenly believes the buyers are locked into their home and it’s just a matter of what price they’ll end up at.  Along comes a home at the 11th hour and the buyer switches, leaving the seller at the altar.  The seller wonders what just happened, and this is the principle of substitution.  Even though inventory is limited, buyers still have choices.  If you price your property at today’s value, you’ve got an excellent chance of selling.  If you’re stuck on fuzzy math, this one class could hold down your GPA and keep you from graduating to the next level.

Good luck and Happy House Hunting!!!