Monthly Archives: October 2022

Home Prices Fall Locally in 2nd Half 2022

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Home prices fall locally as rising interest rates and back to work states takes toll on the housing market. The Fed began raising interest rates in earnest in 2022 and the chilling effect on real estate prices was noticed almost immediately.

Home Prices Fall Locally in 2nd Half of 2022

Home prices are right back to where they began in January, around $414,000 for the median price. The average price is a different story as prices went backwards by about $40,000. Headlines show price gains year over year between 12 and 16%, but that was based on last September and not January. We have mentioned in previous articles that later in the year you will see those price gains come down or go away.

Post Hurricane Ian Home Prices

Hurricane Ian may not help prices either, but not because what you would think. Many of our more expensive homes in SW Florida are closer to the coast. We know many coastal homes flooded, so less will sell. This may help bring down the median and average sales prices for a while. It does not necessarily mean home prices are declining, just that the more expensive homes are not closing.

On the other hand, we could argue home prices were already coming down prior to Ian.  So maybe that will continue?  We analyzed home sales after Hurricanes Charley and Irma in a previous article. In both those cases, prices came down after the storm. With Irma, that price decline continued the next year. In Charley’s case, prices went up, but so did the red-hot housing market everywhere.

Our conclusion was that neither Charley nor Irma stood in the way of what was already happening in the market. It’s as if the hurricane had no effect.  If that holds true with Ian, it will be interesting to see where our market heads going into 2023.

Rising Interest Rates

We expect interest rates to rise further as the Fed battles inflation. Forecasts expect rates to level off mid-2023, but then again, they’ve been wrong for all of 2022. The bottom line is nobody knows what the economy, inflation, nor what the Fed will do until it happens.

We are telling people housing is tight in SW Florida, and Ian did nothing to help that situation. If you’d like to search the MLS and see up to the minute listings, search www.LeeCountyOnline.com. Nobody gets data to you faster. Speed wins finding the best listings in this market.

You need a professional to guide you in this market.  Some listings have damage and insurance claims. Each day we are learning more and more about claims, the 50% rule, and how past home improvements might affect the 50% rule. Navigating listings has never been more challenging, and most of the relevant information is contained in the confidential remarks section only agents have access to.

It might be a good idea to get a baseline of what your home was worth pre-hurricane at www.SWFLhomevalues.com and compare that each month after the storm. I would do so quickly before the new values come out.

If you have questions, feel free to call Sande or Brett Ellis 239-310-6500. Experience matters after a storm like Ian. Navigating the home sale and insurance process has never been more complicated than today.  85% of agents have never worked after a hurricane, so you don’t want them practicing on your transaction.

We’re here to help. Hopefully you and your family are safe. We know the heartache this storm has caused. It is heart breaking for sure. Our mission is to use our experience to help where we can.  Good luck, and God Bless from all of us at the Ellis Team at Keller Williams Realty.

Mortgage Rates Expected to Rise in 4th Quarter

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Current 30-year interest rates stand slightly over 7%, with mortgage rates expected to rise in the 4th quarter perhaps another one percent. Buyers have sticker shock simply because they’d gotten used to 3% rates for such a long time.

Mortgage Rates Expected to Rise in 4th Quarter

Mortgage Rates Expected to Rise Further

Rates have doubled this year. Many buyers want to wait until rates come down because they do not like the new rates. However, this strategy may cost home buyers as rates are expected to rise in the 4th quarter and into 2023.

Some people believe the Fed isn’t as serious as they say and will stop raising rates. The Fed has stated their target for the rest of 2022 is to raise about 1.25% more. This was before the September inflation data came out that was higher than expected.

We understand why people believe the Fed may pause raising rates. Raising rates will cause a deeper recession, and there is no guarantee it is going to work. The alternative is to do nothing, and high inflation is worse for the economy and Americans in general.

The Fed is fighting inflation and a government that keeps spending. If you pump money into the economy, you guarantee inflation. The Fed would prefer we slow down government spending so they wouldn’t have to raise rates so much. We have a $31 Trillion dollar debt, and rising rates affects the interest payments on that debt. This is not a good position.

Stock Pickers

We believe the Fed will raise rates 75 basis points in November. The stock market may do well until we get closer to the Fed meeting. The 10-year note is currently just under 4% but may start to rise as we get closer to the Fed meeting in November. This is a scenario we’ve seen play out each meeting this year. If you are a stock picker, betting on the market prior to a Fed meeting has been good as long as you sold off a week or two before the next meeting.

Home Buyers

If you are a home buyer, buying sooner rather than later may be in your best interest. A 1% rise in interest rates steals about 11% purchasing power from a buyer. Home inventory is already low and getting lower after Ian.

Rent Vs Buy

We are hearing stories of rents for single family homes exceeding $5,000/mo. Some go as high as $7-10k per month.  That’s basically $60,000-$120,000 for rent for one year. While interest rates might seem high, the cost of rent is crazy right now. Today is one of those days where it is better to purchase versus rent. After a storm, people need quick housing. They immediately turned to rentals, but as that inventory dries up it may force people to purchase.

FEMA housing can’t get here soon enough. It should have been here by now, but it isn’t in any quantity. The battle is going to be getting damaged homes fixed up and ready to sell to meet demand.

Home Sellers

We are working with several home sellers to bring their home to market. Some have damage and some are fairly free from damage. Pricing is determined by how much flood restoration will be needed and/or wind damage. If you are considering selling, now would be a good time to call us 239-310-6500

Our market conditions are changing as inventory changes. Fairly soon interest rates may change too. Buyers and sellers who act sooner may have best success. We took a punch from Hurricane Ian, but it doesn’t have to keep us down. You have options.

Always Call the Ellis Team at Keller Williams Realty to discuss your options. The Ellis Team was voted the Best Team in Real Estate by News Press readers for the 9th consecutive year. Let us help you figure out the best way forward after Ian.

Best of Fort Myers 2022

Hurricane Ian Information

Hurricane Ian Real Estate Information Update

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We’re getting a lot of questions from homeowners who don’t know where to turn. Some want to sell but their home has sustained wind or flood damage. Today we like to provide a valuable Hurricane Ian real estate information update to answer some questions.

Hurricane Ian Real Estate Information Update

Insurers are reticent to issue new insurance without an affidavit that the home is free of hurricane related damage. What if the home has wind or flooding damage? Can the home be sold and financed?

Owner Wants to Sell

You may be able to buy a property with damage. Citizens Property Insurance will write coverage on damaged properties as temporary insurance and will simply exclude the damaged items. FHA has a loan called the FHA 203K that will allow a buyer to make repairs after they purchase. In this case we may be able to get a buyer a loan for a damaged home and do the repairs after closing all the while having insurance to satisfy the lender.

Owner Wants to Stay

What if an owner owns a home and it is wiped out or heavily damaged by the flood for more than the $250,000 flood coverage and they have a current mortgage on the property? FHA has another loan program called the FHA 203H that is only available in special disaster situations. It is a 100% LTV loan meaning no equity in the home is needed. The homeowner can finance on top of the current mortgage so they can rebuild or rehab their home without having to sell.

FEMA Resources

FEMA has setup two disaster centers that will help answer insurance type questions as well as tell you what is available through the state and federal government.  Cape Coral and Fort Myers are allowing people to setup trailers on their property while their home is being worked on. They may have trailer assistance available for you as well as a plethora of other options.

Forbearance

Your mortgage company may call you with some payment relief options that can help. Be careful though as forbearance options shouldn’t harm your credit score but it will affect your ability to finance another home for 2-3 years. You would think when the government offers a relief program it wouldn’t harm you in other ways, so be careful. If you have a FNMA or Freddie Mac insured loan the forbearance is 18 months and is added to the end of the loan. Interest does accrue. Private lenders might require the interest be paid in bulk at some point, and that might be too much for some borrowers.

Assignment of Claim

We have been successful in transferring the right under a claim to new buyers who are buying a damaged home. This is different that assignment of benefits whereby a contractor takes over the claim for your home. This is especially useful in cash transactions as many mortgage companies will not finance a new purchase with an existing claim outstanding.

Be Leary of Out of Town Contractors

Out of town contractors come here looking to make a fast buck. Some are reputable and are lifesavers, while others simply collect as many deposits as they can and skip town. Dealing with a reputable local company when you can is wise because they have a local reputation at stake, and often times you know where to find them.

FEMA 50% Rule

Many cities will require damaged homes to adhere to new building codes. Naples is just one example. If the cost of improvements or the cost to repair the damage exceeds 50% of the market value of the building, it must be brought up to current floodplain management.  See Naples Requirements. Look for Lee County and other cities to enact similar requirements.

 

Scammers

Be aware of scammers, both online and at your door or on the phone. Not everybody is who they claim to be. Be careful clicking on links. Scammers today are more clever than ever.

Property to Sell

If you have a property to sell, always call the Ellis Team at Keller Williams Realty. We are local and we have trusted resources. The Ellis Team cares about our clients and will do what’s right by you. We are not in it to make a fast buck. You can reach us at 239-310-6500 We’re here to help. If you have questions, we might know where to find the answer for you.

Praise God to all that survived, and prayers for the ones that did not!

Past Hurricane Sales Pricing Data

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Since Hurricane Ian people from all over the country have been asking what effect the hurricane will have on pricing in SW Florida. We studied past hurricane sales pricing data to see what impacts other hurricanes had on pricing so we could draw some conclusions.

Past Hurricane Sales Pricing Data shows the median sales price when Hurricane Charley hit in August of 2004 was $202,600. In the months following the median price went to $197,800 through November, but then the market started taking off once the world recognized we are getting back on track. It’s almost like Hurricane Charley put SW Florida on the map. Prices ended the following year at $322,300.

Hurricane Charley

Keep in mind this was also the runup to the housing boom in SW Florida and other parts of the country. It was fueled by easy-to-get loans and overleverage. Probably none of the runup in prices had to do with Hurricane Charley, but Charley certainly didn’t hold our market back in any way either. We know this because similar markets like Phoenix and Las Vegas increased by similar percentages to what we did in SW Florida.

Past Hurricane Sales Pricing Data Hurricane Charley

Hurricane Irma

Hurricane Irma hit in September of 2017.  The median price of a home back in September of 2017 was $255,000. By the end of that same year that number fell to $238,350. Keep in mind one thing about these statistics.  Some homes had damage and needed repair before they could close, so it could skew the data. We only count homes that officially could close, and in those few short months we closed what we could.

We like to look at longer periods of time, so we looked through the next year for both hurricanes.  By the end of 2018 the median home price was $246,000. Home prices 15 months later were still below what they were when Hurricane Irma hit.

Past Hurricane Sales Pricing Data Hurricane Irma

 

Current Data

So, what conclusions can we draw? One thing we know is that people have been displaced in their current homes. Those people are looking for new housing. Some are looking for temporary housing until their existing home is repaired, and some homes were wiped out and they’ll be looking for permanent housing. The need for rentals is expanding.

It remains to be seen how many displaced homeowners will look to purchase or rent, and how many might just leave the area.

Currently there are 138 less single-family homes on the market now than before Hurricane Ian hit. We expect this number to climb as agents gain access to power and Internet and assess their listings.

When Hurricane Charley hit the market nationwide was about to take off, and it did. When Hurricane Irma hit the economy was just revving up after a long flat growth period and housing hadn’t been affected yet.

With Hurricane Ian, the economy and the housing market were in contraction. Interest rates have risen, and housing had already started a downturn. Our market leveled off in August, but more economic headwinds were on the way.

Conclusions

Our conclusion is Hurricane Ian probably will not help our local real estate market based on past storms and economic conditions. Florida already had a desperate insurance situation pre-Ian, and we expect that to worsen. Building codes may change again, although newer built homes seemed to fare well. Nothing protects against rising water, and they say this was a once in a 500-year storm.

It will be interesting to watch sales numbers as they begin to change over the coming months. Nobody tracks the market like we do, so stay tuned. You can read articles and sales data going back to 2005 on our Blog at https://blog.topagent.com You can find out what your home is worth at www.SWFLhomevalues.com Keep in mind the analysis tool doesn’t know how much damage your home may or may not have. We would need to evaluate your home’s value further to be more accurate.

You can search the MLS at www.LeeCountyOnline.com, or call us at 239-489-4042 The Ellis Team is here to help. I still don’t have power yet, but we are working hard to answer your questions.

Good luck and stay safe. We’ll get through this together.

Home Sale Prices Rose in August Despite Rising Rates

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Home sales prices rose in August. The median home sale prices rose 16.9% over last year and rose .18% over July. At least it was a positive. Average home sale prices rose 22.4% over last year and 5.09% over July.

Home Sale Prices Rose in August

In 2022 we have noticed that when interest rates rise, home prices haven’t fared as well.  August bucked that trend.  Rates started out at 4.99% in early August and ended about 5.55% at the end of the month.

Home Sale Prices Rose-Will it Continue?

We will be watching September prices closely as rates have risen dramatically. While we are seeing less offers for homes it does not appear that prices are declining right now. We did see some price declines May through July as the market adjusted.

Supply and demand have held for the past 7 weeks or so.  We will be doing a future article on supply and demand in greater detail. Suffice it to say, if supply and demand are holding steady as well has home prices, it will setup an interesting baseline as mortgage rates rise after the September Fed meeting.

Our suspicion is it will be difficult to see rapidly rising prices in an increasing rate environment. Our market has done well to hold onto much of the price gains of the past few years and we will be tested in the next 6 months. We believe the year over year price gains we saw in August of 16.9% and 22.4% are about to change. Last year we saw big price runups from September 2021 to April 2022.  We will begin bumping up against those numbers, and by the time we get to April it will be hard to eclipse those numbers at an appreciable rate.

Many parts of the country have seen buyers scrambling to complete purchases and lock in rates before they go up. It is possible we will see continued demand from buyers attempting to beat the rate increases. The Fed’s mission is to slow the economy, and that starts with housing.  Housing accounts for about 32% of GDP, so how the housing market goes so goes the overall economy.  To quell inflation, they must slow the economy.

Our local real estate market has been resilient in the face of strong headwinds. The question is, will our market stand up to what our Fed must do to lower inflation? That is the $64 million question. While we cannot predict what the economy, or what our local market will do, we will track the statistics and report out to you what the data shows, and the feeling on the streets.

Buying

If you are thinking about buying now may be a good time.  We know of some zero lender fee loans out there that can save you thousands when financing. We can take that savings and buy the interest rate down which also saves on your mortgage payment.

Selling

If you’re considering selling, prices have cooled over the summer but leveled off.  Now might be a good time to take your profits and move on to your next venture.  If you’d like to speak with Brett or Sande Ellis, call us at 239-310-6500 The Ellis Team has been in business over 35 years, so we know how to structure contracts and financing to benefit our clients. Working with agents with experience can make the difference between getting your transaction closed and missing this opportunity.  We’re here to help!