Look for prices to be up in SW Florida about 17% and single family home sales up about 3% over last year. Condo prices in April 2011 will show a 4% rise and condo sales rose 8%.
Look for a detailed report in next week’s article.
Watch our May SW Florida real estate video update
Watch NBC 2 Report on Fort Myers – Cape Coral numbers up versus National prices down
For the first time in years distressed sales were less than normal or traditional sales, down to 45.26% of all sales in April 2011.
March 2011 saw 901 distressed sales while April produced 683 distressed sales resulting in a decline of 24.2% We had 51 fewer short sales and 167 fewer foreclosure sales in April versus the previous month. Overall we had 163 fewer transactions. Traditional sales actually rose from 765 in March to 826 in April, so the lower distressed sales are helping the overall market.
Perhaps this is why official prices have risen over 15% since January. Next week official numbers will be released and we’ll of course be tracking prices. We can say that pending sales are down 9.97% from March numbers, and this can be attributable to seasonality of home sales and falling inventory levels.
March 2010 was the first month in years with inventory of single family homes below 10,000. March numbers stood at 9,785 and current April numbers stand at 8,718. That’s a drop of over 1,000 units in just one month. We’ve been seeing inventory levels drop since February at a rate of about 500 per month, but April’s drop was the sharpest we’ve seen in awhile. To put these numbers in comparison, we tracked 12,669 active listings back in October 2006.
The Ellis Team SW Florida current market Index now stands at 3.14, which is the lowest since September 2005 when it stood at 2.11. It rose to 3.44 the very next month and was a sure sign of what was to come. This Index accurately predicts the future direction of the real estate market. Back in 2005 it began rising which told us the market was in change. Later on the public and media began to see what the numbers were telling us.
Fast forward to 2011 and we’re seeing similar numbers, but they’ve been heading steadily down, which means the market has been shifting from a buyer’s market to a seller’s market. Now don’t get too confident if you’re a seller as the overall economy is still limiting price increases, but this is good news for a market that bled for years.
SW Florida was long known as the epicenter for the housing crisis along with Phoenix, Las Vegas, and California. Today Fort Myers and Cape Coral is actually faring better than many parts of the country, although better is a relative term as unemployment is still high and many people are struggling.
Our market has been in the healing process, and while there is still more healing to do, it’s nice to report a little positive news after years of misery. In fact, people from all over the world have been contacting us recently asking about our market as they’re beginning to read that SW Florida has bottomed and it may be time to get in on the good deals. Our real estate is certainly affordable, and probably about as inexpensive as it’s ever going to be, so people want in on the deals.
It still strikes me as odd though as people from all over come here to buy and they still offer ridiculously low offers when they know full well we’re experiencing a shortage of certain homes in certain prices, and they’ve read that prices are going up. You just have to wonder what makes them think they can low ball in a rising market.
I think the answer is greed, and unfortunately it is this same emotion that got us into this mess years ago, and it is this same emotion that will prevent certain people from buying in this market as they’ll always be in search of the deal from last year, ignoring what is occurring in today’s market.
I’ve always said, if you wanted to sell in 2005, you had to price it right and actually sell it in 2005, not 2006, 2007, or 2008. And if you want to buy today, you have to step up and get a great deal in 2011. You missed 2010 pricing, and if you’re not careful, you’ll miss 2011 pricing. Today’s pricing is still far below replacement cost and is artificially too low, however it looks like we’ve bottomed and are moving up, and it’s a little late to go for blood when the wound was bandaged months ago.
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.
The past few weeks we’ve written about home sale prices are at their highest level since December 2008, inventory levels are falling, and a breakdown of traditional sales versus distressed sales and how the market is changing. All signs pointed to rising prices the past several months, and that’s exactly what has happened.
Median sales prices are up 15.14% since January in Lee County. How much of this is seasonal? We’ll attempt to answer this question.
As you can see from the attached chart, home sales are seasonal and typically peak in March through May. This year home sales in March almost equaled June of 2009’s recent high of 1,705 homes closed. We’ve been tracking pending sales which are also high which might indicate April and May sales could be high as well, all at a time when inventory is falling.
When you combine high pending activity which leads to closings along with declining inventory naturally you might assume prices have room to go up. This is especially true as home sales are artificially too low because they are so far below replacement cost and there is built-in room for prices to go back up.
Much like Wall Street, it’s difficult to draw conclusions on price gains or losses without also measuring volume. On Wall Street volume is defined as shares traded, and on Main Street volume is properties closed. 2009 was a record year for volume, followed closely by 2010. As you can see, 2011 is off to a good start, but the real test will be can the market reciprocate by bringing enough inventory to the market, or will volume fall off as less distressed sales come to the market?
We believe there is an abundance of sellers who would sell if they could. They don’t want to short sell, but can’t afford to sell at today’s prices so they’re just waiting out the market. Prices are on the rise, but there may not be relief for many sellers because although the market is poised to rise, it won’t quadruple overnight if ever as jobs and the economy are still lagging, not to mention tight lending standards.
So what does the future hold? Most probably we’ll see bouncing prices with a general trend upward. We’ll keep an eye on inventory released by banks. Banks have had some legal issues which has caused them to delay foreclosures but they’ve been working through these procedures the past 7 months or so and we should see more coming beginning in the next 2 months.
The market is absorbing sales. Season is over and many of the 2nd home buyers have gone home although many return in the summer and purchase. 1st time home buyers and investors have been competing with each other for the bank owned bargains, and the investor usually wins with a cash offer. The variables in this market right now are bank owned inventory, jobs, the economy, and oil prices.
Sales could decline if we don’t have enough sellable inventory, and of course ultimately the economy will drive sales once prices return to normal. The future is clear, the path is chosen. What is unclear is the timing and what variables may accelerate or knock us off our track. Stay tuned, and we’ll keep reporting what we observe.
The Ellis Team has just released it’s Fort Myers Cape Coral Florida Real Estate Update Video May 2011 covering the Fort Myers Florida and Cape Coral Florida areas. Prices are up over 15%, inventory is down, pending sales are up, and distressed sales are down. The video includes charts and analysis to bring you up to date on exactly what is happening today in the SW Florida real estate market.
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.
When you hear the market is falling off a cliff it brings back memories of the past 5 ½ years of a real estate market in free-fall. Anyone reading headlines for the past several years would believe any such headline is another bad story and perhaps would bury their head in despair.
Well SW Florida, a part of the market has fallen off a cliff, and it’s actually good news. Inventory has been eaten up by buyers faster than it has come on the market, and buyers are actually competing with other buyers to buy the best properties. It’s not uncommon for a property to have multiple offers.
For historical reference, I just checked overall Lee County single family inventory numbers for October 2006 which stood at 12,669. They peaked at 16,694 in February of 2008 and basically held firm until December of 2008 when they began to fall. Currently single family home inventory stands at 9,785.
We’ve included inventory charts for Fort Myers, Cape Coral, and Lehigh Acres because overall inventory numbers can be deceiving. You’ll notice there are some minor differences, but for the most part the lines look similar and all three show a steep decline from January 2011 to present.
While national news outlets report the rest of the country could be in for a fall, nationwide analysts fail to recognize SW Florida has fallen for over 5 years and is actually on its way up. All real estate is Local, and our market is artificially priced too low, as much as 40% below replacement cost in some instances. As distressed inventory is shrinking, we’ve seen median sales price increases because the market cannot sustain these artificial low prices forever.
We do expect more foreclosures to hit the market as the legal system has been working through some challenges pertaining to the validity and legal documentation provided by the banks. We don’t believe however there will be enough foreclosures to satisfy buyers’ appetite and we could continue to see rising prices. We don’t believe the next wave of foreclosures will be as large as the first waves, and our market absorbed all those foreclosures just fine.
We’ve seen rising prices, increasing pending sales, and decreasing listing inventory for several months now. The fundamentals point to a recovering market in SW Florida. Wildcards can always influence any market, such as gas prices, terrorism, the United States mounting debt and its effect on interest rates, inflation, Middle East flare-ups, and so on. Last year we had an oil spill that had the potential to influence our market, and in some respects probably did.
Nobody knows for certain what wildcards might present themselves. For instance, not many people predicted a 9.0 earthquake that would lead to a tsunami which would lead to a nuclear crisis in 2011, but it happened. Each event led to and compounded the following event.
Absent any major wildcard events, it would appear that the SW Florida real estate market is on solid ground and mounting a comeback. We’d like to see sustained job growth before we’re ready to see sales prices take off, and this is why we know prices will increase, we just can’t say how fast and how high until more of the picture comes into play.
Let’s face it, as agents we’re either promoting properties to sell or educating the public about changes in the real estate market or tips professionals know that the public may not. For years agents used traditional print marketing, TV, radio, billboards, mail outs, signs, banner advertising, and more. Many of these are still very effective and they’re used by large and small companies to this date, however video has exploded on the scene as a medium anyone can use to further illustrate a message.
Newspapers are using video as a way to compete with TV stations. Large news organization post videos provided by viewers, Viewers become extra eyes in the field. Courts are using video from police cars, and defendants are using video to tell their side of the story.
Video doesn’t replace older media, but it does open up new ways of reaching consumers. The Y generation would just as soon search the Internet and watch videos about a subject than watch the news or visit a library, so reaching younger consumers requires change. If I comment to my children I’m having difficulty hooking something up, they’ll have a YouTube video up in about 15 seconds thoroughly explaining the task. I guess those bad instructions in the box don’t matter so much now.
High definition video cameras make it easy to produce video. The trick is proper lighting and sound. We’ve created some high quality videos and some quick videos that tell a simple message about the market without all the bells and whistles. What we’ve found is viewers don’t seem to care about the bells and whistles as long as the video is informative, timely, and matches what they’re looking for.
We’ve created a YouTube channel http://www.youtube.com/brettellisfl Currently we have 113 videos uploaded and about 45,000 views. Our property tours are located on another channel, so these 45,000 views are simply people tuning in to hear about the market or timely news affecting real estate.
Marketing really works when you tie all the media together. For instance, our print ads show our website. Our website has links to our YouTube channel, property tours, MLS search, and more. Our MLS search has links to the others as well. In this way we get all the marketing tools we invest in to work together, in concert. Together these tools can be so much more effective than if we just used on over the other.
Consumers are like cable TV viewers. If you’ve ever flipped channels you’ll notice there are a lot of things on at any one time, and they’re competing with each other. Younger viewers like MTV, while older viewers might like the History channel or national news. There is a place for each, and while they cross over, each definitely has a certain target demographic.
Marketing is similar. Each method could potentially reach everyone, but realistically there are target demographics, and getting them to work in concert with each other increases frequency and reach. It also sends out a message to the public when they see you more than one place. They think you’re everywhere. No matter where an agent puts their marketing dollars, the message is critical. It pays to be clear, concise, and topical. The public enjoys getting this information in print, on smart phones, and certainly in video form.
Look for video to play an increasing role in the dissemination of real estate information. Video will help companies and agents differentiate themselves and allow consumers to decide who they best want to do business with. It could be the information, the look, the professionalism, etc. Video opens up an array of ways a consumer can evaluate who they do business with and assist in making a choice. And if you ever want to know how to unclog a sink or hookup a BluRay player, consider doing a video search, or ask a 10 year old.
Tune in to the Future of Real Estate. This week’s show is the April 2011 SW Florida Real Estate Market Update
The past few weeks we’ve laid out in detail how prices have increased and some reasons that would explain why. This week we thought we’d illustrate how the distressed market is faring versus the traditional or normal resale’s and look at how that impacts prices.
As you can see from the chart, distressed sales are down about 4% in 2011 versus 2010. We all know distressed sales have weighed down the SW Florida real estate market for several years. Prices didn’t just fall in half, they fell in some cases to about 25% of what they were back in 2005 or early 2006.
We’ve often said sale prices have fallen artificially too low and the only thing holding them that low was a flood of continuing foreclosures entering the market to keep the prices down. For the most part, investors and 1st time buyers bought every foreclosure they could and prices stayed low because there were new foreclosures coming on to satisfy buyers appetite.
The foreclosure machine hit a snag in late 2010 due to legal concerns in Florida and 10 other states; however we expect that foreclosures will return in the 2nd qtr of 2011. The question is how many more are left, and how long will it take the banks to work through them. I guess the other question is how long will the economy be stagnant further forcing teetering homeowners over the brink?
Assuming we’re in the 7th inning of the foreclosure crisis and that any wave of future foreclosures won’t be as robust as past waves, prices should continue to rise. Official numbers for March won’t be released for about 3 weeks, but preliminarily we’re seeing median prices rising about 3.45% over last year and mean average prices rising about 16%. Stats were pulled as of March 29, and it does take several days for all sales to be entered into MLS, so these are very raw and preliminary numbers, but they do coincide with what we’ve been seeing and predicting the last several months.
As prices rise, more and more sellers will qualify to sell without being a short sale or foreclosure, which will also change the charts. Nobody should expect an overnight turn around as our market is still healing, and even though we’re in the latter stages of the correction, healing can be painful. Sellers expecting a return to 2005 prices might be waiting years or a decade or more.
We’ll also be anticipating Congress submitting and passing a budget. Many do not realize that last year’s Congress didn’t do that, so we haven’t had a budget in 2 years. They’ve kicked the can down the road and left it for others to do. Because Congress didn’t do their job last year, it’s making it tougher this year, and everyone knows we need steep budget cuts. Inflation will rise as we cannot continue deficit spending. This throws the capital markets off and interest rates could rise, which could also affect real estate prices as increased rates dig into buying power for buyers. When rates go higher, buyers have to offer less for homes in many cases to afford the property. Increased interest rates are like a hidden tax on real estate, so we’d hope for our country to get it’s spending in order for a lot of reasons.
Stay tuned and we’ll watch together how these forces play out and affect our market. Nothing is as simple as one variable dictating prices. We have several variables at work, and time will tell.
Watch our April 2011 SW Florida Real Estate Market Update
As expected, SW Florida median single family home sale prices rose in February, up 4.1% over last year’s numbers and up 3.39% from this January’s numbers. Sales volume was down 12% from last year and up 3.17% from this January.
These sales numbers were not unexpected as we’ve definitely seen an uptick in 2nd home buyers from up North looking to secure their piece of paradise before prices go back up. Banks have also lowered inventory due to legal issues with the foreclosures which has dried up inventory at the lower end. Investors are finding it more difficult to find lower priced homes to flip. We’ve entered a period where the short term investor is being squeezed out and we’re left with long term investors who can purchase and rent the property with a positive cash flow, but can’t flip right now and make a guaranteed home run.
Actually the market is healthier and more balanced in this period than it has been since 2005. It’s always dangerous to buy something with the immediate expectation of a flip. This is all well and good when it works, but too many speculators didn’t have a plan B if the market turned, which it obviously did. Back in 2005 prices a property wouldn’t cash flow, so when the flip didn’t work, neither did the rent for cash flow. Today investors truly should focus on long term. Prices are still well below replacement cost and artificially too low, so there is automatic built-in price increases on the way, it’s just a matter of time.
Positive cash flow buys time, and a great investment provides cash flow and long term appreciation, not to mention possible tax benefits. For regular homeowners we always recommend buying a home that suits your needs and you can be happy in. Long term, a home is usually a good investment, but why suffer with a home that doesn’t meet your needs in the meantime? In the end the numbers work themselves out but you have to live with the home. You might rent a home you’re not crazy about, but why buy something you don’t like just because it appears to be a good investment?
Home affordability is high, although inventory selection has been declining. Unless banks start listing foreclosures again, we should see another decline in inventory levels this month as sales have been strong. The perfect opportunity for a buyer was probably between April 2009 when prices were at their lowest and December of 2009 when inventory was it its highest. Since then prices are higher by 7.02% and inventory countywide is down 8.70%
We’ve been hearing from banks and Fannie Mae that they could start releasing inventory again in the next month or two. We’ve seen listings trickle in, and we expect more in the coming months.
The market has always had a thirst for more inventory, so that won’t be an issue. The lack thereof will create price increases, so the true test will be how much more bank owned inventory is on the way compared to market thirst. The answer is prices will rise; the question is how high and how fast. We’ll be keeping an eye out for the inventory as that will be the leading indicator for the answer to how high and how fast.