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Are SW Florida Real Estate Prices on the Rise?

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The most asked question I get, both in daily business and on Facebook is, “Are prices about to spike up?”  People are reading that inventory is shrinking, and buyers are buying all the foreclosures faster than the banks can bring them to market.  People assume the foreclosure pool is diminishing and we’re about to run out, and of  course they want to know how fast and how much prices will rise once that happens. 

It is true, to date buyers have been soaking up the incoming foreclosure inventory and whittling down the existing inventory.  Banks have been allowing short sales to some degree for qualified sellers, and in some sub-markets we are running low on inventory.  The chatter these days seems to be that prices are headed up in a big way, so let’s explore what’s really going on in the market today, and what may happen in the future and why. 

Median single family home sale prices have gone up for two straight months, but only marginally, up 1.25% in July and up .34% in August.  The median sales price now stands at $89,300, up from $87,900 in June.  Are all prices going up?  The answer is no.  The definition of median sales price is that half the sales occur over the stated number and half occur under, which now stands at $89,300. 

Median Home Sale Prices SW Florida Real Estate
Median Home Sale Prices SW Florida Real Estate

What is actually happening is the bottom has firmed up, and it’s getting tougher to find some of the bargain basement deals.  Homes in Cape Coral under $90,000 are getting harder to find, as they were somewhat plentiful last year. The bargain deals have swung to Lehigh. 

The other interesting phenomenon is that mid and upper priced homes are falling in value.  As these homes become bargains to their selective buyers, they are selling.  As these mid and upper priced homes sell, they actually pull the median sales price up, even though those home prices are falling.  Remember back to the definition of median sales price. 

In a few months people will start reading that prices are on the rise, when in fact prices are falling in the mid to upper tiers, and prices are rising in the lower tier.  Very soon the median sales price may begin to rise as it gets hit from both sides of the curve, however when you read that prices are rising, you have to remember that all real estate is local, and even Lee County has submarkets that are different. 

In some cases properties are cash flowing for investors at today’s prices, which was unheard of in years past, even before the run-up.  We believe now is an unprecedented time to be buying real estate in SW Florida as prices are so far below replacement cost that builders cannot compete, so building has been silent. 

We believe there will be more mid to upper priced foreclosures coming to the market in the next year, as more Alt-A mortgages are foreclosed on as scheduled interest rate resets take effect.  We’ve seen most of the sub prime loans already come and go from the market, so the next wave should be the Alt-A and the  economy driven foreclosures as regular people who have lost their jobs due to the falling economy. 

As you can see from the chart, median home sale prices are back to 1993 levels, but replacement costs to build are still at 2003 levels.  Our market won’t fully take off until we reach equilibrium on a broader scale reaching not only the bottom tier, but also the mid to upper tiers as well. 

So the answer as to when will our market spike up to where it was at the height is complicated.  The answer is it may never spike up to where it was, as those numbers were irrational and not supported by any sound financial basis.  However, the opportunities that lay before us may also be unprecedented, and because of the over-correction of the market dues to the financial crisis, foreclosures, credit becoming scarce, and over-supply, prices in many sub-markets are already on the rise.  Prices in the mid to upper markets will rise again; after they potentially fall some more, and the opportunity for home buyers to purchase at affordable prices and potential investment opportunities have many insiders excited. 

Remember the herd mentality.  When prices are at their height, most think it’s the time to buy, and when prices are at their low, most believe the sky is falling and time to run for the hills.  The smart money is back in, selectively, and they’re buying.  The opportunities today exceed perhaps any other time in the last 40-50 years.  

So when you read, prices are falling, or prices are rising, be sure to dig deeper and analyze what it really means.  Chances are, both statements are right, but in the analysis lies the true opportunity and wisdom.

 

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Pent-Up market

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You’ve probably heard the term pent-up demand bantered about over the years.  Pent-up demand is a term used in business to describe consumers who have held off purchases, bolstering savings accounts in uncertain economic times, and waiting for consumer confidence to increase before unleashing purchasing power. 

We’ve certainly seen pent-up demand unleashed in the last 12 months as the 4th qtr of 2008 was nearly an all-time record in home sales in SW Florida, and the 1st and 2nd quarters of 2009 have been all-time sales records.  We talked extensively how 1st time home buyers and investors have driven sales to record levels, but one thing that has been lacking is upward pricing pressure that usually accompanies a downward trend in inventory levels. 

In order to assess what future pricing trends may hold, we first must assess what is selling now, who is selling now, and what potential inventory lurks on the horizon, and intermix that with current economic conditions. 

As you can see from the attached chart, distressed sales accounted for 86% of the Lehigh Acres resale market, 71% of the Cape Coral market, and 66% of the Fort Myers market.  These sales all occurred in the last 3 months.  Distressed sales have actually fallen in Lehigh Acres and Cape Coral, and have risen about 4% in Fort Myers. 

 

Distressed Sales Single Family Lee County Florida June-August 2009
Distressed Sales Single Family Lee County Florida June-August 2009

To answer the Who is selling, the answer quite simply is banks who have foreclosed, and home sellers who owe more than what the property is worth, and with the assistance of their lenders by agreeing to a short sale.  Banks don’t always agree to a short sale unless the borrower has significant financial hardship, and even then these deals are tenuous at best. 

In answer to what is selling, primarily the foreclosures have been entry level homes at bargain basement prices.  We have recently seen some higher priced foreclosures, and we think more are in the pipeline.  We have also seen some intermediate and slightly higher priced short sales selling, with a trend also to higher priced properties of late. 

Let’s turn to what is Not selling.  Many sellers cannot afford to sell due to depressed property prices, but they do not qualify for a short sale because they don’t have the necessary hardship to qualify.  Other sellers cannot sell right now because they would not qualify for a new mortgage under current underwriting guidelines, so it’s best just to stay in their existing home and ride out the market. 

This leads us to the reality that we also have pent-up supply.  Due to record sales, our listed inventory has steadily been going down; however I think there is a lot more inventory that could be on the market if prices were higher.  Because prices are low, many sellers who don’t need to sell won’t and will wait out the market.  The only downfall with this strategy is that whatever these sellers would like to purchase to replace their existing home is also low right now, but will go up with the market.  Sellers waiting for higher prices to replace their existing home will be paying a higher price for the home they purchase, negating any financial gain by trying to take advantage of bargains today. 

Sellers today are in a no-win situation, unless they’ve owned their home for a significant time or put a lot down when they purchased.  If you’re going to trade up you have to do it within the current market.  As the market goes up and down, so does what you are selling, and what you are buying.  There really isn’t a great way to time the market, unless you have the wherewithal to buy a bargain home now and either rent out the new home or your existing home, then sell one when prices are better. 

Everyone wants to know when prices will return to what they were at the height of the market.  The answer is they may never return to the frenzied level that wasn’t sustainable.  If inflation returns like some think it will, tangible assets like gold and real estate typically do well.  However, if inflation returns, those price gains may be down the road because inflation in the short term can stifle home sales. The other wildcards are the job market, the overall health of the economy, and the biggie might also be pent-up supply. 

How much pent-up supply is out there?  Nobody really knows, just as it was hard to know how many of the pre-construction homes were actually sold to speculators who said on their loan applications they were primary borrowers. These so called speculators would later lead to foreclosures and the mess we are in today.  The builders may have had an idea when one person was buying seven homes, but there was no way to tell with all the people buying just one home back in the run-up. 

The real test will be when everyone who wants to sell feels like they can, and what the supply and demand factors are at that time.  Until then we have an artificial market, and any time you have an artificial market, artificial economic rules apply.  This market is a lot like the Price it Right Game show.  You don’t know what’s behind each door, and the only rule that applies is you must price it right to sell.

SW Florida Real Estate Inside the Numbers

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We’ve been researching and studying the SW Florida real estate market ahead of official releases due out next week, and our preliminary research tells us we expect sales numbers to increase approximately 100% or more over last August sales numbers.  The third quarter of 2009 is setting up to be another record quarter, and keep in mind 2008 numbers were near record numbers to begin with. 

Lee County single family inventory levels are on the decline again and pending sales are remaining strong.  The chart attached shows single family home inventory for Fort Myers and Cape Coral Florida. Listings in Fort Myers and Cape Coral fell by over 100 units as home buyers snapped up more property last month than came to the market. Separately, Lee County levels fell almost 200 units, suggesting buyers are buying faster than sellers and banks are bringing property to the market.

 

Fort Myers Cape Coral Listing Inventory Chart
Fort Myers Cape Coral Listing Inventory Chart

In the last several weeks we’ve addressed who is buying these properties, predominantly first time home buyers and long-term investors seeking to rent them out until the market improves.  At today’s low prices, properties actually cash flow, and we have lots of renters who have been displaced from properties. 

Now for some interesting observations we’re noticing that you won’t see in this chart.  We think home sales will be down about 11% from the previous month, which is normal due to seasonality.  Again, sales should be up about 100% over last year’s August, and last year’s August was down from July as well due to seasonality of the market, so no big surprises here. 

Foreclosure inventory increased 4.14% in the past month and foreclosure sales fell 13.82%  We’ve been saying for the past month or so banks are ramping up foreclosures for the next year and we expect double the write-downs banks will take, although because many of these properties will be in the higher price ranges it doesn’t mean we’ll see a doubling of foreclosure inventory.  Foreclosure inventory and sales will definitely be something we want to keep an eye on going forward and may tell the story of how our market is doing. 

Another trend we’re tracking is short sales to see if banks are cooperating more and agreeing to see short instead of taking back in foreclosure.  Even though total sales are down about 11%, and foreclosure sales are down about 13%, short sales are up about 3.76%.  This would suggest banks are cooperating more and our experience has been this is true; however it is still a very daunting process and not one a homeowner can reasonably attempt on their own.  In fact, it is so daunting that many agents won’t deal with short sales either.  If you’re going to attempt to buy or sell a short sale, make sure you’re dealing with an agent with lots of experience, preferably a CDPE (Certified Distressed Property Expert.)   

Distressed sales accounted for 70.04% of Lee County home sales in August, up slightly from 68.6% in July.  Distressed sales are here to stay for awhile.  In Fort Myers, 66.45% of the sales were distressed, while in Cape Coral the number is 68.87%  Lehigh Acres has far more distressed sales at 84.27%  County wide, distressed sales percentage remained stable over the previous month. 

Inventory levels fell in Fort Myers, remained fairly constant in Cape Coral, and increased about 2.35% in Lehigh Acres. So what’s the bottom line?  We believe median prices may increase some over time as banks bring higher priced foreclosures to the market.  Banks allowing more short sales may also increase the median sales price, but that doesn’t mean all homes are going up in value.  If this occurs like we think, it simply would mean the bottom has formed in the lower price range, and we’re still seeing erosion in prices in the mid to upper price ranges, and as they become more affordable buyers switch “on” and buy them.  

All real estate is local, and you can’t judge the entire market by a single statistic like median sales price.  This is why we take so much time to really study the market and explain what is really happening with hard facts.  We’ll keep an eye on the distressed end of the market, as these latest trends will offer us signs as to where the market actually is and where it’s headed. 

Until we flush out the distressed properties, normal market assumptions do not apply.  Supply and demand still rules, it’s just that it’s hard to get a grasp on supply without having a thorough understanding of what the banks are doing with foreclosures and short sales.  Until then we’ll keep tracking it for you and reporting the trends.

Is First Time Home Buyer Tax Credit Helping the Market?

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I recently attended the Star Power convention in Denver where the presidents or founders of RE/MAX, Prudential, Coldwell Banker, and Keller Williams spoke about where the market is today and where it’s going.  Dave Liniger from RE/MAX stated that nationwide we have a market fueled by investors and first time home buyers, but we’re lacking the move-up buyer in this market.  Jim Gillespie from Coldwell Banker agreed, and shared some interesting stories from Capitol Hill on his efforts to change the First Time Home Buyer Tax Credit to help the entire market.

It’s well known that tax codes effects home buying activity.  Look no further than the interest deduction and you can see why whatever Congress does impacts the entire market.  We can also look at the cash for clunkers program as an example in another industry.  The problem with only offering the credit to First Time Home Buyers is they will buy, but there’s no incentive for anyone who is selling to sell and move up.  So we end up with a bottom forming on entry level homes and stagnation in the mid level and secondary home market, which arguably needs more help than any other segment in SW Florida.

Percent of Distressed Sales in Fort Myers, Cape Coral, Lehigh Acres
Percent of Distressed Sales in Fort Myers, Cape Coral, Lehigh Acres

As you can see from the attached chart, 87% of Lehigh Sales and 74% of Cape Coral home sales have been distressed in the last 3 months, as this is where the majority of entry level speculator homes were built.  Fort Myers to a lesser extent stands at 62%, and that number grew last month.  By distressed we mean either a short sale or foreclosure sale.  This has put pressure on median sale prices, and illustrates that first time home buyers and investors are the majority of the buyers right now.

Jim Gillespie and others are lobbying Congress for a $15,000 tax credit for all buyers.  The $8,000 tax credit for First Time buyers is set to expire December 1, but we’ve heard this may get extended in October if the economy doesn’t pick up steam by then.  But what about helping the overall market, not just one segment?  We’ve helped solidify to some extent the entry level market, and we’ve done nothing for the mid market on up.  We’re talking $200,000 market and up in Lee County, the same market that used to be $400,000-$600,000 a few years ago.  Yester year’s prices aren’t coming back, as the market has done a reset.  However, we could inject infusion into this segment as well and keep it from further declines and get this economy moving again.  Real estate has led the US economy out of each recession, and it stands to reason it will do it again.  21% of the nation’s GDP is real estate related.  If the economy is the #1 issue right now, then what are we waiting for?

Could you just imagine the new activity that would occur if there was a $15,000 tax credit for all buyers?  Imagine how many people from up north could come by a 2nd home in Florida, or how many move-up buyers might pull the trigger and move, especially with today’s bargains.  A recent study showed nationwide a real estate sale generates $63,101 back into the economy.  This is based on everything from new carpet sales or to look as new, appliances, commissions, closing fees, plus the propensity of money at about 1.5%, meaning when you go out and spend, the vendor you just bought from also goes out and spends into the economy.

The truth is investors and first time home buyers were already buying in SW Florida before the tax credit.  Our buyers were limited to first time home buyers and investors only because the properties they’re buying were such great deals, and we’re happy the first time home buyers are getting a tax credit on top of a great deal.  I’m sure it has spurred even more buyers off the fence.  We would like to see all buyers benefit, and if we speeded up the recovery of the real estate market, not only would the economy benefit and we’d get people back to work, but we’d also protect banks from more foreclosures going forward.  We know foreclosures are about to pick back up again, and many will now be in that mid market and upper range.  Come on Congress, let’s make this happen, protect our banks, and get people moving again and get this economy and real estate market on solid ground again.

Current Market Index Predicts the Future of SW Florida Real Estate

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About 8 years ago the Ellis Team created a market index that accurately predicts the SW Florida real estate market. It helped us in 2005 warn the public that the local real estate market was about to turn.  Later in the fourth quarter and on into 2006 people began to realize the train had run out of steam.  We named it the Ellis Team SW Florida Current Market Index.  Since unveiling this index, the National Association of realtors came out with a similiar index called the NAR Pending Home Sales Index, which also predicts future closing activity, but it doesn’t measure the overall health of the market.  

Current Market Index SW Florida Real Estate by the Ellis Team
Current Market Index SW Florida Real Estate by the Ellis Team

 Our local index measures pending sales, but also takes into account listing inventory and measures the overall health of one against the other.  It tells us if properties are moving relative to overall supply.  This is important because in a good market, it may actually be more of a seller’s market than people realize.  In a hot market, sales are held back by the supply, meaning if there were more supply, chances are, there would have been more sales. 

 

The CMI Index numbers peaked out in January of 2008, and back then we started telling the public sales were about to pick up and inventory would start declining.  Sure enough, that’s exactly what happened throughout 2008 and into 2009.  Our Index was at it’s lowest in April of 2005 and at it’s highest in January of 2008.  The higher the index number, the more of a buyer’s market it is and the lower the number, the more of a seller’s market we have.  Back in July of 2005, the overall Lee County Index stood at only 1.07.  As we know all too well, that was about to change drastically.  The numbers shot up to 2.11 by September 2005, and 3.44 by October.   

So what do the numbers tell us today?  Our index hit 3.72 in April and stands at 3.80 in July of 2009.  This tells us inventory levels have been decreasing as predicted and pending sales have been increasing, as predicted.  In fact, last month we sounded the alarm that June sales could reach record levels, and they did.  July’s numbers when released should be strong as well.  Don’t confuse this with rising prices just yet.  The market is strong in sales volume, but we’re in a new market that has reset, and prices aren’t going back to 2005 levels.  We are starting all over from scratch and 2009 is the new baseline, and as the market heals, the baseline will have room for future price appreciation, with moderation. 

We update this graph each month on our Blog, blog.topagent.com and we look forward to providing this insight to News Press readers in the months to come.  Its one thing to have a Feeling about what the market is doing, however really studying the actual facts and charting trends helps to better understand what the market is actually doing, and where it may be headed.  Nobody can know with absolute certainty what will happen in the future, so we look to statistics to give us our best guidance.  Statistics are our radar so to speak.   

We really try to look at the data with an unbiased eye, meaning we’ll let the data speak for itself and tell the story, as opposed to hypothesizing what the story should be and trying to prove it.  We’ve been right, and we’ve been wrong, and the point is we’re not attached to the outcome of our predictions.  We simply lay it out there and let you decide based upon the best facts we have at the time. 

We’ll be running a new batch of numbers soon, but the July Index appears to show a strong market going forward for the next few months.  It looks like July and August sales numbers should be in good, and we look forward to the release of official numbers on August 21.  We won’t be surprised if July’s numbers are big, perhaps up as much as 100% or so, but down slightly from June’s record numbers.

As printed in the Fort Myers News Press August 15, 2009

 

 

 

 

 

2009: Housing Bust or Housing Boom in Sw Florida?

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2009: Housing Bust or Housing Boom

Its official, the 2nd Qtr of 2009 set the All-Time record for single family home sales, eclipsing the 2nd Qtr of 2005 by a wide margin.  Many people don’t realize that the 1st Qtr of 2009 also set the All-Time home sales record, and the 4th Qtr of 2008 was nearly a record.  Home sales in June were up 137% over 2008, a trend we’re seeing regularly throughout SW Florida.

 

Fort Myers and Cape Coral Single Family Homes sales by Quarter
Fort Myers and Cape Coral Single Family Homes sales by Quarter

The reasons sales are up are numerous.  SW Florida has received much International attention which has drawn interest to the area.  We’ve sold many more homes this year to Canadians who can now afford to buy some sunshine at affordable prices.  We’re also selling more homes to people from up north to use as a second vacation home, another encouraging sign.  Perhaps the two largest segments of buyers right now are the 1st-time home buyers and investors.

 

First-time home buyers are trying to cash in on the chance at the American dream with low interest rates, a potential $8,000 first-time home buyer tax credit, and affordable pricing we haven’t seen in years.  Most of these buyers were priced out of the market in years past, and now is their chance to live in their own home, cut their own grass, and have their chance at building wealth.   That chance is alive and well, as home sale prices today are well below replacement costs, so builders can’t even afford to build at these bargain prices.  No builder is willing to lose money right now when a buyer can buy for less that the cost to build.  This trend will end when there is no more inventory, and as you can see by last week’s graph, inventory levels are shrinking.

 

Lastly we come to the investor.  Today’s investor is much different than the speculators we saw in 2004-2006.  Many of today’s investors are paying cash vs. the over-leveraged speculators who leveraged everything and didn’t qualify for anything but maybe their own personal residence.  Today’s investor isn’t looking for the quick flip, although we have seen a few successful flip transactions.  Today’s investor recognizes bargains, and they’re buying up properties, rehabbing when necessary, and renting them out for cash flow.  In the future, each investor will decide on their own whether they want to sell at normal pricing, or keep the property for positive cash flow.  Positive cash flow is a term we never really used to hear much about in SW Florida because it was so hard to accomplish, even before the so called Boom of the 2000’s.

 

But was the Boom of the 2000’s really the boom?  We can say with certainty that prices went up for awhile, before they came crashing back down, giving up all the gains and then some.  Some people made money, and a lot of people lost money, including the banks, tax payers, etc. The opportunity to make money was limited to when you could get the new construction completed, and the demand was false.  All that happened was the supply side sped up, bringing needed housing to market much sooner than the demand.  So today we have more supply than demand, however that will change in time.

Today’s buyer has more opportunities for success going forward than any buyer did in 2005.  Sales are stronger in 2009 than they were in 2005.  Prices are more affordable, interest rates are low, and there are tax incentives in place now.  In fact, we’re hearing that if the economy hasn’t picked up by October, Congress may extend the 1st time home buyer tax credit scheduled to expire Dec 1, and some are saying it should be opened up to move-up buyers as well. We would argue the market in many ways is much healthier today than it was in 2005.  Many might ask, how could anyone say this market is healthy?  The truth is even with the foreclosures, the market has been cleansing itself for the last 4 years.  It may not be healthy today, but would you rather buy a home today or one back in 2005?  We would say it would be healthier to buy one today than back then, and most people call back then the Boom.

 

We think we should change the conversation.  2005 was not the Boom.  It was not healthy.  There was little to any chance of making money, and first-time buyers couldn’t afford to live here.  Nothing was good about the 2005 market, it was all false.  So let’s stop calling it the Boom. I don’t know if 2009 is the Boom, but if your definition is record sales, affordable housing, Real opportunities to make money in the future, and healthier lending standards, then this is all true today.  It just seems more sensible to call 2009 the Boom than 2005.

 

If you’re a seller or facing financial difficulty, Boom may not excite you.  We’re just saying the last so-called Boom is what started the pain and misery, and it’s going to be real estate that pulls the nation out of recession going forward.  Real estate recovery leads to eventual job creation.  We may be a few years away from construction jobs coming back to SW Florida, however the market has been well on it’s way to healing itself for years now, and we at least have those painful years in our rear view mirror.  I’d much rather be sitting here in 2009 and think of the market as the Boom than back in 2005 thinking everyone was going to make money on their next Flip.  Today is the Boom, 2005 was the Bust.

 

As appeared in Fort Myers News Press August 8, 2009

Ellis Team is Hiring Agents in SW Florida

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The Ellis Team has so many leads we need to hire experienced agents.  SW Florida is experiencing record sales numbers, and buyers more than ever are looking to purchase real estate in SW Florida now that it’s affordable again, interest rates are low, and of course the First Time Home Buyers Tax Credit.

The Ellis Team at RE/MAX Realty Group in Fort myers has not cut back on advertising, but rather has refocused on advertising that actually works.  In some cases we’ve increased our advertising, as is the case with The News Press and NBC.  We’ve continued our radio show for 9 years, our Yellow Pages ads, and we’ve increased marketing in other areas.  We’ve eliminated a few advertising venues that didn’t prove to work, and we’ve recently added a few opportunities that we’re really excited about.

We’ve changed our office staff and we’ve never been stronger.  This is the market to hire key people and march forward, and we’re doing that.  Average isn’t good enough anymore, and it’s never been good enough for us.  This market ha given everyone an opportunity to evaluate what’s working and improve upon it, and eliminate what’s not working.  We’ve improved our personnel tremendously and getting much more accomplished.  We’ve never felt better about our team, and we’re excited about opportunities moving forward.

We recently attended the Star Power Convention in Denver and listened to the Leaders of RE/MAX, Coldwell Banker, Prudential, and Keller Williams.  All four had interesting things to say about where the real estate industry is going in the next 5 years, and all agreed that mediochre won’t cut it in today’s market.  You can’t just give average effort, or you’ll end up going backwards.  You’re either evolving or dissolving according to larry Kendall, owner of Kendall Real Estate and author of Ninja Selling.

Our advertising and systems are working.  We’re creating more leads than we can handle.  We’ve sold more properties than last year.  We’re handling foreclosure accounts, getting short sales through, and helping regular sellers sell in this market.  We need good quality agents to help handle the leads and sell.  We have the administrative team to handle the details for our agents, which frees them up to work with more customers.

If you’re an agent struggling in this market, check us out.  We’re growing, and we’re looking for a few good agents to grow with us.  Let our 20+ years of selling and training experience put you on a path to success, no matter what the market does.  Call us for an interview.

SW Florida Real Estate Update-Listing Inventory Levels Down

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SW Florida Listing Inventory Down

This week we’ll focus on the amount of single family home inventory in Lee County and
compare that with pending sales activity from a historical perspective so that we might be
able to draw some conclusions as to what’s happening today in the SW Florida real estate
market, and where the market may be headed.

Fort Myers and Cape Coral Real Estate Listing Inventory
Fort Myers and Cape Coral Real Estate Listing Inventory

As you can see from the chart which shows Fort Myers and Cape Coral single family
home inventory levels since December, 2004, inventory began rising in the 3rd Qtr of
2005, which was a precursor of what was to come.  The overall Lee County graph looks
similar, only larger numbers. Because new construction contracts were still in effect and
building was in its height at that time, the public really didn’t understand what was about
to happen.  Simultaneous to the rising inventory levels, you can see that pending sales
started to drop off as well.  Combine that with the flood of new construction homes that
continued to flood the market, and you can see very quickly what was about to happen. 
Having this information in real-time back in 2005 would have saved some investors some
money.

Fast forward to the 1st Qtr 2008.  As you can see, pending sales started to increase, and
listing inventory started to decrease. All the foreclosures entering market were quickly
absorbed, and then some.  2008 4th Qtr sales were close to an all-time record, and 1st Qtr
2009 was an all-time record.  In fact, we’re seeing more sales now than we saw at the
height of the Boom back in 2005.  So why isn’t everyone reporting this as the Boom?

2005 was filled with euphoria, rising prices, banks lending money like drunken sailors,
and just generally reckless abandon.  People just didn’t think it would end.  They ignored
the warning signs.  The market was not sustainable, but just try telling that at a cocktail
party with 6 of your closest friends who were flipping houses and making money. 
Nobody wanted it to end, and yet it could not continue.  It was phantom demand, and
over-supply. 

Today we have more sales than the Boom, but consumer confidence is low,
unemployment is high, oil is still high compared to 2005, and home sale prices are low. 
Homeowners are having a hard time making payments as incomes are down, and few
people feel great about their financial matters.  This is why nobody is calling 2009 a
Boom, and perhaps they should.  The opportunities for a buyer today are far greater than
they ever were in 2005.  2005 was a false market as nothing was what it appeared. 
Today’s market is real, and the bargains are there.  In fact, sale prices are so far below
replacement cost there is no building inventory entering the market in the foreseeable
future.

When the job market and the economy begin to recover, we may actually have difficulty
finding properties for buyers.  The builders have not been building, and many sellers
cannot afford to sell at today’s prices.  Banks have been forced to “short-sale” or
foreclose, and the foreclosures may start drying up by next year.  Some speculate there is
another wave coming due to resets in the ARM schedules in 2011; however we feel that
in SW Florida, most of those buyers have already walked because they were the
speculators who long ago realized they could never make a profit, so they chose not to
carry the costs.  If all this is true, we may have a period of diminishing inventory to sell
until the market sorts it out.

Many Realtors who study the market  were sounding the warning signs back in 2005, and
yet the public didn’t get the message.  Many of those same Realtors are recognizing that
2009 is a Boom, and yet not all of the public is getting that message either for reasons
outlined above.

Our goal is to provide you with meaningful data so that you can see what is really
happening in today’s market.  These first several weeks we’ll be providing a baseline of
where we’ve been and how that relates to where we’re headed.  We seek to provide
unbiased insight you might not have received anywhere else.  We seek to make sense of
what’s happening, and prove it with facts.  We can say that home sales have exploded
since 2008, and listing inventory is declining.  We’ll watch this market together, and
we’ll do our best to explain what’s happening.  We’re not tied to the outcome, as markets
go up and they go down.  Our job is to explain what it’s doing today, and offer our
insights as to where it may be going in the future, so you can make informed decisions. 
Remember, all real estate is local, even in SW Florida.  Just because we report something
is going on in the Cape or Fort Myers doesn’t necessarily mean the entire market is
affected the exact same way.

We are seeing a shift from Cape Coral, which has been on fire, over to Lehigh Acres, as
Lehigh is the affordable hot spot right now.  It’s the same shift we saw in the height when
prices in the Cape got carried away and buyers shifted to Lehigh.  Funny how life repeats
itself.  Stay tuned each week and we’ll present more insights.

Florida Lieutenant Governor Jeff Kottkamp This Week’s Guest on the Future of Real Estate

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Florida Lieutenant Governor Jeff Kottkamp is this week’s guest on the Future of Real Estate which is broadcast on Saturdays at 11:00 AM on WINK AM 1240 in Lee and Charlotte Counties and AM 1270 in Collier County.  You can listen to this special show Online Now   

We ask the Lieutenant Gov the following topics:

  • Update on Foreclosure Task Force (Hope Now)
  • SW Florida’s chances on landing another Major League Baseball Team
  • State Farm Insurance situation
  • Health Insurance-Obama’s plan and it’s effect on Florida
  • Cover Florida Insurance Plan
  • State Rights Vs US Rights
  • Private property rights
  • Space Florida
  • Cuba and Tourism
  • Attorney General Race
  • Drug Control
  • Port Security
  • Governor race-Crist Vs Rubio
  • Adoptions in Florida

It really is a great show and the Lieutenant Gov answered all questions.  Tune in now.

SW Florida Social Media Update

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Last week we tested a social media experiment.  Our goal was to create a few Facebook Fan Pages for various parts of the SW Florida real estate market and see if we could drive 100 fans to each.  If we could do that, we could signup for Facebook unique URL’s.  We’re happy to report that not only did we hit our goal of 100 fans, we far surpassed it in only a week.  Currently we’re over 400 users on our Ellis Team site, and close to that on others.

The advantage of signing up on one of these pages is that we post timely news pertaining to each area, specific to that geographic location, or in the case of The Ellis Team site, about real estate marketing in general.  We provide discussion boards, Blog posts, nes paper articles, video updates, photos, and much more.

Our new goal is to hit 1,000 users by the end of the month.  Can we do it, who knows?  There’s no magic reason we picked this number, it just sounds fun.  We’ll post the web links here for Facebook users to follow us, and our Twitter addresses too for our Twitter users.

Facebook Pages

Ellis Team at RE/MAX Realty Group currently at 408 Fans

Cape Coral Real Estate                     currently at 244 Fans

SW Florida Real Estate                      currently at 342 Fans

Fort Myers Real Estate                      currently at 280 Fans

Future of Real Estate                        currently at 354 Fans

Twitter Followers can follow us at:

@swfltopagents   Ellis Team

@brettellis_swfl   Brett Ellis

We look forward to connecting with you on many levels.  We still do business the old fashioned way, and we still advertise in traditional methods like newspaper, TV, and radio.  We are however expanding our reach into the Social Media markets to better serve our customers, and we look forward to seeing you online.