Here’s the latest look inside the numbers ahead of the sales report expected to be released tomorrow at 11:05 AM by the Florida Association of Realtors.  Based on latest MLS statistics, inventories have grown in the last few weeks slightly, and pending sales have remained relatively steady.  We’ll post an update tomorrow after the official numbers are released showing median sales price and number of closed transaction for Fort Myers, Cape Coral, Naples, and the entire SW Florida real estate market as well as the state of Florida.

Lee County Florida Current Market Statistics.

 

November 27,2006 Active Pending Months Supply of Inventory
Single Family 13,186 1,031 17.49*
Condo 8,344 535 31.85*

 *We project there will be approximately 9,048 single family closings reported in Lee County MLS, and approximately 3,144 condo sales reported.  Months supply of inventory are based upon these projections. 

November 9,2006 Active Pending Months Supply of Inventory
Single Family 13,148 1,046 17.44*
Condo 8,096 534 30.90*

October 18,2006 Active Pending Months Supply of Inventory
Single Family 12,669 1,128 16.80*
Condo 7,834 543 29.90*

 

August 23,2006 Active Pending Months Supply of Inventory
Single Family 12,168 1,261 13.10
Condo 7,391 557 14.18

 

 

July 25,2006 Active Pending Months Supply of Inventory
Single Family 12,053 1,343 12.97
Condo 7,387 591 14.17

 

 

May 27, 2006 Active Pending Months Supply of Inventory
Single Family 11,838 1,426 12.74
Condo 7,414 644 14.22

 

Naples Florida real estate sales for both homes and condos were of 50% for the first 9 months of 2006.  Inventory of properties on the market is up 300% to over a 21 months supply.

The Fort Myers Cape Coral real estate market hasn’t fared much better, although sellers have adjusted quicker than Naples sellers.  Both markets will be hit hard.  Fort Myers and Cape Coral has already adjusted.  The end result will be similiar, the time it takes to recover will be different.  Naples market will stay down longer because they’ve been slow to respond,  Fort Myers and Cape Coral is already showing signs of recovery as buyers are coming into the market.

Affordability is up as prices have come down.  When inventory levels start coming down and pending sales start going up we’ll have a more definitive answer, and until this happens we can’t say the worst is over just yet.  We are seeing signs of increased buyer calls, and increased showings, which is a ppositive sign heading into season.

2007 is already starting off much better than 2006 did.

Resale properties are expected to increase at a 1.6% rate in 2006 and a 1.7% rate in 2007.  2006 will be the third highest year on record for number of sales, and 2007 levels are expected to match 2006 levels of about 6.47 million homes.

"We now have the most favorable market for home buyers in several years, and most sellers — who’ve been in their home for a normal period of homeownership — are still seeing very healthy returns on their investment. Conditions for buyers have improved because sellers are flexible now and mortgage interest rates are near historic lows. The market promises to be more balanced between buyers and sellers by early spring, supporting future price growth," according to David Lereah, NAR chief economist.

SW Florida real estate sales climate is expected to improve significantly in 2007.  We are beginning to see the tell tale signs of buyers realizing now is a good time to enter back in the SW Florida real estate market.  We’ll explain those signs in further detail in a future Blog article.

As you can see from the charts below, the SW Florida real estate market continued adding inventory since our last report, and pending sales have fallen again.  This has led to sellers lowering asking prices to attract buyers.

 

 

Lee County Florida Current Market Statistics.

 

November 9,2006 Active Pending Months Supply of Inventory
Single Family 13,148 1,046 17.44*
Condo 8,096 534 30.90*

*We project there will be approximately 9,048 single family closings reported in Lee County MLS, and approximately 3,144 condo sales reported.  Months supply of inventory are based upon these projections. 

October 18,2006 Active Pending Months Supply of Inventory
Single Family 12,669 1,128 16.80*
Condo 7,834 543 29.90*

 

August 23,2006 Active Pending Months Supply of Inventory
Single Family 12,168 1,261 13.10
Condo 7,391 557 14.18

 

 

July 25,2006 Active Pending Months Supply of Inventory
Single Family 12,053 1,343 12.97
Condo 7,387 591 14.17

 

 

May 27, 2006 Active Pending Months Supply of Inventory
Single Family 11,838 1,426 12.74
Condo 7,414 644 14.22

 

Make no mistake, the 4 headed monster is firmly in control of SW Florida’s real estate market.  To illustrate this, we’ll explain what the 4 heads are and how it affects the market.

1.  Investors entering market.  Investors bought property in SW Florida and around the state in record numbers.  They weren’t traditional buy and hold investors who looked at rental rates, cap rates, cash on cash returns and such to make intelligent investing decisions.  These investors were simply interested in the Flip method, buy today at any price and sell tomorrow at a higher price.  This strategy worked for awhile, until someone was left holding the bag like a bad pyramid scheme.  Prices eventually became too high and unsustainable by end users.  Flippers were even flipping to other flippers, but with end users nowhere in sight, this was bound to run out.

What the investors did do was speed up the building process by several years, flooding the market with excess inventory.  This inventory would have been OK over time, but because the investors sped up that process we now have too much inventory today. Had it come at a more normal pace and over the next few years, we would have been OK because we’d have normal inventory without the big runup in prices.

2.  Investors in and around the environs of Ormond Beach left the market on a moment’s notice.  We’ve established that they sped up the supply and put out all Plantation Bay Ormond Beach FL homes for sale. But when investors left the market they took away approxiamtely 35% of the demand.  This demand wasn’t normal demand, rather artificial demand.  Many of these investors were not sophisticated.  They simply heard about how their friend made $100,000 in real estate so they thought they’d buy something and the same would happen to them.  They weren’t all doing their homework.  Many took out equity lines of credit on their current homes to finance these purchases, and were financially ill prepared if everything did not go their way.  These investors should have never been in the market, and are the most likely to lose money and face foreclosure.

3.  Property Insurance rates have skyrocketed out of control.  Insurers blame the rate hikes on increased risk and hurricane activity.  We believe this is partly to blame.  The other part of the equation is failure of government oversight.  Insurance companies must get their rate hikes approved based upon need.  What isn’t governed is the rates re-insurance companies can charge insurance companies.  An insurance company can show how their costs have gone up, but what they aren’t telling you is their re-insurance costs have skyrocketed, and the re-insurance company is often their parent company raking in billions in profits.  Re-insurance rates aren’t goverened like regular insurance rates are, so it’s a way for parent companies to pass along much higher costs to their subsidiary.  State Farm Mutual can rake in billions while State Farm of Florida policy holders pay the difference.  And we wonder why rates are skyrocketing.  Government needs to close this loophole.

4.  Property taxes are skyrocketing, not so much from higher rates but more from higher assessed values.  Local governments have grown accustomed to much higher tax bases without cutting rates smiliarly to make up for the windfall.  The result is much higher taxes.  Adding to the inqequities is the unfairness with the Save our Homes Act.

Let’s take an example of two exact homes located next to each other.  We’ll assume the home and land are exaclty equal in value.  Let’s say home A has been owned by the same owner the last 10 years, and the taxes on it are $2,000 because the owner of home A has filed homestead exemption for the past 10 years and is shielded from more than 3% assessed value increases per year.

Home B is owned by a seller, and he/she wants to sell.  Their taxes are also $2,000/yr.  As soon as they sell, the new buyer will pay $9,000 in taxes, because the Save Our Homes Tax Act is out the window when the property transfers ownership.  They buyer for Home B is moving across town, and is now currently paying $1500/yr in taxes,  He’s willing to pay an extra $500/yr in taxes because he’s upgrading homes, but not an extra $7,500.  So, he decides not to buy, and the seller of Home B still sits on the market.

Scenarios 3 & 4 all add to the total cost of ownership.  Buyers cannot afford to buy.  Home prices have retreated from their 2005 highs.  It used to be home prices were holding buyers back. Now that prices have come down it’s property taxes and insurance holding them back.  Goverment could fix both these issues, if they were motivated to.

The market will fix scenarios 1 & 2 on their own.  It’s up to each of us to speak with our elected officials to fix the homeowners taxes and property insurance debacle.  Tell your legislator you want them to enact Property Tax portablity, so any savings you receive under the Save our Homes Act travels with you so you can afford to purchase another home in the same area.

 

September sales data released in October show national exisiting sales dropped , but inventory also dropped 2.4% to a 7.3 month supply of homes on the market according to a National Association of Realtors report.  This is welcome news and a positive sign going forward into 2007.  It was the second consecutive drop in inventory.

Inventory levels have been creeping up in SW Florida, although that trend could change as pending sales are anticipated to increase in coming months in SW Florida.

The National Association of Realtors created a Pending Home Sales nNdex which tracks pending sales.  This is an indicator of sales scheduled to close and accurately predicts the market in the next 30-60 days.

NAR’s index slipped 1.1% to a level of 109.1 in September.  The index is measured against pending sales back in 2001, and anything over 100 is greater than the pending sales back in 2001, the start of the real estate boom nationwide.

The south weighs in at 125, which is actually down 9 compared to September 2005, a record year.  National economists predict theis index to remain fairly stable the rest of the year, signalling a bottom in the real estate market.

Pending sales in SW Florida real estate remain steady as well.

RE/MAX Realty Group II has opened in Pine Island servicng Bokeelia and St. James City as well as Matlacha real estate.  RE/MAX is the #1 company both locally in SW Florida real estate and wordlwide.  RE/MAX offers top quality service to its clients by attracting top producing agents to work at RE/MAX.  If you’re interested in buying or selling real estate in Pine Island, call 239-283-5610

Search MLS for Pine Island real estate.

FEMA is updating the flood maps for Lee County and SW Florida.  These proposed changes will affect flood insurance rates.  Some people’s rates will go up while others may go down.  Some people previously not in a flood zone will now be, and their mortgage company will require them to obtain flood insurance.

Single family home sales in the Fort Myers Cape Coral real estate market dropped 36% from 2005 levels in September, down from 1,075 sales last year to 693 sales this year. SW Florida Real Estate Market Report shows median prices dropped 9% since last year from $288,700 down to $261,400

Sales actually increased since August 2006 from 691 to 693 sales.  Prices remained relatively steady since August 2006.  September prices came in at $261,400, down from $264,100 in August.

Single family home sales and prices in Lee County seem to have leveled off, and this could be a silver lining.  Many national experts predicted sales prices would fall in SW Florida about 18% from it’s all-time high.  We’ve already seen a 15-20% price drop, so then end may be near.  Inventory is still rising, and pending sales have dropped slightly, not encouraging news.

What is encouraging is the rate of homes coming on the market is dropping, and the decrease in pending activity is dropping as well, signaling a leveling off may occur sometime in the future.  Showings have also actually increased, which could lead to an increase in pending sales down the road.

Additionally, pending sales are picking up in other parts of the country, which may affect home buyers looking to purchase here.  We still have a lot of inventory, but there are some really great buys out there now awaiting home buyers, and we think now is the time for buyers to pounce.  We won’t know exactly when the market has hit bottom and starts to go back up.  What we can say is that there are definite signs a leveling off maybe close at hand.  Until that leveling off actually occurs and we start eating into existing inventory levels, we can’t officially say we’re at the bottom.  Stay tuned.

Condo sales in Lee County were off 52% from 126 sales in September 2005 to 61 in 2006.  Sales prices of condos in Lee County were down 3% from $314,800 in September 2005 to $305,600 in 2006

Collier County single family home sales were down 37% from 377 in September 2005 to 236 in September 2006.  Sale prices were down 8% from $487,500 last year to $446,900.  Naples condo sales were down 62% from 456 condo sales last year to 173 this year.  Sale prices were actually up 4% from $365,700 last year to $378,600

We think this is partly the reason sales in Naples are down because sellers haven’t reacted as quickly to changing prices as sellers have in Lee County.  We believe sales are much closer to leveling off in Lee County than they are in Collier County because of this fact.  Affordability and price are a much larger issue in today’s market.  It’s total cost of ownership, not just the price.  As homeowners insurance goes up, property taxes goes up, interest rates, gas, etc it eventually weighs down on buyers.  There is too much price disparity right now between Naples and Fort Myers.  Soon you will see another rush of buyers purchasing in Lee County because Collier County is just so expensive.

Naples is a beautiful place to live, as is Fort Myers,  The address won’t matter as much going forward as price will.  Collier County is poised to lose buyers to Lee County, just as Lee County will lose some buyers to Charlotte County for the same reasons.  Housing affordability.