Housing Market Priced Correctly in SW Florida?

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Is the SW Florida housing market priced correctly in 2022?  Let’s take a deep dive and analyze some key statistics.

Housing market Priced Correctly in SW Florida

Keller Williams has been analyzing the national market for years. In their estimation, 4% annual appreciation is the standard.  When the market surpasses the 4% appreciation rate for an extended period, it can get in trouble. Beginning in about 2002 the market began eclipsing 4% cumulative appreciation. It continued to eclipse that rate for 6 years and on the 7th year it corrected to the norm. What happened after 2008 is a result of prolonged riding above the line for an extended period.

We not only rode above the line, but we also rode high above the line. We then proceeded to ride below the line for 12 years.  Had we ridden just a little bit above the line the correction wouldn’t have been so great.

Fast forward to today. 2021 was the first year we exceeded the line. We are expecting price gains in 2022, and if they pan out as anticipated we will once again be above the line, but not by too much.  Again, the line is a guide, and it is OK to go above or below the line.  The chances of being exactly on the line are slim, although for 12 years on this graph we were right at the line.  The line is scary accurate over time.

How long can we ride above the line?  That depends on how high we go above the line.  So far, we haven’t gone over by much. With the Fed expecting to raise interest rates in 2022 combined with rising gas prices, each can work to slow the rise of home prices. Each eats the purchasing power of buyers by eroding their spendable disposable income.

Another factor we like to track is inventory levels. Nationally inventory sits at 2.3 months, and the average line is 5.9 months. Both nationally and locally inventory levels are below where they should be. This tells us it is more fun to be a seller than a buyer. We are closely monitoring inventory levels. When we see a significant rise in levels, we need the upward pricing pressure will abate.

 

So far, we are not seeing that yet. However, we do have headwinds with rising inflation, interest rates, and fuel prices. The market can still rise in price, and most experts are predicting it will.  We are saying there are limiting factors on how much higher they can go, and how fast.

If there would be a future correction, it would not have to be much.  Unlike 2006-2009 here locally, we have not overbuilt relative to demand. In fact, we have graphs showing we are underbuilt, and therefore inventory is lacking.

Builders are doing their best to catch up.  They will not catch up anytime soon. The question becomes, will sellers decide to cash out in enough quantity to affect the market? Nobody knows the answer to that.  Our bet is rising rates will temper the market, but no correction will be necessary, at least not in 2022. We would need to see prices rise substantially to warrant a correction in 2023. If prices rise enough, they could come back to today’s price plus or minus a few percent. If prices rise as expected, perhaps no correction will be necessary.

A lot will depend on how far interest rates rise, how persistent inflation is, and if incomes keep up with inflation.

Politicians talk about inflation being transitory and how inflation will moderate later this year. All we can say is it will have to, because if it doesn’t, Americans will be priced out of their standard of living. Incomes simply cannot keep up, and inflation hurts the little guy the worst.

If you are thinking about selling in the next year, we should talk and come up with a strategy for you. Financial planners meet yearly with their clients. We believe 2022 should be a year you meet with your Realtor to update your plans. We’d love to be your Realtor. Call Sande or Brett Ellis 239-310-6500, or visit www.SWFLhomevalues.com to track your home’s value going forward.

Housing Market Correction Risk Harms Sellers More Than Buyers

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For the past year we have been talking about how rising interest rates harm buyers by eroding purchasing power. Today we would like to focus on how the housing market correction risk harms sellers more than buyers.

Housing Market Correction Risk Harms Sellers More Than Buyers

In this example we have posted before, we illustrate a $350,000 home that falls to $300,000 in a correction. That is a 14.29% correction. Also shown was a 1.25% rise in interest rates.  The net effect to the buyer was only a $2 savings per month in payment. The seller on the other hand suffered a $50,000 loss by waiting to sell.

Housing Market Correction Risk

This is one of those times where it can cost a home buyer to wait because interest rates are expected to increase in 2022.  A market correction can really cost a seller to wait. Both can be hurt, but in this example the seller is hurt the most.

Next week the Fed is expected to meet to begin their interest rate hikes. It is almost certain they will hike rates .25% and some believe it may be .5% Inflation is rampant and may only get worse as fuel prices spike. Inflation hurts the low to middle income earners the hardest, so the US government is determined to slow inflation, even if it means slowing the economy.

As rising rates, rising oil prices, and rising inflation eats into consumers pocketbooks it can eventually eat into people’s ability to afford a home. Home affordability is an essential ingredient for rising prices. As homes become less affordable there is less upward pressure on prices. Remember, a 1% rise in interest rates robs buyers of 11% purchasing power.  If you rob enough buyers, eventually it will hurt the market.

Florida in a Good Position

Florida is better insulated than many states at is tax friendly and a desirable place to live. More people are moving to Florida than leaving, so we are a net migration state. Other states, primarily high tax states, are losing residents to states like Florida.

Which force wins out is anybody’s guess. The point of this article is that if a buyer waits and prices go down, they are no better off.  But if a seller waits and prices go down, a seller is definitely worse off. Since nobody can tell for sure how the economy will go and where housing prices will go, waiting to sell could be at the seller’s own peril.

We are not making a market prediction.  We can see scenarios where prices could still rise, and others where they could correct a bit.  The point is, it is not our money, and sellers are asking the question. If your home is not working for you, give Brett or Sande Ellis a call 239-310-6500. We can talk about your circumstances and discuss if now may be right for you to sell.

Nobody is Predicting a Crash

Markets do not go up forever, and corrections are not a bad thing.  Crashes on the other hand are bad, and nobody I know is throwing around the crash word except for hopeful buyers wishing they had bought years ago.

To find out what your home may be worth instantly, go to www.SWFLhomevalues.com Not only will you get a pretty good idea of your home’s value, but you can also track it to see the direction of your home’s value.  Each month it will send you a new value and it is fun to see if your property is appreciating or declining and by how much.

Need a place to go. We can share some creative ideas other sellers are exploring that might be a way to cash out at today’s high prices. Give Sande or Brett a call.

See last week’s article “Inflation Home Affordability Perspective”

 

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Inflation Home Affordability Perspective

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Today we’d like to give you an inflation home affordability perspective you may not have thought about. These days everyone is talking about how expensive housing is. But is it really? Yes, home prices have gone up, but that doesn’t tell the whole story.

Inflation Home Affordability Perspective
Inflation Home Affordability Perspective

We are including a graph, and there is a lot going on in this graph. Let’s break it down. In 1989 the Keller Williams research team took the national average price of a car, a home, wages, and the cost of a mortgage for that average home.  They then went back and adjusted each for inflation. Here is what we found.

Of course, all four went up in price. But after adjusting for inflation, the cost of a mortgage, even at today’s prices, went down 24.02% You might ask, how can this be?

The answer is mortgage rates are lower than 1989 which is making housing affordable. We have other graphs that show in 2021 16% of the average home buyer income went to paying their mortgage. Back in 1989 it was 24%, so home affordability is better than it was back in 1989. This suggests there is more room for price appreciation if rates do not rise.

What if Rates Rise?

What happens if rates do rise? That eats into home buyer affordability and can damper price increases.  If they rise enough, it could put negative pressure on home pricing. In the coming weeks we will post another graph that shows where home prices are today compared to where they should be on the curve.

The forecast we pay attention to suggest home prices could rise nationwide about 9% this year. However, home prices are out over their skis and could ultimately bounce back if they expand too much from here. A lot will depend on interest rates. Expect the Fed to raise their rates a qtr. point to half point in March. Most experts now see a qtr. point hike, but I would not be surprised to see the half point rise. Many financial analysts are expecting the economy to pull back the 2nd half of the year. One way or the other, inflation will be pulled back whether through a slowing economy or continued interest rate hikes. Therefore, I believe the Fed may want to act faster now than having to continuously raise rates later.

Nobody knows what the Fed will do. They should have moved sooner and had they we might not have need to raise as much in 2022. Of course, many mistakes have been made not just by the Federal Reserve. A lot of people are responsible for this drastic inflation.

We are not here to assign blame. We are simply here to look at how we got here, how we think they may address it going forward, and what that means for the local real estate market.

Call Us Before Prices Peak

If you are a homeowner and your home is not working for you, you might want to call us 239-310-6500. Do not wait for prices to peak. If timing the market is your goal, you have a 99% chance of not getting that right. You will only know months afterward if you timed it perfectly.  Even if you miss it by a few percent, you are still doing well. Remember this, when word gets out that prices topped and are heading down, buyers turn off.

No buyer wants to buy in a declining market, just like nobody wants to catch a falling knife. Some people must buy, but the ones that don’t will continue to rent and wait for prices to come back down. When this happens, they will have no mercy on sellers. Sellers did not care that they put in 20 offers on homes and got none while prices were going up. When the market reverses, buyers will have no sympathy.

If you’d like to check your value online without speaking to us, you can at www.SWFLhomevalues.com Not only will it give you your home’s value, you can also check to see your value each month and see if it is appreciating or declining.

Always call Sande or Brett Ellis at the Ellis Team at Keller Williams Realty. We look forward to helping you get Top Dollar for your home!

Ellis Team Weekend Open House

3914 NW 41st St Cape Coral

Cape Coral Pool Home

Cape Coral Pool Home

Record Home Sale Prices Set in January 2022

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January 2022 saw record home sale prices set as we started the year out with a bang. Median home sale prices rose to $413,500 from $327,250 last year. That is a whopping 26.4% increase over last year. Average home sale prices rose to $574,393 from $489,738 last year. That is a 17.3% increase.

Record Home Sale Prices

We did notice a drop in average sale price from December. Last December averages sale prices were $605,784. We do not get too hung up on average sales because a few large sales can skew the average. Therefore, median is most used. For instance, the Ellis Team closed one for about $3.8 million in December that would skew the numbers up on the average.

Inflation and Housing Prices

What effect will rising rates and inflation have on housing prices?  That is what we are going to watch. Typically, the Fed raises rates to slow down the economy.  An overheated economy leads to inflation which hurts the most vulnerable among our population. The Fed is determined to stop rising inflation with a series of rate hikes and elimination of the bond buying program that has infused so much into our economy. This will take money out of the money supply which will serve to slow down the economy and also make rates rise.

Where it gets tricky is the global economy. In the old days the US would raise rates and that would be that. Today we no longer live in a bubble and have to look at how the dollar stacks up against foreign currencies and economies. It could be that foreign governments choose to invest in US Treasuries which would pull rates back down. Keep in mind there is an inverse relationship with prices and yield, so as the price goes up the yield goes down. It will be interesting to watch how much interest rates will go up.

Price of Oil

The other wild card is the price of oil. Rising oil prices can be inflationary. We have a graph that shows key moments in history where when oil reached a certain point it led to recession. We are no super economist, and you know what they say about economists. It just feels like to me if oil were to hit $115/barrel or so it would not be good for our economy. As I write this article West Texas Intermediate crude oil is just above $94. We will be watching this number closely along with the price of the 10-year treasury yield.

Many sellers are holding out for higher prices, and their hunch to this point has been good. Nobody knows how much longer prices will increase. We also do not know how fast or how much interest rates will increase. We would say the cost of borrowing is set to go up. Rates have risen in the last year, and we expect more of that. If your home does not fit your needs, making a move today may be in your best interests. Waiting to make the move when borrowing costs are higher can cost you in two ways.

Interest Rates

If you are getting a mortgage on the next house, your borrowing costs will be higher by waiting. Secondly, all the buyers looking at your home will now qualify for less home when rates rise. For every 1% rise in rates takes away 11% purchasing power from borrowers. This means the pool of buyers for the home you are selling could shrink as well.

The good news is today we have more buyers than sellers. It is always more fun to sell in this environment. In the future we may not have quite the imbalance, which wouldn’t be as fun. Waiting can be a gamble.

If you’d like to discuss your options, call Brett or Sande Ellis 239-310-6500. We can consult and give you answers to your questions. Or visit www.SWFLHomevalues.com to get your home’s value instantly.

Let us know how we can help. We are easy to talk to, so we look forward to hearing from you.

Daily Inventory Levels Down 23.66% Since Dec 8

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Today we are reporting SW Florida single family daily inventory levels down 23.66% since Dec 8th, 2021. In roughly two short months we’ve managed to whittle down single-family inventory by 332 homes in Lee County. Back in December inventory stood at 1,403 homes and today it stands at 1,071.

Daily Inventory Levels Down 23.66% Since Dec 8

Sellers can attract multiple offers if their home is marketed correctly and choose from an array of buyers.  Buyers on the other hand are increasingly frustrated by the lack of inventory. They must compete with other buyers for fewer opportunities.

Dare to be Different

At the Ellis Team at Keller Williams Realty we work a bit differently than most Realtors.  This is why we are able to get our buyers into homes in an increasingly frustrating market. We are also able to get our sellers Top Dollar because we study the market in greater detail.

In a tense, stressful market it pays to work with a team that has been through changing markets before and knows how to operate.  The average Realtor has only been through one cycle. Therefore they do not understand what it truly takes to succeed for their clients in a rapidly changing market.

When the market makes a move, you must spot it quickly.  Our team is working the MLS every day and we track numbers religiously. When the market makes a move, we want our clients to know first.  Speed wins in this market.  You cannot tell where the market is going unless you know where it has been and where it is this minute.

We hope you appreciate us letting you in on some of the statistics we track and what indicators we look at when we give advice to or clients. We appreciate that so many Realtors read our column and share with their clients as well.  You do not want to be caught with week old data in a changing market. Unfortunately, we write this column on Monday or Tuesday before it prints on Saturday so it is the best we can do for readers.

Best Information Wins!

If you are in the market to buy or sell, you will want to call us for the timeliest information available.  We are listing properties one week, and by the time professional photos are taken and the home is ready for MLS we are adjusting. We have added tens of thousands of dollars to our sellers’ pockets by having up to date info on the market.

If we did a market analysis for you several months ago and you are thinking of selling, we need to talk again and update that price for you.  Chances are your home has gone up in value significantly, and the new data may affect your decision.

2nd Opinion

If you have consulted with another Realtor and did not like their opinion, perhaps it is time for a second opinion.  This offer is not an attempt to solicit a listing from any currently listed homeowner. We are simply saying your home may be worth more than you realize.

Our team has had great success already this year bringing several homes to market and getting Top Dollar. It is not uncommon to sell our listings above appraisal value. Buyers will pay above appraisal value even if they are getting a mortgage, and we can show you how.

If you are considering selling if the price is right, call Sande or Brett Ellis today 239-310-6500. We are experts at getting your home sold fast and for Top Dollar. Perhaps this is why the Ellis Team has been voted Best in Real Estate by News Press readers for 7 years in a row.

You can always use our online property value tool at www.SWFLhomevalues.com or search the MLS at www.LeeCounytyOnline.com. To get the timeliest information on what the market is doing and how to capitalize, give Sande or Brett a call 239-310-6500.

 

Good luck and Happy Selling!

Inverted Yield Curve Predicts US Recessions

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I think it is safe to assume nobody studies the numbers for the SW Florida real estate market like we do.  Perhaps it is because I graduated with a degree in Finance that I study the cause and effects of the market.  This week I want to share a leading indicator.  The inverted yield curve predicts upcoming recession and stock market corrections.

Inverted Yield Curve Predicts US Recessions

Because of this we are better able to spot emerging trends that can affect our customers.  We were one of the first to predict the market change back in 2005, and back then everyone said we were crazy.  While we educate our customers first, I like to let readers in some metrics I will be watching going forward.

A lot of sellers are asking us if the market is going to crash.  My answer would be which market, the US market, or the local market?  For the record, I am not saying either is going to crash as the setup for this market is nothing like it was back in 2005. If it were to crash, or even suffer subtle setbacks it would surely mean that interest rates are rising, and the economy is faltering.  We know interest rates are already rising and predicted to go higher as soon as March.

Let’s look at the economy.  There is one leading indicator among others that predicts the economy, and that is the inverted yield curve.  Technically the inverted yield curve refers to the 10-year to 2-year spread.  Right now, the spread stands at .62% It has been falling since March 2021 when it stood at 1.58% difference. You can see it is declining, but it does that.  We will be watching to see if it reaches 0.

Did you know that the inverted yield curve has accurately predicted every single recession in the United States since the Fed has been publishing data on this back in 1976?  It has, and that is a scary accurate leading indicator.

This is why the Fed’s hands may be tied.  We have handled inflation all wrong heading into 2022 and it leaves the Fed with few choices.  They need to stop borrowing money and taper the bond buybacks.  They are doing this, and this program will take trillions out of the economy by end of March.  This will lead to higher rates.  Secondly, they must raise interest rates.  Some say look for 3-6 hikes this year.  But doing so could cause the economy to stall and lead to recession.  Recession is not good especially with such high inflation.

The working men and women in America are being hit the hardest.  Wages cannot keep up with rising cost of living and people are getting further behind.  If recession hits, some could lose their jobs.

Some people say the economy is on fire.  January numbers show 467,000 jobs were created.  Were they really?  We have 10.9 million unfilled jobs in the United States, and they report 467,000 jobs were created.  Perhaps 467,000 people decided to go back to work because they had to. Be careful which headlines you read.  Track your own numbers.

We cannot say what will happen. There are too many wildcards and too many decisions to be made by others.  We can report on what we look at to evaluate.  The inverted yield curve predicts recession before it happens.  It may or may not happen, but it will be fun to know ahead of time if you look at the right tools.

We hope you enjoy reading about how we analyze the market. It may be kind of geeky, but if you are buying or selling, it pays to know a geek.

If you are thinking of selling your home, call Brett or Sande Ellis 239-310-6500. We might be geeks, but we’re easy to talk to and we know our stuff.  Or visit www.SWFLhomevalues.com for an instant and Free home valuation on your home.

Good luck and happy selling!

Open House Saturday 12-3 PM

12790 Meadow Hawk Dr $450,000

2021 Year End Sales Prices Southwest Florida

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2021 year end sales prices ended up at $360,000 median sales price and $506,033 average sales price.  The year end median sales price rose 24.6% while the average sales price rose 28.2%  The year end sales price is an average of all the sales that occurred in that year and is compared to the average the previous year.

2021 Year End Sales Prices Southwest Florida

Last week we wrote about how December median sale prices rose 27.6% over 2020.  It is always interesting to view the month price change in context with the yearly price change. It appears home prices sped up in the 4th qtr. which helped propel the yearly to the 24.6% price gain.

The question becomes, will the rapid price growth continue or will prices stall? We saw institutional investors come into the market and buy up as much inventory as they could.  They turned these properties into rentals and raised the rents. This put pressure on renters and first-time home buyers alike.

With Wall Street reaching record highs and retreating, will institutional investors keep paying top dollar for residential real estate going forward? They may, but if the economy turns in the 2nd half of 2022, they may not be willing to spend as much.  If institutional investors pause buying and normal buyers are hit with recession, the real estate market could become interesting.

Florida sits in a better position than many states, but you must wonder if homes become harder to sell up North, will the money keep flowing to Florida like it has in years past?  Even if money does continue to flow, at what rate?  Will we see 25% price gains going forward?

25% appreciation rates are unsustainable, and if you have them for too long it is a matter of time before things go back the other way. Some sellers are questioning whether now the time is to sell.  The answer is probably homeowner and situational specific. Additionally, nobody knows how much more upside is left in this market and for how long.

All we can say is it is more fun to sell right now than buy. Listing inventory is low. Sellers usually wait to sell until they see the market turn, and by then it is too late.  Have you ever heard the term “You never want to catch a falling knife”? Buyers do not like to buy when the market is falling. They prefer to wait when the all-safe is given, which means the market begins to go back up.

Some people will always need to buy, and others will always need to sell no matter what the market is doing.  It is the discretionary seller that may be holding out for one last sign the market is peaking. Stock analysts always advise not to time the market. Rarely will you get it exactly right, and only in hindsight will you know if you did.

If your home does not work well for you, or if you have better uses for your equity, now might be the time to explore your options. Do not sell just because the market is high. Have a plan. Who knows, the market may go higher in 2022. However, do not hold something that doesn’t work for you simply because the market went up in the past.  Just because it went up last year does not mean it will go up this year. If your home is not ideal for you, let’s sit down and talk about your options.

Call Sande or Brett Ellis 239-310-6500, or visit www.SWFLhomevalues.com to get an Instant and Free online valuation.

We can discuss your options and help you make better decisions for your family.  This may be a generational wealth decision for your family, so let’s get this decision right.

Good luck and Happy Buying and Selling!

 

January 2022 State of the Market Video

Home Sale Prices Rose Sharply in December

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Home sale prices rose sharply in December climbing to a median price of $402,000 and an average price of $605,784.  Median prices rose 27.6% versus December 2020 while average prices rose 32.9% The number of homes closed dropped 13.2% from December 2020 primarily because there is less inventory.

Home Sale Prices Rose Sharply in December
Home sale prices rose sharply in December 2021

Cash sales accounted for 37% of all single-family home sales in December. We did see a 3.5% rise in new listings in December, so some homeowners have decided to sell while the getting is good. There were only 5 foreclosure home sales in the county and only 1 short sale. For those so-called experts that were predicting distressed sales hitting the market in 2021, they were sadly mistaken.

Sellers Wondering When Market Will Top

Many homeowners are concerned about rising interest rates, as they should be.  Traditionally rising rates limits home sale prices. While many financial gurus have predicted 5-6 Fed rates hikes in 2022, we are not so sure. Many experts believe the Fed will have a difficult time raising rates as drastically amidst a rapidly falling stock market.  While we have seen stock market volatility, it remains to be seen how the market will fare throughout 2022.

The stock market, and the real estate market’s future may be tied to inflation and what the Fed must do to get it under control. Taming inflation through the Fed is the toughest way to go and takes the longest. Typically, there is a lag between rising rates and slowing down the economy to fight inflation.

The president has so many other tools he could use than just using the Fed, but we doubt he will go that route so here we are. Today the 10-year note stands at 1.784. Keep your eye on that number.  Some believe it could go to 2.5 or even 3. Thirty-year mortgages are pegged to this number, so the higher it goes, the higher mortgage rates will be.

Marketing Muscle Leads to Multiple Offers

Last weekend we sold 3 properties. Both homes sold over asking price.  We attracted buyers both locally and targeted buyers in high tax states. Many open house attendees were from those high tax states we advertised in.

We plan to do a future article on how to properly evaluate multiple offers and how to negotiate them. Most people believe it is as easy as picking the highest price. Agents are getting very creative in writing their contracts. Financed offers are disguised as cash in hopes of winning the bid. It takes a savvy agent with experience to sort out true facts of the buyer which are critical in selecting the best offer. It does no good to select the highest offer only to find out buyer is getting financing and does not have money to cover an appraisal deficiency.

Some agents are writing ridiculous offers only to win the bid and knock the price down later when they can’t perform.  If they can catch the seller days or weeks down the road, perhaps they will be in a position where they must take less.  While this tactic is less than honest, it pays to verify facts before accepting an offer.

Strong Listing Agents

Real estate agents can be very pushy trying to get their buyer’s offer accepted. You need a strong listing agent to stand up for you. One that knows the local customs and has relationships with local agents. Nobody is going to push our sellers around. An inexperienced agent with less confidence might buckle when the other agent is demanding answers on their time frame instead of yours or demanding to know how high they must go to win. They know this is unethical and yet we saw it happen many times this past weekend.

Rest assured, when you list with the Ellis Team at Keller Williams Realty, you are in good hands. We are not saying all agents operate this way, but a few hungry agents desperate to get a deal did this past weekend.

Please call Brett or Sande Ellis 239-310-6500 or visit www.SWFLhomevalues.com for an instant home value of your home.

Good luck and Happy Selling!

 

Market Update

New Listing-Open House Sunday 11-2

Luxury Home Sales Raise SW Florida Real Estate Prices

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Luxury home sales raise SW Florida real estate prices in 2021. In December the average sales price was $567,481 while the median sales price was $399,000. Of the 1,367 sales in December, 124 were for $1 Million plus. 263 sold for $700k +. 528 sold for $500k+.

Luxury Home Sales Raise SW Florida Real Estate Prices

Certified Luxury Agents

Brett and Sande Ellis are both certified Keller Williams Luxury sales agents. We attend our monthly luxury calls where they share information nationally.  Last year Keller Williams sold over $100 Billion dollars of luxury property. This does not include regular sales, only luxury sales. Because luxury agents refer to each other, it is important to be in this group and share information.

Last year the Ellis Team saw an uptick in luxury sales. Our team sold more homes over $1 Million dollars in 2021 than perhaps any other year, and we have some pending for 2022 as well. We believe the luxury market will hold up well. Rising interest rates are typically a headwind to the real estate market. Luxury home sale seem to be less effected by interest rate and economic swings.

Wealth is Relocating

Many of the luxury home buyers are coming to us from high-end markets across the US. While our advanced marketing and artificial intelligence shows us which markets to advertise in for these luxury buyers, perhaps just as important are the relationships we have formed with top luxury agents from across the world.

We have a Million dollar plus buyer under contract right now and the referral came from a Nicaraguan Luxury agent we met inside the luxury agent network. Florida is attracting luxury buyers at a brisk pace. Wealth is relocating from Northern states to Florida.

Tax revenues in Florida are increasing because we are attracting wealth. In November Florida collected $398.8 million more than expected. Florida expects to have about $2.6 Billion in extra revenue this year. Buyers are attracted to our state’s low taxes and quality of life. California on the other hand is talking about raising taxes again to cover a new health care proposal. Their taxes would double to fund a $163 Billion budget.

High Tax State Warning

We saw increased sales in Florida coming from California before due to high taxes and regulation. If this current proposal goes through, we expect a continued mass exodus from California. While Florida was not the primary beneficiary of fleeing California residents, we did receive more than you would think.

Florida did see many relocations from New York, New Jersey, Illinois, Pennsylvania, and other higher tax states. As those states continue to raise taxes to make up for the shortfalls in revenue, the exodus could continue.

Luxury home buyers like to work with agents who understand the luxury home market. At our convention next month, we will be spending time networking with luxury agents from around the world and cultivating those relationships as well as learning about developing trends. Luxury home buyers have different needs, and meeting those needs is critical to working with luxury home buyers.

Luxury Referrals Exploding

Through November of 2021, the Keller Williams network had 7,099 referrals totaling over $15 Billion in sales. We had 22,107 agents in our network sell a home for over $1 Million the first 11 months of 2021.

We see luxury home sales as here to stay and being at the forefront helps us position SW Florida to capture more of those sales. Buyers have choices when moving to Florida and we want to make sure SW Florida is on the map. Luxury home sales raise SW Florida real estate prices. In the coming weeks we will post an article about home much prices rose in 2021.

If you would like to talk to us about buying or selling luxury property in SW Florida or anywhere in the world, call Brett or Sande at 239-310-6500 We’ll be happy to get you connected on the right path and talk about your needs. Or email us at Brett@topagent.com or Sande@topagent.com

New Listing in South Fort Myers

Inflation Suppresses Real Estate and the Economy

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Mild inflation is a good thing because it means the economy is growing. Rapid inflation suppresses real estate and the economy and is not a good thing. The fed’s target for inflation has been around 2 percent the past several years.

Currently we are experiencing rapid inflation. Many US employees woke up to a 3% rise in wages on January 1st, and they are excited about that.  The sad thing is, prices are rising at 7% overall, and some things are much worse than that. Inflation is like a hidden tax in that consumers just lost 7% purchasing power on their money.

Everything is going up in price, from food, gas, clothing, cars, construction, etc. If you have a rise in wages, you are further behind because of inflation. Seniors will be hit the hardest because they live off social security and investments. They are not even enjoying the 3% raise workers are.

If you own a house, you might think that’s good because rising home prices will help protect you.  That may seem true right now, but it’s what comes next that might alarm you.

To combat inflation the Fed must slow things down.  There are too many dollars chasing too few goods and services in the economy. The Fed will be forced to halt stimulus. In addition, the Fed is ending bond purchases to take money supply out of the market. When that is completed in March, they will begin the process of raising interest rates.

You may have noticed rates have already risen. This is because the Fed has already begun tapering of the bond purchases. Many are now expecting 4 rate hikes this year instead of 3, and the rate hikes might need to be bigger than .25% The last time we saw inflation at 7% was back in 1982. To combat inflation the Fed raised interest rates in chunks of .5% to1%

Inflation Suppresses Real Estate and the Economy
10 Year Treasury Yield

Mortgage rates are closely tied to the 10 Year Treasury Note. As of today’s writing, the 10-year treasury note stands at 1.716%. Lenders use this as a baseline and add a percentage to determine today’s 30-year mortgage rate.

Rising interest rates temper consumer spending. If there is less stimulus and borrowing costs rise, consumers must spend less. When consumers spend less, businesses make less, and consumers have less in their pockets. Taxes may rise to pay for last year’s spending spree by the government which will serve as a double whammy to consumer pocketbooks. We will have an increased tax bill plus the hidden inflation tax leaving you with less money to spend. This is exactly what the government wants. They need to slow down the too many dollars chasing too few products and services. The economy feels like it is doing well now, but the bad medicine is coming.

There are other ways to tackle inflation. This government has not done that, and they will not use those tools, so unfortunately monetary policy will be the only tool they will use, and only reluctantly. Had they enacted the other tools or acted sooner we would not be in this mess, but now here we are.

It will not do any good to complain or worry about it. The bad medicine is coming. The fed may try to sweeten the medicine with more stimulus, but that is like giving pain pills to an addict. It is what helped cause inflation in the first place.

For every 1% rise in interest rates buyers lose 11% purchasing power. As the economy slows you eventually run out of people who can afford to pay rising prices. Back in the 80’s we had over 18% interest rates, and selling real estate was tough. Back then, home sellers had to pay thousands of dollars in buyer’s points just so buyer could get a loan that was legal. The US has usury rates which were the maximum rates allowed by law a lender could charge.  Because market rates were higher than usury rates, buyers had to pay points to buy-down the rate.  Buyers did not always have the money to buy-down the rate, so sellers had to do it to unload their property.  It was simply a cost of doing business in inflationary times.

Rising rates and a slowing economy will eventually catch up with the housing market. Using monetary policy alone is the toughest way to fight inflation and takes the longest. Rising rates are a lagging component of slowing the economy.  Monetarily, the sooner the fed tapers the balance sheet and raises the rate the sooner we will slow the economy.  Doing it slowly can lead to a recession.

Of course, if the government did this the correct way we could have avoided much of the pain that will come from doing it only monetarily. This administration caused inflation, so asking them to correct and reverse course does not seem likely.

Some people believe the economy will slow in 2nd half of 2022. Whatever happens, rates will rise, and the economy will slow for rates to be held in check.

To find out your home’s current value, go to www.SWFLhomevalues.com or call Brett or Sande Ellis 239-310-6500 We can help you sell at today’s high prices. If you are a buyer, call us at 239-489-4042. Let’s get you in before rates go up.