This past week I had the distinct honor of speaking in Fort Lauderdale with some of the brightest minds in the business.  Throughout the 3 day conference we heard from the CEO’s of Better Homes & Gardens and Coldwell Banker, the #1 real estate team in the Coldwell Banker system, HUD Secretary Julian Castro, Freddie Mac chief economist Sean Becketti, top designers, and top agents from all over the country.

2016 Housing Projections Released

2016 Housing Projections Released

Today I’m going to focus on projections made by Freddie Mac as they control a large part of the financing in the US.

Mr. Becketti projected mortgage rates to increase somewhat which will decrease home affordability.  In fact, he said home affordability can disappear on a dime when interest rates increase.

The Fed may have a difficult time raising rates as much as they’d like because unemployment is so high.  Basically, our government hasn’t been completely honest with us.  Unemployment is about as high now as it ever was.  Statistically the government is stating lower numbers around 5% but when you factor in labor participation they’re around 10%.

In other words, our economy isn’t as strong as some would have you believe.  When rates rise, it will pinch home buyers.  When buyers get pinched, large price gains begin to abate.  We’ve seen a nice run-up in prices the past several years, and we needed to.  The question is how long will that last?

Much of the country is back to previous peaks in prices while Florida is about 24% below the peak.  This feels about right here in SW Florida too.  Economists are projecting higher prices for us this next year, but a lowering in the growth projections.  We may not see 15% price gains going forward, which in my opinions is a good thing.  That is not sustainable and a recipe for disaster were it to continue too long.  It was good to catch up as we were hit too hard, but now that we’re getting closer to a normal market, normal growth it perfect.

Many sellers are trying to time the market and get out at the top.  If this thing goes swimmingly, there will be no top.  There would be normal positive growth for years to come.  We see large ups and downs when the market gets out of balance or there are external economic factors placing undue pressure on the housing market.

We know rising rates are coming.  This will inhibit buyer’s purchasing power.  We don’t know who will become president or how the economy will react, so in a vacuum we’d say our market should do fairly well with rising but stabilizing prices and growing inventory levels as sellers wouldn’t be able to name their price like today.

To all sellers I would say, you’re in the driver’s seat today.  Rev the motor and smell that crisp clean air rushing by.  It may not last forever.  We will still have a good market, you just may have to switch over to a safer, slower lane.  More sellers may place their home on the market as competition to yours.  Add more housing inventory to rising rates and you can see more sales but less big price jumps on the horizon.  This isn’t a bad thing; in fact it would be considered a great normal market.  It just may not fit current sellers’ expectations, which are normally higher than buyers by human nature.  The sellers that recognize and plan for the future have the greatest chance of accomplishing their goals.  Unrealistic sellers struggle in good times and bad.

If you’re going to buy or sell, it pays to be realistic.  There are costs of not paying attention.  Give our office a call and we’ll be glad to guide you. 239-489-4042  You can search the MLS for Free at

Good luck and Happy House Hunting!

Check out last weekend’s open house on Instagram

1917 SE 36th St Cape Coral, FL

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.