Tag Archives: housing affordability in SW Florida

Housing Affordability in SW Florida Hits All-Time High

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People are surprised to learn fixed interest rates are at or below 4% for 30 yr mortgages.  Because of this there has been a refinance boom which should throw some disposable income back into the economy.  It did the last time we had a refinance boom.  Not everyone can take advantage of this bonanza though as some are upside down on their mortgage.  Owners might be happy to know there is a government program that allows homeowners to refinance even if their first mortgage is up to 120% of current value, and if you have a second mortgage or equity line it can be subordinated to the 1st.  All good news if your rate is 6% or higher.  It’s possible good news even if your rate is in the 5%+ range depending on the home value.  Check with your lender for details.

Housing Affordability in SW Florida
Fort Myers Cape Coral Year End Sales Prices

Getting back to the main subject of this article, buyers today can now afford more home than ever before.  The reason is simple.  A home’s cost has several elements, and the two primary elements are sales price and financing costs.  As you can see from the year end sales prices our median home values have dropped dramatically and at the end of 2010 year end average prices were approximately even with 1997 prices.

Everyone rushed to buy in 2005 when in fact they should be rushing today.  Prices have moved upward a bit and when year end prices are posted for 2011 they will show an upward trend.  Bottom line is they’re still a far cry from the peak in 2005.

Income Needed To Qualify for $200,000 Loan

Look at the average 30 yr interest rate chart.  Back in October 2006 rates were approximately 6.36%. Today rates are around 4%. That’s a difference of about 2.36%. A $200,000 mortgage this year would be roughly $300 cheaper than it was 5 years ago.  This fact alone makes housing much more affordable.  Combining the lowest rates we’ve seen on record with deep price reductions in our market, it’s no wonder why this is the best time in years to purchase a property. Much thanks to Keith Cloak from Summit Home Mortgage for pointing out these historical rates to me.

The nation’s economy has been stalled for years.  Locally our market was hit first, and hard.  Because of that our market may be poised to recover sooner.  Tourism may get a shot in the arm if the proposed $1 Billion casino is approved at the Forum.  This would put Florida on the map for additional tourism and the all important convention and trade show business.  We would have our gorgeous Sanibel and Fort Myers beaches, year round sunshine, and now convention business attracting tourism to our area.

I spoke to Lee County sheriff Mike Scott the other day about his thoughts on the casino.  Those against bringing gambling to Florida argue it brings crime and detracts from the family atmosphere Florida is known for. Sheriff Scott doesn’t believe a casino would bring crime from a law enforcement standpoint.  Judging from my visits to Las Vegas or a seminar I attended in AZ at a casino on an Indian reservation, I don’t necessarily buy into increased crime either.

I do see this as an opportunity to add $1 Billion in construction at a time when our area desperately needs it.  I also realize we have gambling in Florida at Indian reservations, so I wonder why the state can’t capture some of that revenue too.  Lord knows our state needs the revenue as well.  Primarily I think about what increased tourism, conventions, trade shows, and visitors who might extend their stay a few days because Florida has so much more to offer than Las Vegas.  Vegas has gambling, but we have beaches, Disney, water sports, nature, and so much more.  I can envision vacationers choosing to come here instead of Vegas or Gulf Port MS, or even places like Branson MO.

With housing affordability in SW Florida at all time highs, home prices on the rise which will settle people who may be afraid if now is the time to buy, and a possible economic jolt to our economy, it sure is exciting to live in SW Florida.

Check out what Fort Myers Beach and Sanibel Island have to offer you.

SW Florida Real Estate Buying Strategy

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People always ask each year what Season will bring in terms of home buying activity in SW Florida.  The past few years Season has been slow compared to historical standards, with good reason.  The past few years buyers have been fearful prices could slip lower, and the economy seemed to be showing signs of slowing down and consumer confidence was eroding.  Some have even argued we’ve been in recession or at least heading toward recession.

So why would 2009 Season be any different, as the economy doesn’t look any better than it has the past several years?  There are many reasons this year could be different.

1.  Prices are down.  Not just a little down, but way down.  They’re down so far that builders wouldn’t dare build right now because sales prices are much lower than replacement cost.  This phenomenon can only last so long, and once inventory levels start coming down, prices will go back up.  We’ve witnessed a large number of foreclosures work their way through the system and come to the market.  As soon as they hit the market, they’re sold because they’re affordable.  Affordability is back in this market, and that is new.

2. Retirees aren’t getting younger.  A Retiree has been able to sit on the sidelines and wait for prices to come down, and they have come down significantly.  The demographics for Florida are still fantastic as Baby Boomers haven’t even peaked yet.  Retirees have wisely waited, but they can’t wait forever.  A retiree only has so many good years and opportunities left, and if they wait too long they’ll miss out on living their dream in Sunny SW Florida forever, not because the market won’t be good, but because they only have so many good years left.  Retirees are so much healthier when they move to the sunshine because their outlook improves, and they can be physically active 365 days per year due to the weather.  They also enjoy conversations with other people in the neighborhood close to their same age and with similar interests.  This isn’t always the case in rural areas up North with bad weather.

3. It’s always wise to Buy when everyone else is selling and Sell when everyone else is buying.  Look back to 2005 and you’ll recognize many were buying.  Those that sold did very well.  Now that prices are abnormally low and below replacement costs, those that buy now when banks and sellers are selling at bargain prices will fare much better than those that purchased only 3 short years ago.

4. Interest Rates have remained low.  Because of the global crisis, the World Bank has coordinated interest rates cuts among many nations, so the US was free to cut again without fear of the dollar being de-valued if we were the only one’s cutting rates.

5.  Inflation may come back long term.  If so, buying assets today at low prices and financing them with low rates allows people to pay back a rapidly appreciating asset due to inflation at today’s low prices and with cheap money.  It’s the same reason people have bought gold, only a house is something you can live in, Vs.  gold or a stock.

6. When real estate was down, people flocked to stocks.  People are running from stocks right now, and because prices are so low in real estate, you could see a charge back into real estate in the next year or so.

The bottom line is nobody knows for sure the future.  All we do know is that our streets are getting busier with our friends from the North visiting, and people are watching to see if this is the year many of these snowbirds start opening up their wallets now that Florida is on sale.  Everyone loves a good sale, and we’re having a blowout sale as we speak.  The next few months could get interesting.

Click here to Search the entire MLS for your bargain property today.  Cape Coral and Lehigh Acres has had a number of bank foreclosures.  Fort Myers has had a few, but not near as many, but there are bargains galore.  Sales in Lee County Flroida have been up tremendously versus other areas of the state because our prices in SW Florida real estate have come down much faster than other areas.  The areas throughout the country seeing the greatest sales gains are those where the sellers have reacted first and brought value back into the market.  While it’s been painful, SW Florida home sellers have reacted.