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 like wynnclub. 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.

A few years ago we reported that listing agents were listing homes at ridiculously low prices to create buying interest simply because the home was being sold as a short sale.  This is a bad practice for several reasons, and yet we’re seeing it continue today. 

Misleading Short Sales Distort Actual Values
Misleading Values in SW Florida Real Estate

This past week I noticed two different homes, each located in a different subdivision, listed at far below actual values.  This can cause many problems we’ll outline now. 

The bank is not likely to accept a short sale on either of these homes.  The bank will learn the actual value by ordering a BPO (Broker Price Opinion) or a bank appraisal.  Once they determine the home is worth much more, typically they just kill the sale.  Many owners and agents mistakenly believe that banks typically counter, but this isn’t normally true, especially when the offer is far below value.  There also can be more than one lien holder involved, and both look into value, and either one can kill the sale. 

If the banks were to accept such a deal, it creates a potential tax event or larger deficiency judgment against the seller.  The bank could also ask for a promissory note against the seller, and that note would be significantly larger due to the under valued sale. 

Even though the deal is not likely to be accepted, it also hurts the market in two other ways.  Buyers mistakenly believe that artificial number is the new market, because they saw a home for sale for X amount of dollars, even though it has no chance of selling.  Some buyers act quickly to tie it up, then wait months to find out the answer is No.  All the while, some good bargains have come and passed and they’ve missed out.  They may not have been the Steal they thought they were getting, but they were good bargains and suited their needs. 

In addition to the misperception buyers have, banks must also make decisions on how to price foreclosure inventory.  They do look at sold comparables, but they also look at what is on the market.  If they’re not careful, they’ll notice a particularly low priced sale and price theirs too low, which has a domino effect on future foreclosure properties, and it snowballs from there. 

The artificially low listing can influence future sales if people aren’t paying attention.  The foreclosure process is far from perfect, and people from other states typically make decisions about local property, so there is no need to give them false ammunition for fear they may shoot themselves in the foot with it.  When they do this, it hurts the entire market. 

The market will go up and down as conditions dictate, but it need not move in a direction due to false hopes and misinformation.  Sellers need to do a better job interviewing agents, and agents need to insure they know the local market, understand the short sale process, offer advice commensurate with what market conditions dictate.  This can be challenging I know in a changing market, but we see False Listings everyday and it doesn’t help anyone. 

The seller is let down when the bank rejects and it goes to foreclosure, the bank wastes time investigating a False Listing, and the buyer mistakenly believes they’ll end up the proud owner of a steal; all the while great bargains pass them by in the process.  And the market is let down by false and misleading listings that really shouldn’t be on the market.

If you missed last week’s Future of Real Estate Show, you can tune in now.  We interview Lee County Sheriff Mike Scott and ask him tough questions about Florida’s and Arizona’s immigration law and how that affect what he does.  Additionally we ask him his views on controversial red light cameras, the upcoming tight budget process, school resource officers, the jail, traffic stops, and much more.

This week’s guest will be Lee County Sheriff Mike Scott.

We will ask the sheriff for a crime update in SW Florida.  We’ll also ask how the economy and foreclosures are affecting crime, and his efforts to crack down on air conditioner and appliance thefts in Lee County’s vacant homes.  We’ll also ask what the sheriff”s office is doing to crakdown on grow houses and drugs,  A lot of people ask us about trafiic enforcement, so we’ll ask why there seems to be a stepped up effort to write speeding tickets and we’ll ask where that money goes.

We’ll definitely ask how the property taxes and the budget crisis is affecting his department, as well as gas prices and salaries.  This should be a power packed hour filled with lots of questions and hopefully lots of answers, so tune in Saturday at 11:00AM on WINK AM 1240 and 1270 in Naples live, or you can listen to the show on the Internet starting next Monday after it airs.  SImply go to  our Radio Show page and click on Listen Online.