SW Florida real estate has on average bottomed out. That’s not to say there won’t be tough times in isolated areas, but overall prices have steadied for the past three months and buyer activity has really picked up in the last two weeks.
Buyers will look back and say they should have bought in April or May of 2006 as inventory levels were excellent for the buyers and mortgage rates were at their lowest. Prices have also come down around $40,000-50,000 since their highs in some market price ranges.
We’ve had pent-up demand from buyers who have been afraid to buy because they thought if they just waited a month or two, prices would be lower in the future, and they would have been correct up until now. We’ve seen prices level out. Buyers need re-assurance that it’s OK to buy, and they haven’t had that. This changed about two weeks ago as buyers started buying again. When the word gets out to other buyers, they’ll all turn on, like fire ants. Fire ants seem to bite all at once. They’re there, everybody knows they’re there, and when the decide to bite everybody will know they’re biting. The same is true with buyers of real estate.
Fort Myers real estate is rebounding nicely, followed by Cape Coral and Naples. Naples probably had the furthest to fall as it was the most ahead of itself. Cape Coral still has loads of inventory, and that will take time to work itself through.
Thye wild card is rising interest rates and rising insurance costs. If insurance costs goes up $100/mo it reduces the buying power of a buyer by about $16,000. Rising interest rates, insurance, and property taxes all work the same way, and could limit the price increases we’ll see down the road.
The good news is overall the market has stabilized and is near bottom. Expect the market to level where it is while buyers eat up inventory, and eventually rise about 5% per year once inventory levels have come down.
Home appreciation could have been in the 7-9% range and may be limited by rising home ownership costs described above. It’s possible the market will just stay level the rest of the year and not appreciate too much as we work through this inventory. Buyers should buy now though because rates are expected to rise throughout the year, and waiting may increase the payments.
Just a quarter percent rise in rates costs the buyer several thousands of dolalrs in buying power. For these reasons, this is why I say that buyers will look back on May 2006 as the best time to have bought real estate in SW Florida