Brett Ellis
Realtor
RE/MAX Realty Group
Host of "The Future of
Real Estate" radio show
TopAgent.com
Economics Drive Real Estate Markets Too
In a typical town in anywhere USA, local, state, and national economics dictate real estate demand and prices. Sometimes destination locales and tourist areas forget this fact as some places buck national trends and can do well in a recession and poorly in boom times.
One could argue it all comes down to economics, and one could argue Florida will always have sunshine and retirees, so we're immune to such things. I agree that Florida has a lot to offer no matter the economic situation, and I also agree that economics affects us as well.
For instance, rentals are doing very well as many people have been foreclosed upon. Foreclosures are synonymous with bad economic times, but it goes deeper than that. People with bad credit are actually helping the rental market, which in turn makes the apartment building worth more. REIT's (Real Estate Investment Trusts) and insurance companies tend to buy up apartment buildings, and their value is derived from the income they generate, so as rents go up, so do values. This can also affect single family homes, especially in the low to mid end. Upper end homes never rented well enough to support their value, so their value is determined by something else, like appeal, and future price appreciation.
This takes us to national economic factors. As Realtors in Florida, we all have access to economic data, and it's important to look at how this data potentially affects real estate values here. If nobody had a job, it would surely impact housing. All real estate is local, and so is economic data. Today we are looking at national data, because this data affects real estate economies all over the US. Other markets affect us here too. If a snowbird can't sell their home up North, there's a chance they can't or won't purchase that 2nd home or retirement home in Florida. If their market is in the dumps, or their 401k, they may be less inclined to invest down here, so even though we are insulated from certain events, we can still be affected.
Unemployment went down nationwide, but so did payrolls. Many people gave up looking for a job and are not included in the unemployment data. Of course, we also have the under-employed. These are people who have given up on finding a job today they are qualified for and have alternatively taken a lesser job just to scrape by and pay some bills until jobs come back.
Average hourly earnings were down. This can be because less workers are full time and more are part-time. It could also be because there is pricing pressure and employers have had to cut salaries, or replace higher paying workers with less experienced and lesser paid employees.
Many employers are cutting back on bonuses, benefits, and salaries by furloughing employees in an attempt from laying more off, or shipping jobs overseas. We are in a global economy, and we must compete, or business will cease to exist here in the US.
Construction spending is down, as is the average workweek. These are not signs of a revved up economy and definitely a trend we'd like to see reversed. Keep in mind, small changes in numbers equate to big dollars, so it is important we start growing this economy in a sustainable way. All these parts work together, just like real estate markets do. We do not live in an economic or real estate bubble. We are affected, so it’s important we pay attention to what's going on.
We just finished season, and by all accounts it was very successful. Many people from up North bought. Many will come back and buy in the summer or by next year. People loved their visit here. We're entering the summer months, and an election year. This is the time of year economics matter. Keep your eye on the news.
Together we'll be watching to see if Lee, Collier, and Charlotte Counties can lure some businesses to SW Florida. We'll be looking at Florida employment figures, local construction, and housing numbers. We'll also be looking at the national scene. We really need about 400,000 new jobs per month to grow the economy. Anything less than that is dragging our economy, and you can see that in March losing jobs did not help us gain 400,000.
Economic reports are only a point in time. They go up and unfortunately down. We're focusing on trends and not blips. We're praying for positive trends. I think this nation, and particularly SW Florida deserves some good news going forward.
Fenway South a Big Hit With Baseball Fans
You can't turn on the TV without getting daily updates from Fort Myers on the state of the Major League baseball teams. TV networks love to use the new JetBlue Park, affectionately nicknamed Fenway South as the backdrop. It's named Fenway South because the field is designed to look like Fenway Park in Boston. There is the green monster in left field baseball fans from all over will remember. The designers took note to match the exact dimensions of Fenway Park when building this new stadium.
Some Lee County residents weren't happy the county invested $80 million for a stadium that is in use one month of the year when we have such other pressing needs, and there is an argument for that. The stadium was paid for by the bed tax, which is a tourist and development tax. I think it's fair to say this new stadium has caught the eye of baseball enthusiasts everywhere, and hopefully this translates into tourism dollars coming back to the area.
It's hard to put a price tag on the free publicity our area is getting. On a recent trip to a night game, I noticed the satellite trucks beaming the game up to folks in the New England area. Combine that with ESPN broadcasting games and the daily baseball newscasts from Fort Myers, and you begin to realize this free publicity is worth something.
How many people from New England came this year or will in future years? That's hard to tell. We can say that the real estate market got hot back in October, a full 3-4 months earlier this year. We noticed many northerners buying, and that trend continues to this day. I think people are also intrigued that we have two major league teams here, so maybe there's something special and worth looking into in SW Florida.
Now there's talk a 3rd team, the Washington Nationals may be interested in relocating here and taking over the old Red Sox stadium. This would come with a price tag as the Nationals would want some of the very same things the Red Sox asked for, like practice fields closer to the stadium. I'm not sure how much more money Lee County has to spend on baseball, especially in light of the fact the Twins are now asking for renovations to their stadium to the tune of about $60 million. They won't get anywhere near that, but they've asked. Their contract says the stadium must be looked at every 5 years, and must be kept up with a certain percentage of the top spring training stadiums.
So the Red Sox stadium not only cost Lee County $80 million, but potentially lots more with upgrades to Hammond Stadium. Politics aside, this is a time to revel in the fact that this new stadium has put SW Florida on the map, in a positive light, and after 6 years of making news for a housing crash, it's nice to make the news for something good. Our housing market is getting much better by the way. All this leads to economic recovery and dollars being spent here locally.
While locals hate the traffic, keep in mind season only lasts a few more weeks, and we certainly enjoy the money spent all year long. I'd say the 1st year of the new stadium was a success, and let's hope it inspires more people to come here next year. All the visitors bring money to the area, which spurs local jobs, and local jobs lead to economic recovery. It's all related, and each feeds off the other. We've spent the money for the stadium. That argument is over. Let's reap the benefits, enjoy some popcorn, peanuts, and Cracker Jacks, and cherish the sound of "Play Ball".
Buyers and sellers have decided to Play Ball too. Houses are flying off the market. Let's root, root, root for the home team and for our good fortune to continue.
Happy St Patrick's Day to all, and may the luck of the Irish be with you.
Follow-Up on SW Florida Military Veterans Article
Last week's article drew much attention from readers all over the country. The article's intent was to create interest and educate the public about military veterans' issues, and from the feedback it worked. If you missed last week's article, it can be found on our Blog at blog.topagent.com
We have limited space, so it's impossible to clarify every detail, but there are a few points worth mentioning. Last week we said "People don't realize that if a veteran or active duty military is foreclosed upon, or does a short sale, they lose their military benefits forever. That's a pretty steep price to pay. Remember, we, the United States, are the ones moving them around. They don't have a say, and yet they suffer all the consequences."
We should clarify this. If a veteran has a VA loan and has a short sale or foreclosure on that loan, they will lose their ability to get another VA loan. If they are foreclosed or do a short sale on a conventional loan this will not affect their certificate of eligibility. They are still entitled to their other military benefits.
This week we'll touch on some new items as they pertain to real estate. Did you know that per the Servicemembers Civil Relief Act (SCRA) active duty military and their families are protected from eviction if they lease a house or apartment and cannot make rent. Service members also have the right to terminate a housing lease when they receive Permanent Change of Station orders or when they are deployed to a new location for 90 days or more.
There is also protection against default judgments against anyone in the military. This is especially important in SW Florida. Often I am asked to attend evictions and lockout proceedings against former owners or tenants on behalf of a bank foreclosing on the property. Before a court can enter a default judgment against a military member for not responding to a lawsuit or appearing at trial, the plaintiff who is suing the Service member must provide the court with an affidavit stating the defendant is not in military service.
Imagine someone working here in SW Florida and being called up to serve and being deployed overseas to Afghanistan or anywhere else the military needs them. They receive regular military pay during that time, not the regular pay they might be accustomed to. Just imagine if they came home and the landlord or bank evicted them while they were gone. How would you feel if this happened to you? For the privilege of serving our country, many service members returned home only to find their houses were foreclosed upon and sold to someone else. That's quite a kick in the pants.
The SCRA creates rights for our Service members, like the right to terminate a lease if they are called, protection against foreclosure, health insurance protection, motor vehicle lease protection, and so on. There are many details that cannot be explained in a short article like this. I would highly recommend Service members contact their local AFLA office or visit legalassistance.law.af.mil A quick and easy way to read up on this act is go to www.Military.com and type SCRA in the search box. From there you'll be able to read up on the entire act. This information is important to Service members, landlords, real estate agents, and the public in general.
I'd also highly recommend agents and lenders take the Military Residential Specialist course. There is so much more information you'll learn that will not only help your business, but will also help educate the public and Service members as to options in dealing with military and their benefits. If you'd like more information on this course, feel free to contact me at Brett@TopAgent.com
A few weeks ago I met with several military leaders including Brigadier General Earl Jakes pictured above, Jean Shine, the civilian assistant to the Secretary of the Army from Texas, and others as we talked about the course and ways to improve the education of agents and loan officers. We hope industry has a better understanding of protecting and meeting Service members needs, because I can assure you, our military is protecting and meeting our needs.
SW Florida a Hot Bed for Military Veterans
Recently I had the opportunity to attend the Military Residential Specialist Program and I learned some very interesting things all agents should know in learning how to better assist our veterans.
I must admit, even though several members of our family served in the military, I didn't have a full understanding of the needs of veterans because I personally didn't lead that life. This class has helped shed a light on some of those things.
I'll share a few facts many people may not know. When someone is active duty military, they tend to get moved around quite a bit. Each member must find housing. Some rent, some buy. They get orders for periods of time, but you can just imagine how up in the air their life is. Many have a family behind they care about deeply, so housing is important.
Because they never really know where they'll be for great periods of time, making housing decisions can be difficult. If they buy today, they may need to sell in 2 years. What if the market declines due to base cutbacks or other economic factors in a community? We don't pay them a lot for their service, and they may not be able to afford the loss. Many around here in SW Florida understand what it's like to be stuck with a property that isn't worth what you paid or what you owe.
People don't realize that if a veteran or active duty military is foreclosed upon, or does a short sale, they lose their military benefits forever. That's a pretty steep price to pay. Remember, we, the United States, are the ones moving them around. They don't have a say, and yet they suffer all the consequences.
Here's another scenario. Let's say a doctor, lawyer, pharmacist; anybody really is now in the Reserves. A Reservist can get called up for duty, just like many were for the Iraq wars. When you get called up you leave behind the pay you were making and only get the pay the military pays you. People tend to live a lifestyle depending on their job, so if you're a doctor making a certain amount, and all of a sudden you get called up your pay may be cut 50% or more. Your bills don't go down 50%, they remain the same.
People need to understand the burden placed upon our military. Not only do the serve our country, but they risk their life, and do so many times for less money than they could make back home. Unemployment is 7% higher for veterans returning home than it is for the general population, and we all know unemployment is too high anyway.
The largest employer of veterans is the postal service. What is the number one thing our government is trying to cut right now? You got it. In addition to cutting the military, we're cutting the postal service. Somehow we've got to do a better job protecting our vets.
As a real estate professional, we need to encourage a vet to use their benefits. Several agents shudder when they see a buyer come in with an offer with VA financing. Actually, VA loans are easy to do if you know what you're doing. An offer with a VA loan shouldn't be looked down upon; it should be treated equally with other financed offers. I understand cash is king and the seller only cares about their own sale, I just think we can portray these offers in a more positive light.
SW Florida has in excess of 250,000 veterans living among us. Veterans are 9.5% of Florida's population. They served our country well. The freedoms we have today can be directly linked to their efforts. Some of our military were spit upon when they returned. The public has turned off on them in the past, and will in the future.
They may not be a cash buyer. They have certain needs other buyers may not have. Let's at least try to give them a level playing ground and an opportunity to enjoy the good life SW Florida has to offer. They've earned it.
If you'd like more information on the Military Specialist Certification, give me a call. I'd love to share with you how you can learn to better serve this segment. Call Brett Ellis 239-489-4042 or email Brett@TopAgent.com
2012 State of the Market Report
The past two weeks we've written Top Tips of Selling Your Home and Buying a Home. In case you missed those articles they can be found on our Blog at blog.topagent.com This week we thought we'd focus on where the market is headed as so many have asked for an update on the market.
Prices in 2011 were up all year since February and never looked back. Most buyers realized the bottom of our market was back in 2009 at the height of the foreclosure crisis. Inventory has fallen dramatically although it has risen again which is a surprise to many.
Attached is the pending sales chart. As you can see, pending sales are up 15.44% over the previous month. Looking back, February always sees a jump in pending sales as the Northern Snowbirds are here in mass every year when our weather is beautiful and it's cold up North. This year, we started noticing seasonal visitors back in October which was an early start.
While the pending sales chart doesn't show it, people have been here looking for months. We believe they realize Florida is still relatively inexpensive compared to 2005 levels, but prices are rising and nobody wants to miss out on a good deal. Unfortunately, we have less inventory to sell, so not all are leaving with a deal. In fact, several commented they wished they would have bought last year as prices are definitely higher and selection is definitely less.
We still get calls from buyers looking for $25,000 properties 3 blocks from the beach. We're not quite sure which website they're looking at. The only thing we can guess is maybe it's a 2008 or 2009 version that hasn't been updated. Maybe they're reading old headlines, or headlines about falling prices up North. Whatever the case, they're convinced our agents are holding out on them and they move on to call other agents who they think will have those old deals for them.
The reality is the market moved on. The market rarely stays in one place, it is always in flux. Look at the Lee County Total Distressed Sales Chart. Last month only 44.84% of all single family home sales in Lee County were distressed compared to 71.86% back in June 2009. We have seen a rise in traditional sales combined with a fall in foreclosures available to sell which has contributed to higher prices.
We've actually seen more homes being built because of higher price points, declining inventory, and builders have been able to cut costs from suppliers and workers looking for work. While building activity has increased, it's still a far cry from where it was back in the prime of the market.
We've got dozens more charts we could share but only so many would fit in a one page article. Suffice it to say that SW Florida is looking up a bit in housing. Our economy seems to be doing mildly better as well, which we ultimately need to fuel and sustain any housing run-up.
We know more foreclosures are on the way, but nothing like what we saw back in 2009. We have a slight backlog due to legal slowdowns because of the robo-signing issue. The market is easily absorbing all new foreclosures we bring to market and in fact has a thirst for more. We don't believe this thirst will be quenched. We believe this year will produce a good season and hopefully things will continue on.
This is an election year, and the unknowns are always tax laws, gas prices, instability overseas, and the future of our economy. Absent the wild cards, our market looks in good shape and is healing in a positive way. This healing may be slow for some sellers, and fast for some of those buyers looking at outdated headlines or websites, however it is occurring at a healthy and sustainable pace. It is a process that had to occur, and thank God it is occurring.
Whether you're buying or selling, it pays to get the facts. A mistake will cost you. Each neighborhood can be different, so be careful about relying on countywide information. It may or may not apply to the home you're considering buying or selling.
Good luck and happy house hunting.
Top 10 Tips for Buying a Home in Today's Market
Last week's tips on selling a home was such a hit we decided to write an article on home buying tips to help buyers.
Shop in Your Price Range- One of the more frustrating things a buyer can do is shop in the wrong price range. If you shop in a higher range than you can afford, the homes in your range won't seem as acceptable and will feel like a let-down
Get Pre-Qualified- You'll be competing with other buyers for the best homes on the market. By being pre-qualified you appear more like a cash buyer than someone who has not even spoken with the bank yet.
Home Inspection - We recommend home inspections as the inspector may point out items that are covered under the purchase contract, as well as helpful hints on maintaining your home. Home inspectors are very helpful in educating you on what you're buying and best maintenance practices going forward.
Survey - Banks don't always require one and title companies don't always offer insurance in certain cases when a survey wasn't done. It's best to provide that survey to the title company and let them insure the property with the full survey.
Competition With Other Buyers - Remember, the best properties go quickly in any market. Rarely do we hear a buyer say they want to look at the worst homes on the market. Because you'll be competing with other buyers for the best properties, you'll want to put your best foot forward with your offer. As a buyer, you don't always hold all the cards. For instance, you may be a finance buyer competing against cash buyers. The seller may wonder if your bank will appraise the home at the contract price. They may wonder if your bank will close on time, if at all.
Escrow Deposit - Putting a larger escrow deposit down shows you're serious. This is a helpful technique when competing against other buyers. It usually amazes a seller when a cash buyer won't put much in escrow. If they won't put it in escrow, will they ever come through at closing?
Price - Research the market and determine if the property is priced correctly. If it is, offer accordingly or you could wake up to see a Sold sign on the home and the seller didn't take your offer.'Always ask yourself, "If I wake up tomorrow and see the property is sold to someone else, how will I feel?".
Terms- Remember if you're asking a seller to pay buyer closing costs, it essentially reduces your offer. Another buyer may offer the same amount as you without asking seller to pay closing costs and you'll lose out. Many buyers increase their offer to cover seller paying buyers closing costs, if the property is priced correctly to begin with.
Out Clauses - Only use out clauses if you need to, and remember they do weaken your offer. If a buyer can cancel a contract the seller will wonder why they should take the property off the market for you versus waiting for a more serious buyer.
Title - Be sure to look at title policy, especially if it is a foreclosure. Ask the title company what policy covers and what it does not. Look at the title exceptions page carefully. Consider hiring a real estate attorney to review your policy if you have any questions whatsoever. Eliminating mistakes now can save you lots of time and money later.
There is no substitute for working with a good Realtor. Full time Realtors not only know the area, they also assist you with many of the pitfalls you may encounter. If you need assistance, feel free to call our office at 239-489-4042 and ask for a buyer specialist.
Top 10 Tips on Selling Your Home in Today's Market
Yesterday another agent called me wondering why his 3 listings in Lehigh Acres weren't selling. After offering some tips to help out, I thought an article on the subject might help others as well.
Curb Appeal - Buyers judge the quality of the home by what they can see. You will never get to the home inspection stage if the buyer never offers. Look at your yard, landscaping, outside paint, roof, gutters, etc. If the outside looks bad, buyers judge the inside probably looks just as bad and they don’t schedule appointments to view.
De-Clutter Inside - If a room has too many things in it, it make the room look smaller. Additionally, buyers have a harder time envisioning their personals in your home when all they see is stuff. Take out as much as you can.
Be sure to remove Personal Photos - Buyers always stop and look at the pictures on the wall, and if there are too many the home feels like it's someone else's and they have a hard time picturing themselves in your home. Knick knacks and photos subconsciously turn off buyers. A few are OK, but too many can be a turn-off.
If a Buyer Can Smell It, We Can't Sell It - Cigarette odor and pet odors are the #1 turn offs for buyers today. We would suggest smoking outside and removing pets as best you can during the sales process, and hiring someone to remove any smells. Some breeds emit more odor than others.
Remove Pets For Showings - Buyers love pets, and the problem is many times they walk away remembering how cute your pet was, but they remember next to nothing about your home. Your home is in competition with other homes, and you want your home to be remembered and stand out against all others. You don't want your buyer's time distracted by your pet. Buyers will not buy your home because you have an adorable pet, but they may buy another if they don't remember your home.
Be Gone For Showings-We have a saying that every word a seller says to a buyer costs the seller $1,000. Sellers think they know they're home better than anybody and therefore they're the most qualified to sell it. Buyers typically feel uncomfortable talking with the seller, and usually give feedback the seller wants to hear. The best and true feedback is a good offer, not meaningless words to appease the seller. Some buyers like talking to sellers because they glean information they'll use against the seller in negotiations. Best advice is to be gone for showings.
Price-Overpricing a home is a sure fire way to make it sit. After your home is on the market awhile, buyers begin to wonder what's wrong with it. After awhile fear kicks in and buyers don't want to offer too much on a home nobody else wants to buy either. While the market is Hot today, it is a price sensitive market. Overpricing is a good way to ward off potential offers. Many buyers don't want to insult the seller, so they just offer on another home that is priced where it should be. Sellers usually think the buyer can always make an offer, and of course nobody ever offers full price anyway so we'll build in some negotiating room. This is a myth and statistically it's proven that seller's that overprice end up taking less later than sellers who price correctly upfront. Many homes in the market today sell at or near full price, and some sell for over asking price.
Marketing- Times have changed. Some agents employ the 3 P's. Put a sign up in front yard, place it in MLS, and pray someone else sells it. Successful agents today rely on newspaper advertising, radio, TV, social media like Twitter, Linked In, Facebook Fan pages, YouTube, virtual tours, as well as mobile technology and much more. Ask to see how your home will be marketed and which national sites it will be syndicated to when interviewing agents.
If You Owe More Than Home is Worth, Select a CDPE-44% of homeowners in Florida are underwater on their mortgages. It takes a certain expertise to work with the banks on short sales. Buyers and sellers need lots of education attempting to close a short sale. A Certified Distressed Property Expert can help.
Select the Right Offer-Don't just take any offer. Many times it pays to wait for the right one. Why waste time with a buyer that doesn't qualify, or the loan program they're pre-qualified for will present issues for your home or association. Knowledge is power and can save you from many bad transactions. If you don't have time to do it right the first time, when in the world will you find the time to do it over?
Be sure to check out our 2012 State of the Market Report at Youtube.com/brettellisfl
The Bear Went Over the Mountain
To see what he could see. We've all heard this particular children's song and it's probably playing in your head right now. I thought this headline was appropriate because our year end sales numbers graph looks like home prices went up the side of a mountain through 2005 then fell off a cliff until 2009 before rebounding the past few years.
Official sales numbers were just released this past week for the state of Florida and the SW Florida real estate market. Year end sale prices were up 14.67% from $93,400 in 2010 to $107,100 in 2011 The year end graph isn't where prices finished the year but rather an average of what they were all year long. For instance, November median single family home prices in Lee County was $106,300 and December's was $123,400, a whopping 16.09% jump over the previous month and a 36.05% jump over year ago December figures.
2011 was the 3rd best year on record for numbers of sales. Inventory declined throughout the first 3 quarters of 2011 or we very well could have sold many more. To put things in perspective, 2011 outsold 2005 by almost 2,000 homes. Everyone speaks about 2005 being the height of the market, but it is the 4th best year on record in terms of units sold. 2009, 2010, 2011 respectively were 1-3.
While prices rise it's quite natural volume will go down. It's simple supply and demand. If we had more inventory than our market could handle, our prices would be lower and not rising. It's always difficult to predict a top or bottom, but hindsight always provides crystal clear clarity. The reason is you can have a false bottom whereby prices bounce back for a few months only to retreat again later. On Wall Street it's termed a dead cat bounce when the market does that.
With several years in the books it appears we can safely say the market bottomed in 2009. If the market would go lower in the future it would be a new market, not a continuing drop. We don't see the market going lower year over year going forward; although monthly price swings are not out of the question as closings are dependant on what inventory there is and what's actually closing in a given month.
We have no problem listing and selling properties. The skill is really getting them closed today. The regulatory and operating environment has never been so tricky as there are so many new regulations pertaining to new mortgages. If the lenders initial disclosure is off by a little bit, it requires by law to re-disclose everything and a new waiting period goes into effect.
Combine new lending rules with negotiations with HOA's and condo association over fees, title issues, appraisal issues, inspection issues, and challenges with short sales and you can quickly see nobody can guarantee closing dates, and scheduled closings in one month can easily pop over into subsequent months.
All these challenges affect the real estate market and can push high end or low end closings from one month to another, ultimately effecting month end numbers. In the end, these numbers all work out in the wash, so we like to look at year end numbers or a moving average throughout the year. So many people focus on one point in time when the market is always in flux and needs constant attention to understand what's going on.
That's what we're here for, to keep you updated with unbiased information good or bad. We're in the midst of season, and as predicted season started early and seems to be going well. I guess we'll know in April or May for sure. In the meantime, stay tuned.
Inside the Numbers
Again, we are writing this article before official sales numbers are scheduled to be released later in the week, so by the time you read this in the newspaper, official numbers will have been released yesterday.
Because of that we'll focus on some new information that won't be in the release this week. Official stats in January track December sales and year-end stats which are always interesting. This tells an important, but partial story, because it only tells what has happened. Today we'll focus on what is happening right now.
Listing inventory had risen slightly for the past 4 months, but it has dropped slightly in January. Pending sales had also been dropping slightly which is probably why inventory was rising. However, pending sales have increased this January which may help account for why inventory recently dropped.
While inventory has dropped everywhere, perhaps the most significant drop has been in Lehigh acres. Lehigh Acres has experienced a 61% drop in inventory since January 2010. Cape Coral has seen a 38.54% drop in inventory in the same period, and Fort Myers has seen a 32.52% drop. Lee County has seen a 35.42% overall drop in single family inventory, so Lehigh Acres 61% drop leads the way by a large margin.
Lehigh Acres was home to single family home sales in the $25,000-$40,000 range a few years ago and now it's getting tough to find homes much below $70,000. Investors have swooped in and gobbled up everything they can. Homes at the lower prices were cash flowing as investors could purchase, fix them up a little bit and rent them for more return on their money than they could get at bank or other places.
Another trend we have noticed is short sale closing increased as banks have geared up to handle more short sales just as foreclosure sales decreased. We've included a graph that illustrates foreclosure versus short sale closings over time. Keep in mind that banks have had fewer foreclosures due to the robo signing issue and that has affected foreclosure inventory throughout 2011. We've been told to expect more foreclosures in 2012, however they will not process them as fast as they did back in 2009 which caused the whole robo signing legal fiasco in the first place.
Next week we'll go inside the official numbers and give additional background as to what drove the numbers and how 2011 ended compared to previous years. Going forward we are seeing a robust selling season as many have realized our median prices have been on the rise and the bargains may be running out. If rising pending sales, rising median sale prices and decreased inventory are any indication heading into season, the next few months could be interesting to watch.
Setting realistic expectations is key for buyers and sellers in this market. Realistically, prices have room to rise especially as the economy improves. Nobody is predicting a return to 2005 prices anytime soon, so if you read prices are rising and you’re waiting 6 months to put your home on the market so you can get what you paid back in 2005, you might want to reset your expectations.
We are back to healthy growth, and if we somehow miraculously escalated back to 2005 prices, it would be as unhealthy now as it was back then. Slow and steady might just be what the doctor ordered, and who knows, that might just be what we'll get.
Top 10 Factors to Watch in 2012
As we've been reporting in our weekly article, we expected sales to be down as pending sales have been declining. We also expected prices to be higher and in fact official SW Florida single family home median sales prices released this past week were up 4.11% over October's prices and up 20.11% over last November's price.
Everyone wants to know what kind of year 2012 will be, and what kind of season it will be. Nobody can predict the future with absolute certainty, so we have to look at clues as to what will drive the market going forward.
There are opposing forces in play affecting our market, and each one can have an influence, The question will always be how much influence will each force play and to what degree?
1. Overall economy It is weak and this is an election year. In previous election years activity slowed as people weren't sure of the outcome and its effect on tax strategies and the government's effect on the economy. The housing market likes a pro growth government.
2. Employment More jobs eventually equals more disposable income in our local economy, which spurs home sales. Unemployment is still high in the area, so we'd like to see jobs. One such employer might be a casino, or perhaps a company that may relocate to our area.
3. World Markets People wonder what the trickle effect would be to the US economy and value of money should Europe's debt crisis spill over. Europe is working on their debt crisis and the US is helping, but we can't seem to get our own debt crisis in order, so I wonder what influence we have to help them when we can't help ourselves.
4. US Credit Ratings Could we be in for more downgrades? Some think so, and it could raise the cost of borrowing.
5. Interest Rates and Availability of Credit For now they are low, so anyone that can afford to buy now should. Prices are rising and rates are at all-time lows. Banks have also tightened standards, perhaps too much, which affects sales in the mid and upper ranges.
6. Inventory Inventory has been rising the past 4 months but ever so slightly. It's been rumored the banks have more inventory to unload in 2012, so we'll be watching to what degree and how this affects the market.
7. Volume Sales have been falling as prices have risen. We set all-time records in 2009 as prices were at rock bottom. Our market has definitely moved off the bottom, especially at the first time home buyer end. Many properties still make sense on a cash flow basis; however fewer investors are buying because the rock bottom deals are gone.
8. Correctly Priced Inventory We have less distressed sales on the market, which is good. However, inventory is rising because not every home is priced where buyers are willing to buy, so they sit on the market. This is nothing new. It just illustrates we are still in a price sensitive market. If you overprice a home, it will sit. If you price it at market, it will sell.
9. Season Begun Early. We saw our Northern friends start their search earlier this year. The beaches and roads are packed. The weather up North is cold. Baby boomers aren't getting younger. Many like the deals they're seeing and many are saying this is the year they're going to pull the trigger and buy. Florida has been on sale for a few years now and buyers see the rising prices, giving them confidence the worst is over.
10. Greed-Greed isn't always a bad thing. It's emotional feeling people use to guide them to buy or sell. It's the reason sellers overprice, and it's also the reason buyers buy. A transaction won't happen if both buyer and sell- er are operating from the same emotion. The answer to this emotion is facts, data, and logic. If a seller prices appropriately, buyers will buy because they fear prices will be higher in the future, and they don't want to miss the boat. They will not overpay though unless they're convinced prices for home will be higher. Greed is one emotion fueling buyers to buy today. If a property is priced at market, they are motivated to purchase. If a property is overpriced, it forces the buyer right back on the fence.
All 10 factors are in play. Only the future knows how each factor will affect the market. There are probably a few wild cards we haven't mentioned as well. All we can do is watch together. Enjoy 2012. We think it could be a good year.
SW Florida Market Trends
Because we are writing this article this week before official numbers are released, we decided to go inside the numbers and focus on listing inventory and sales data. According to preliminary numbers researched by the Ellis Team, listing inventory rose again for the 3rd consecutive month.
Lehigh Acres has been holding fairly steady while Cape Coral is seeing the largest gains in inventory. Fort Myers is inching higher ever so slightly.
What's interesting is the distressed sales market. We track a variety of graphs. One graph not shown here because it's a little tangled and hard to read in newspaper format shows large drops in distressed sales in Lehigh Acres, Fort Myers, and Lee County overall. Cape Coral has held steady at 50.45% of all single family sales being distressed. Lee County stands at 48% distressed rate in November.
We have included a Foreclosures Vs Short Sales graph that is a bit easier to read. It fairly well shows the history of the foreclosure and short sale market in SW Florida. As you can see, the height of foreclosure sales was in June 2009, while the height of the short sale market was March 2011.
Banks revved up their short sale departments to handle an increased load. It can be said that potentially each of these successful short sales may have saved a corresponding amount of foreclosures, so it was in the banks and the markets best interests to sell these homes as short sales rather than as foreclosures.
Going into 2012 we're going to continue to watch the listing inventory and the mix of inventory. Traditional sales are on the rise as a percentage of all sales, although many homeowners are not selling at today's bargain basement prices.
Speaking of bargain prices, many buyers are calling wanting to buy homes for investment and expecting 2009 prices. It seems like sellers are always the last to recognize when prices are dropping and buyers are the last to recognize when prices are rising. Why is that? Could it be selective hearing or denial?
We can definitively say that investment homes in Cape Coral and Lehigh acres bottomed in 2009 and have risen since. Buyers today can no longer pick up a home for $35,000 in Lehigh unless it has major problems. $70,000 is more common place for the low end now, so essentially prices in the low end have doubled.
Sales are flat in December versus November; however we are expecting sales to pickup in season again. We've had no trouble selling homes. The biggest challenges we've faced are closing these homes. Lately we've been encountering title issues, mortgage re-disclosure issues due to any delays, and buyers not waiting patiently for the short sale approval. We're getting short sales approved within 60 days in many cases, but buyers are impatient. Going forward the industry will have to do a better job educating buyers as to what the realistic expectations are for approval and closing time frames on short sales.
We'll also watch foreclosure inventory as we are expecting a few more in the 1st and 2nd quarters of 2012.
We'll keep our eye on the SW Florida real estate market for you, and whether you're a buyer or seller, we hope Santa is better to you this year than he was last year. The market is looking up, and we hope your holiday spirits are too.
Time Shares in Florida
From time to time we get calls asking about the best time share deals in Florida. According to Wikipedia, 'A timeshare is a form of ownership or right to the use of a property, or the term used to describe such properties. These properties are typically resort condominium units, in which multiple parties hold rights to use the property, and each sharer is allotted a period of time (typically one week, and almost always the same time every year) in which they may use the property."
The Ellis Team doesn't handle timeshares as they are kind of their own specialty, although there are a few timeshare places at Fort Myers Beach. What we do see more of in SW Florida are rental companies that will assist a homeowner and rent out a condo or home by the week while the owner retains full ownership of all 52 weeks of the year.
We have several condo projects and cottages in SW Florida that rent very well by the week. A Buyer can purchase a home or unit and place it in the rental pool and produce very good income while allowing someone else to manage the property and rent out the unit. The owner can even use the property so many days per year per the IRS and still claim it as an investment property. We encourage you to speak with your tax advisor on those regulations as they pertain to you.
Unlike a property owner who owns all 52 weeks, a timeshare owner is only concerned with one week. One advantage of a timeshare is its ability to be traded for other like kind properties all over the world. We've talked to several people who own a timeshare say in Orlando and love visiting there, but they also enjoy the ability to trade it for weeks in Hawaii, Bahamas, Cayman Islands, Costa Rica, and all over the world.
Once you own a timeshare you simply pay the weekly maintenance fee each year and then you're free to use the unit on your selected week, exchange it for a different week within your association if permitted, rent it out, or join an exchange service like RCI or VRI to exchange it for nice place elsewhere. While you pay a yearly maintenance fee on your timeshare, there can be significant cost savings when exchanging your unit. Perhaps you own a 3 bedroom unit. You may be able to exchange for a week of a 2 bedroom unit and another week’s use of a 1 bedroom unit, or both during the same week.
You can even exchange credits on your time share towards use on a cruise. Depending on how nice your unit is, where it is located, and which week you have will determine how much credit you get towards exchange to another timeshare or cruise.
Timeshares can be great for those that like to travel. Years ago timeshares were selling upwards of $30,000 in the Orlando area. With the economy being down it seems prices have come down and now you can own them for much less.
In fact, we're aware of an owner of a 3 bedroom unit at Cypress Pointe Resort at Lake Buena Vista in Orlando willing to sell their unit for $2,000 plus closing costs. It is a 3 bedroom unit week 43 rated as Emerald and is close to Disney. It can be exchanged for a 2 bedroom + a 1 bedroom unit or used as a 3 bedroom unit. Cypress Pointe Resort offers lots of amenities for kids. While we do not list or sell timeshares, simply call our office 239-489-4042 if you're interested and we'll put you in touch with the owner and you can deal directly.
If you're looking for a condo on Sanibel, Captiva, or Fort Myers Beach and would like info on investing and what it would take to purchase and how much income you could derive from it, we can help. Simply give us a call.
Useful Tools
This past month I've had conversation with several people who are amazed at how much traffic we're seeing from foreign buyers this Fall. In fact, several news organizations have picked up on this and done stories about Canadians and Germans buying in SW Florida.
Traffic has picked up so much we hired a German speaking agent who created a German Blog and she is generating lots of interest from Germany. Of course we've always had interest from Canadians as SW Florida has always been a popular destination for our Northern friends.
Last night I was speaking with a golf course pro from the Dunes on Sanibel and he was amazed at how many Germans are using the course this year. Business is definitely up at the golf course this year.
In writing this article I wanted to show a picture of our website statistics which would show which countries are most active, but for some reason the analytics aren't reporting, so I can't show that statistic. I know it would be interesting, so we may add a secondary tool to our website soon to track that so we can report that later.
While searching Google for tracking tools I came across some interesting search tools I didn't know about. For instance, I didn't realize you can display results for any search reading level, dictionary, sites with images, pages I've visited, pages I haven't ever visited, nearby, translated, and much more. One particularly useful tool I didn't know about was the Social tool.
I did a search for SW Florida Real Estate much like a foreign buyer might do from anywhere in the world. It picked up sites I've shared and sites others have shared from anywhere on the web, including social media. It picked up Twitter posts, Google+ posts, Facebook, and more.
If you search Fort Myers News Press for example with this handy tool, you'll be amazed at what you find. It's amazing to see how a traditional paper is featured so much on Twitter, etc.
I particularly liked searching for sites with images. As mentioned, there's a tool for that. If you're a business and want to know what your competition is doing or saying online, this tool would be useful. While the benefits are impactful for real estate, this would work for anything a consumer would shop for.
I did a related search on SW Florida Real Estate and articles from newspapers came up, our YouTube videos about the area came up, and much more. None of the information was new as it was always there. What was new is the way it is found and displayed.
It's no wonder every business and media outlet is asking people to Like their page. Search engines are indexing websites, news media's content, video, Facebook, Twitter pages, Linked In, Yelp, etc. and the more a business can be found on all of them the more impressive their search results will be.
We hope this useful tool adds to your online research experience, and happy house hunting!
Grey Saturday
We sincerely hope everyone had a wonderful Thanksgiving as we all have so much to be thankful for, even if times seem tough for many across SW Florida. For those eager shoppers we hope Black Friday was a day to score wonderful bargains.
We were trying to come up with a name for the day after Black Friday this year and we decided on Grey Saturday, because official sales numbers were released for the Florida real estate and market and SW Florida scored mixed results, earning it the Grey Area status.Last month we reported a change in direction in listing inventory and said we wanted to keep an eye on those numbers going forward. For the 2nd straight month, listing inventory rose. The numbers aren't staggering as we're talking about a difference of 231 homes, but it is a recent trend nonetheless.
Single family home prices were up 15% over last year, but they are down 7.69% from last month. We are in a volatile market because agents can't count on which closings will actually close in a given month. Transactions are becoming trickier to count on as governmental regulations are holding up closings, causing delays, and wreaking havoc on the market. It's not uncommon for buyers to receive approval on their short sale and then walk from the deal because of the length of time, or because they became impatient and went for another deal more likely to close.
Banks have told us the foreclosure backlog was coming and we are starting to see more assignments in the 4th quarter. Another large bank has told us to watch out for 1st quarter 2012 for even more. These bank foreclosures may be just what the doctor ordered for our market though because in certain submarkets there is a feeding frenzy to buy. We have short sales, and some traditional sales of which not all are priced at market value, which is typical in any market, up, down, or sideways. We've had a lack of foreclosure properties as banks were stymied with the legal debacle of the robo-signing issue that caused them to go back and evaluate if they had legal standing to foreclose and the paperwork to prove it.
We're starting to see rising inventory and it's not because of foreclosures. We are entering season which is a time when properties are gobbled up like a Thanksgiving turkey, so we'd expect to see inventory decline in the next few months even if the banks do release more foreclosure inventory. SW Florida's appetite when it comes to a bargain is insatiable, much like a Black Friday sale.
Last month we had Trick or Treat Day, so we'd like to see a solid direction in the market. The past few months have brought ups and downs in median prices. Combining the recent up and down price swings, rising inventory, predicted rising foreclosure activity, and tempering that with the upcoming season means we have a market to keep our eyes on.
We really believe we're going to have a good season. What good is a bargain basement sale to a shopper in an empty store? Shoppers want inventory, and this year may be one of the last good years to get the bargain. Even after a downward price drop of 7.69%, prices are still up 15% over last year's prices. The absolute statistical bottom of the market may have been last year, and we may look back on 2011 in years to come as a time when buyers say to themselves, "I wish I would have hung in there and bought that bargain."
When the economy improves and lending standards get back to normal, we'll all look back at 2010 and 2011 and say "I wish I would have bought more."
Good luck and good hunting!
Follow-Up on Short Sale Relocation Assistance Article
2 weeks ago we wrote an article entitled "Banks Offering as Much as $20,000 to Short Sale Your Home" which offered advice in the event your bank contacts you and offers you a payment to either short sale your home or do a deed in lieu of foreclosure. Since that article our office has been inundated with calls and we've met with many sellers who have been offered assistance or would like more information on the process. We've decided to do a follow-up article and answer some common questions we've received. We've heard some amazing stories.
The short sale process is a tedious process and should only be attempted by experienced agents who are familiar with the process. Even though we are familiar with the short sale process, various banks do throw curve balls at us, so no agent can make guarantees as to what they banks will do. We're not even sure the banks always know and each case is different. We've included the chart we posted a few weeks ago to help illustrate the advantages banks have shared with us for doing a short sale or deed in lieu.
FNMA and Freddie Mac have also said they will be more forgiving with sellers who work with them and try to sell their home via short sale versus sellers who lawyer up and try a foreclosure defense. If a seller agrees to a short sale, they have stated that they will look favorably on that borrower in the future and they may be eligible for financing within 24 months, but owners who try tricky foreclosure defenses may have to wait up to 7 years. Is this a scare tactic or reality, who knows? We're not here to offer legal advice, nor could we. This is a conversation best had with your attorney.
We have heard that attorneys have strung out the foreclosure process and made it last longer, but in the end most end up in foreclosure anyway. Other defenses have bought time for a successful short sale to be worked out.
What has changed is the banks willingness to provide time to market a home for short sale. We're in the process of listing one now where the bank is offering the seller more than $15,000 and they'll give us until August of 2012 to complete the short sale.
Banks are even reaching out to selected Realtors and having us call their customers and offering our assistance. While we handle many foreclosures, a short sale is usually preferential because the seller is in control of the process versus the bank. Banks like them because they tend to lose less money with s short sale than going through the entire foreclosure process; all the while the property isn't being properly maintained in the foreclosure. We do our best to begin the cleanup process once we gain control of the listing from the foreclosing bank, but it makes more sense to sell the property before it gets to that point.
Statistically about 70% of foreclosed sellers never reached out for help and just allow their home to go back to the bank. Some speculate this could be because owners are scared and embarrassed while other wonder if the sellers just didn't realize they had options. Banks are doing a better job of reaching out to their customers and letting them know they have options. Of course, you must answer the call or read the letters from the bank.
If you missed the article 2 weeks ago it can be found on our blog at Blog.Topagent.com. If you've been contacted by your lender, it may be at least worth considering your options. Don't throw away documents sent to you by your lender. If they make you an offer call your attorney for legal advice or an experienced real estate agent for advice on the program and assistance selling your home.
The banks really don't want your home back. They'd prefer that owners pay their mortgage payments. When that's not possible, it may be less expensive to offer the occupant relocation assistance and get on with the process of selling the home before it gets to the costly foreclosure process. Once the home gets into foreclosure, the costs mount, the credit suffers, and owners lose options.
If we can help, call us at 239-489-4042. Each situation is unique and it takes time to look into each program. The good news is we have past experience with many of these programs.
Bad Appraisals Blamed For Nixing Real Estate Deals
Don't let the headline fool you, we're a big fan of appraisals. The key word is accurate, competent appraisals. So many times sellers want us to overprice a home and sell it to a northern or foreign buyer assuming they don't really know our market. What sellers fail to realize is buyers usually look at several developments, several homes, and study the market more than sellers do. If you overprice a home, it will sit. This is a price sensitive market, and when you price a home at or very near its value, activity heats up and properties move. We often tell sellers even if we were to dupe an unsuspecting buyer into overpaying for a home; the bank is still going to order an appraisal before they lend money. Not only do buyers tend to research the market but they have a backup with bank appraisal. Some sellers say, "Well, let's find a foreign cash buyer." Sellers don't realize cash buyers research the market perhaps more vigorously than financed buyers do, so they're really grasping at straws trying to sell an overpriced property into a price sensitive market.
Just as some sellers need to research the market better, so do some appraisers. In the past week I've heard several complaints from Realtors who've said a bad appraisal nixed their closing. Sometimes banks use appraisal management companies who utilize appraisers from different markets who aren't as familiar with the local market as local appraisers. We've had past clients ask us to market homes in other cities as far away as Pensacola Fl and we declined simply because we're not experts in that market.'Out of town appraisers are at a big disadvantage and couldn't possibly know everything they should about our market.
For instance, some waterfront canal property in Cape Coral brings more value than others. Nearby neighborhoods in SW Florida may not be good comparables even though they are located right next to each other. Computer models and unsuspecting appraisers wouldn't always know this.
Many times when the bank is considering a short sale or pricing a foreclosure, they utilize a BPO (Broker Price Opinion) and/or an appraisal. If either comes back too high, the short sale is rejected or the foreclosure is priced too high. Recently we had an asset manager contact us because our BPO came in at one figure and the bank's appraiser came in much higher. After studying comparable sales used by the appraiser we discovered he used gulf access homes as comps even though the subject property was not waterfront. He also used a deed in lieu of foreclosure sale which wasn't really a sale at all; it was simply a homeowner giving the property back to the bank for the loan amount. We submitted documentation to have the appraisal overturned so the bank can sell the home.
Bad appraisals can cost a sale at both ends. If the short sale appraisal is too high, the price the seller's bank accepts may be higher than the buyer's bank who is lending money appraisal reveals, so the deal dies unless adjustments are made, which isn't always easy or possible with new rules placed by the government. These new regulations, designed to protect lending and real estate values are doing the opposite. Rarely when government gets involved does anything improve, it just takes more time, more aggravation, and blown deals, which doesn't stabilize the market.
If the lending appraiser comes in too low, the buyer's lender won't loan the money at the contract price, potentially scuttling an otherwise good transaction that should have closed. There are lots of good appraisals out there which do blow some deals, which furthers our comment to sellers that it's not wise to purposely overprice a property. Keep in mind, value is in the eyes of the market, not any one buyer nor any one seller. Values are subjective, and some properties are difficult to evaluate. Not all sales are cookie cutter sales with multiple active and sold comparables.
It pays to study the market, and if you doubt the value, ask questions. Sellers sometimes produce appraisals that are too high and the market won't accept, and bank ordered appraisals are sometimes too low and not at actual market value. Do your homework and question their work. Request a copy of the appraisal. You paid for it. Some banks will let you see it. And remember, keep an objective mind. Everyone in the transaction has their own idea of what the value is, or should be. Make sure that idea is supported by facts, data and logic and not ignorance of the market or motivations.
Banks Offering as Much as $20,000 to Short Sale Your Home
Banks are contacting customers who are past due or in financial trouble and offering owners or tenants up to $20,000 in relocation assistance to move out of home and hire an experienced agent to sell the home as a short sale. Banks are also offering owners money to agree to a deed in lieu foreclosure in some instances as well.
There are several advantages for taking the bank up on their offer. If you let the property go to foreclosure, you'll be evicted without relocation assistance. Additionally your credit will suffer more in a foreclosure than a short sale or deed in lieu. The owner is more in control when actively pursuing a sale through an experienced agent than giving up all control to the bank and the legal system.
A short sale is a commonly used alternative to foreclosure. Generally, when putting your home on the market, the goal is to market and sell your house for an amount greater than any and all outstanding liens against the property. Liens include all mortgages, escrows and fees on the property.
If you can no longer afford to make your mortgage payments and your house is worth less than you owe, a short sale allows you to sell your house at the current fair market value. You then have an option to move to a more affordable situation. In a short sale, the investor or owner of your loan must approve the sale because they are entitled to repayment of the loan and will be receiving less than the amount owed.
If you have additional liens on your property with other lenders, such as a home equity loan, all investors must come to an agreement in order to complete the short sale. This process takes time, and an experienced agent is required to navigate and negotiate through these challenges.
Another alternative is a deed in lieu of foreclosure. With a deed in lieu, you voluntarily transfer ownership of the property to your investor to satisfy the amount due on your first mortgage. In some cases, you may be eligible for a deed in lieu without first attempting a short sale of your home. A deed in lieu generally takes about 90 days, depending on your situation.
In either a short sale or deed in lieu you may be responsible for paying a deficiency. There are many factors that determine this, such as if the home was your primary residence, what state you live in, your financial situation, etc. Sometimes this can be negotiated with your lender.
In any event, most lenders agree it is much better on your credit report and they are likely to lend you money in the future faster if you agree to a short sale or deed in lieu instead of a full blown foreclosure.
If you've been contacted by your lender, it may be at least worth considering your options. Don't throw away documents sent to you by your lender. If they make you an offer call your attorney for legal advice or an experienced real estate agent for advice on the program and assistance selling your home.
The banks really don't want your home back. They'd prefer that owners pay their mortgage payments. When that's not possible, it may be less expensive to offer the occupant relocation assistance and get on with the process of selling the home before it gets to the costly foreclosure process. Once the home gets into foreclosure, the costs mount, the credit suffers, and owners lose options.
If we can help, call us at 239-489-4042. Each situation is unique and it takes time to look into each program. The good news is we have past experience with many of these programs.
Official SW Florida Sales Numbers Reveal Higher Prices
Last week we reported we expected sales to be roughly even if not slightly behind 2010 levels when official numbers were reported. Well, its official and we were wrong. Sales actually increased by 25 sales over last year. Single family home sales were reported as 1127 sales versus 1102 last year.
We also reported listing inventory actually went up slightly by 43 units which was another change in direction. It turns out the sales weren't a change in direction, but it doesn't matter. Whether they were up or down 25 units statistically it’s not a big difference. What was interesting was the first change in direction, and something we wanted to monitor going forward. While we're usually correct with our predictions, this time we were off on the sales numbers.
There was another bit of good news in the official numbers. Not only were sales up, but prices rose 17.6% over last year and 7.17% from the previous month. This could be because home affordability is at an all-time high and buyers today can afford more home due to lower prices and lower interest rates than ever before, or it could be because there was less distressed this past month. In fact, in September 50.77% of all single family home sales were distressed, down from 54.26% in August. Those numbers were as low as 44.57% in June of 2011. Banks have not brought significant foreclosed inventory to the market since the robo-signing fiasco, although we're being told this may change in January as several of the large banks are able to bring more as they've worked through legal issues pertaining to those questionable foreclosures.
Pending sales were down last week, so we'll have to see how this affects sales going forward, however they are typically down this time of year and start picking back up again going forward. There is some seasonality in these numbers we like to account for, and this year is no exception.
We have noticed our roads are getting busier and our northern friends, sometimes referred to as snowbirds, have begun their trek to SW Florida, and judging by our phone calls and Internet leads, many are in search of their piece of paradise. This could bode well for another strong season in the SW Florida real estate market.
Two new programs were just announced that will greatly benefit distressed homeowners. One program allows underwater sellers to refinance their home no matter how much is owed if it is a FNMA or Freddie Mac insured loan as long as they've been current on their mortgage in the last 6 months, and another program that offers sellers up to $20,000-$30,000 in financial assistance to move and sell their home for less than what is owed.
We'll bring more information to you about these two new programs in the coming weeks. If you're a homeowner and struggling to make your payments, you might be interested in either of these programs. Simple give us a call at 239-489-4042 or email me at Brett@topagent.com feel free to visit our website www.Topagent.com for other timely information and links to our videos.
Market Reverses Fortune
We like to include charts to illustrate latest trends in the SW Florida real estate market. For years we've tracked numbers and reported the upside and the downward trends in the market. For the past year or more all market trends have been to the upside. Preliminary numbers gathered by the Ellis Team indicate single family home listing inventory 
in Lee County went up for the first time since January 2011. Granted, back in January single family home inventory was 34.54% higher than it is today, but this past month is the first time we've seen inventory rise in months.
Listing inventory only rose 43 units which accounts for about .5%, so it's not an alarming trend, just a slight change in direction we'll keep our eye on. Due to space constraints we didn't include that chart; however we'd like to draw your attention to the SW Florida Sales Chart and the Pending Sales Chart. Both these charts support findings in the inventory levels.
Sales in SW Florida have been falling since March which isn't out of the ordinary the past several years. What's interesting is that September 2011 sales are slightly behind 2010 levels, but not by much. Again, it's the direction of the change, not the actual numbers we're looking at.
Pending sales have also fallen since March. This confirms that pending sales are an accurate indicator of future closings. While it makes perfect sense, sometimes in life what appears to make sense doesn't always match reality, but in this case it does match. For months inventory levels have gone down and many have speculated that's the cause of decreased sales. We think there is a lot of truth in that.
Listing inventory just went up this past month, so does that mean sales will go up? When official numbers are released next week we don't think so. We think they'll mirror what we've been reporting and will be down slightly from the previous month. So if inventory has been a legitimate reason sales have fallen, why wouldn't the increase signify increasing sales going forward?
The answer is it could, but there are other factors. We must look at the mix of inventory as well as other factors. The mix refers to traditional sales versus foreclosed homes and short sales. Not all short sales close, and their timing is anything but predictable. Foreclosure inventory looks to rise some in the 4th qtr of this year and more in the 1st qtr of next year. If this bears out, sales will almost assuredly be influenced by the exact number hitting the market as there is a large appetite for foreclosed bargains.
Other wild cards influencing the market are the availability of credit. Banks are requiring buyers to jump through more hoops and regulations than ever. The new Dodd Frank act is making it more difficult to close even approved loans. Regulations have become burdensome and making it impossible to meet certain deadlines. We always say time is of the essence in our contracts, but that's not the case as Congress has changed so many regulations for the worse. There are waiting periods for HUD closings statements to be approved, so if there is any little change, all prorations of fees may need to be re-approved. If a buyer selects a different rate or program, the bank must re-disclose everything and a new waiting period begins. This makes it difficult to meet certain deadlines in short sales, and many times that property is foreclosed instead of a successful sale because Congress saw fit to add additional layers and slow everything down.
Congress always has good intentions, but they don't use their head.'Loans take hours to underwrite now and certain loans banks don't even want to mess with because of the new regulations. This hurts certain segments of the market. I hear almost everyday complaints from loan officers on how tough their industry is. Of course, lending affects our industry, and real estate affects the economy. Sometimes I wish Washington DC would listen to people in business and get out of the way. We'd all be better off if they regulated less and let business do business. That's the way to create tax revenues.
While we can't control Washington, we can keep our eye on Main Street. Main Street is ok in SW Florida, and we'll continue to monitor. One month doesn't make a trend. We're simply reporting a slight change in direction, and we'll watch the trends going forward to see what sticks. If we can help you with your real estate needs, don't hesitate to call 239-489-4042 or visit our website www.Topagent.com
Housing Affordability Hits All-Time High
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.
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. Look at the average 30yr 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 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.
Realtors Connecting With Customers on Social Media on the Rise
Social media has been the buzz words the past few years and it seems everyone has tried to capitalize and make money from the latest craze. For those that understand its value and proper use, social media can be very rewarding. For those that make freshmen mistakes, the cost can be lost customers and countless hours of wasted time.
The benefits are clear. If done properly, consumers may flock to your content, or you may find yourself interacting at deeper levels with your customers and finding out more about them than you ever would have face to face. Social media opens up a new world where people sometimes feel safer sharing inner feelings and facts about themselves than they do in real life.
Connecting with customers is all about getting to the heart level and learning what's important to them. You've probably heard the old saying, "Treat others as you'd like to be treated." At the Ellis Team we like to use the Platinum standard which is "Treat others as they'd like to be treated." We study personality profiles and adapt our communication based upon the way our customers like to communicate. Not every personality profile is the same.
Some personalities are bubbly outgoing social beings that have never met a stranger and are certainly the life of every party. Another is the calculated detailed oriented person who must know all the facts before making a decision. There is also the family oriented person that could talk children and family all night, as well as the dominant director type that makes quick decisions and is in charge. Knowing who our customers are helps us to interact with them on their level. The director type turns off with hours of facts and needless chatter, while the engineer, detailed oriented person would never make a decision without studying it from many angles.
Social media helps us to understand our customers and deliver information on many levels. We also engage our customers. We teach our team that if you can get a person to talk about (FORD) Family, Occupation, Recreation, Dreams you will connect at a deeper level and become friends with everyone you meet. Many of our customers are friends because we care about them as a person, not just a transaction.
Apply FORD to Facebook. In just a few minutes you may find out about someone's niece or nephew, their child's soccer game. You might also find out their new relationship status, how happy they are in their job, what they did on vacation, how their sports team is doing, etc. You can hit all 4 FORD items quickly. Social media is an opportunity to engage.
There is no substitute for being face to face with someone and interacting, and many people condemn social media because of that. However, perhaps there is no more efficient way to connect as social media. In real life true communication may mean asking many questions. We call it going 4 or more deep with questions to find out what someone really means. Because people aren't as inhibited online as real life, true feelings come out much quicker, so in some respects I think social media has improved true communication. Not everyone has the time or skill to go at least 4 deep. However, the downside with social media is you might just learn a whole lot more about someone than you cared to know. LOL
So the next time you jump online and into a social media platform, think about more than just posting random thoughts. Use it as a tool to elicit responses, get people talking, and learning more about others. When you learn and care about others, you become more attractive as a friend or resource, and people will enjoy telling you everything, and maybe even doing a little business with you. And if not, at least you'll make some true friends.
Good luck and happy communicating. We've included a few of our public social media pages in case you'd like to get some ideas. And maybe we'll become friends too.
Official Numbers Show Mixed Signs
Official sales numbers were released this past week by Florida Realtors and as expected median sales prices fell 3.46% from July as more distressed sales sold in August 2011 than July. Sale prices were up 16.74% from August 2010 which is positive. Listing inventory continues to slide which bolsters prices as well. Last year Lee County had 11,667 combined single family homes from all MLS's on the market and today w're down to 7,675 combined. Actually there are less than both numbers because some homes are listed in multiple MLS's, especially high end homes or homes in Estero, Bonita, San Carlos park where Realtors may belong to more than one MLS and desire additional exposure. Sanibel and Captiva is another example of where agents might list homes in the Sanibel board and the Fort Myers board.
As you can see from the attached charts, even though inventory has been falling, Realtors have been successful at closing high numbers of homes even though many are short sales. This is a testament to the fact buyers are being forced to look at short sales which may take longer to close to find homes in their price range. It is also testament that Realtors are increasing their education to handle these complicated sales, and banks are gearing up to close more of these sales rather than selling through foreclosure.
While sales prices have declined from their 2011 seasonal highs, they are still significantly higher than last year's numbers signifying the bottom may be behind us. Before our market reaches for the skies again, we must first repair our fragile economy and create jobs and income growth. Combining that with a coherent, understandable, and definite tax policy will also help settle the real estate market. Congress and presidential politicians keep proposing changes to mortgage deductions, increased capital gains taxes on certain groups of people, and worst of all they've failed to extend the National Flood Insurance Program which puts hundreds of thousands of current transactions in jeopardy.
Washington couldn't script are more harmful strategy to disrupt housing, which is amazing as housing leads to 32% of the nations GDP. There has got to be a better way, and thankfully there is a better way, but it won't happen until the next election.
So for the next year the nation's economy and housing market will have its ups and downs and will take its lumps until certainty returns to the market. I never understood why the president proposes raising taxes on certain people and not others. While I'm certainly not rich, nor is any real estate agent I know in SW Florida, I just don't understand how taxing those that make more money encourages them to work harder or hire more people, which is what our economy really needs right now.
Last week I wasn't paying attention and I received a speeding ticket. A day later I thought. Hey, if certain people get to pay more taxes because they earn more, then why can't certain people drive faster than others? If I'm paying more shouldn't I be allowed to drive faster? Well, it's a silly argument as we should all obey and drive by the same rules, and so it goes with taxes, we should all pay the same rates. If someone makes more, they automatically pay more. So why should they pay more, and pay a higher rate?
And when companies are taxed at one of the highest rates in the world, why do we wonder when they move operations overseas? Perhaps we should lower taxes and encourage them to come back and hire US workers, which would raise income to the government.
Have you ever wondered why certain corporations move to Delaware or South Dakota? It's because those states learned to compete with other states they must have lower taxes. It's about time our Federal government understood this. We are in a global competition. When someone can accurately predict when our government will get its act together, almost anyone will be able to predict the real estate market. Until then, we'll keep reading the tea leaves and reporting what we see.
Florida Real Estate Bargains a Victim of Perception
We're writing this article this week two days before official numbers are released, so by the time you read this official numbers will have been released. Absent this knowledge, we expect prices in August to be higher than last year and sales to be down from last year, 
however sales volume may be higher than July.
We've included a chart of average year end sales prices which is really an average of prices for that given year, not the Dec 31 average price. As you can see, prices fell from their peak in 2005 through 2009 where they stabilized and actually rose in 2010. In 2011 we've seen more gains over 2010.
We started writing articles and advertising back in 2009 that Florida was on sale and buyers flocked here in droves looking for bargains from all over the world. Buyers have been competing with each other for the best bargains and in fact many of these properties have seen multiple offers. As you can see from the year end chart, prices are still very affordable and are on par with 1996-1997 prices. If you look at the attached chart you'll notice prices in July were up 14.33% over last year and up 19.1% over 2009 prices.
We are fielding calls from buyers looking for foreclosures, short sales, and otherwise good bargains. They just finished reading on a website or watching an older YouTube video how another buyer bought a $20,000 condo or $30,000 house close to the beach and they want to come here and buy the same thing.
If you ask any agent in this market I'm sure they'd chuckle because they're answering some of the very same calls. This is where the perception that Florida is on sale, which it is, collides with reality. The days of buying newer homes for $35,000 are over unless the home has serious defective drywall issues or is gutted. We still have some inexpensive condos for sale. For instance we just listed a bank foreclosure 1 bedroom, 1 bath condo in Mystic Gardens for $27,900 which is a bargain. These deals are becoming fewer and farther between.
Unfortunately buyers from all over are calling and expecting homes close to the beach or on the beach for ridiculously low prices. While it is true back in 2009 we had some seriously underpriced homes from some of the banks, prices have gone up considerably since then. We're still well below replacement cost in most cases and we're not headed back to 2005 prices anytime soon, however we are still a bargain.
I guess there is a difference between a bargain and a steal. The steals are over, but there are fantastic bargains and opportunities in this market if you're realistic. If a buyer is unrealistic, they'll suffer the same fate as an unrealistic seller, which is no transaction. A buyer who fails to buy in this market is just as damaged as a seller who overprices and misses the top. While the bottom may be behind us, we're still close enough to it that we can see it in our rear view mirror and prices today will look like a bargain years from now.
Remember back in time when someone you know once said "Gosh, I should have bought every piece of property I could get my hands on back when prices were lower?" Well, in the future I'm sure there will be those that say, "Gosh, I should have bought everything I could back in 2010 and 2011. Those were the days when there was little competition from new home builders, interest rates were at their lowest, prices were below replacement cost, and at those prices they actually cash flowed."
It pays to be an educated consumer, whether you're on the buying or selling end. Remember, money is always made on the "Buy", not the sell. Inventory is going down. If you're truly a buyer, learn the market and step up now. I bet you'll be glad you did.
It's kind of funny how humans follow the herd mentality. When everyone else is buying, people feel more comfortable buying at the top, but when things are down, people are scared of overpaying. Back in 2005 you were overpaying, but most felt good about their purchases. Look what prices have done since. The smart money is buying and holding today. Failure to land a property now is a wasted opportunity.
Spotlight on Town & River
Town & River is a waterfront community tucked away on the river side of McGregor Blvd on the Fort Myers side of the river. The community features deep water gulf access lots as well as a fresh water lake offering some nice lakefront views. Not every home is waterfront, but all enjoy the peace and serenity of South Fort Myers living off historic McGregor Blvd and all the conveniences to everything that comes with it.
McGregor Blvd was the original center of town and housing in Fort Myers used to be defined by which side of the street you lived. While growth has certainly moved eastward, the charm and beauty of McGregor Blvd remain a fixture alongside Thomas Edison's vision for McGregor Blvd showcasing why Fort Myers is named The City of Palms. It was Thomas Edison after all who was responsible for lining McGregor Blvd with the majestic palms we see today and defines our place in SW Florida history as people from all over come to visit our beaches and gaze at McGregor Blvd and the seemingly endless flow of palm trees as you drive down McGregor.
Town & River features some amazing homes. The highest priced home we could find in MLS in 2011 sold for $1,359 Million. It was a 4 bedroom 3 bath home with 3,241 sq ft of living area and had a nice view of Deep lagoon canal. We found another home at the end of Cypress Lake Cir that sold for $1.31 Million which is a riverfront view home and features 4,430 Sq Ft of living area and 5 bedrooms along with 5 baths and 2 half baths, also shown here.
The home pictured here is a canal front home just seconds to the river and has 3,921 sq ft of living area. This home sold in 2011 for $1.275 Million.
On the other end of the spectrum we just closed a home for $260,000. The home is lakefront and featured 4 bedrooms, 2 1/2 baths and a pool with a metal roof.
Currently homes are priced from $171,000 to $1.695 Million. We found 21 homes actively on the market and 2 pending sales. So far in 2011 our MLS shows 29 sales from $100,000 to the $1.359 Million sale we reported earlier.
The lowest priced home in Town & River listed for $171,000 is a 3 bedroom 2 bath home built in 1978 and features a pool, corner lot, and is also located on the lake.
If you'd like to search for Town & River homes you can do so on our website www.townandriver.net or search all MLS listings at www.LeeCountyOnline.com
Higher Priced Foreclosures on the Horizon
We've been saying for months the next round of foreclosures to hit the market may be higher priced than recent rounds. Testament to that fact one just arrived today for over $1 Million. We are expecting another $1 Million+ property within a few weeks on Captiva Island as well. To date banks have cleared out many of the vacant investment properties that were built as part of the boom back in 2004-2006.
The higher priced properties tended to cater to wealthier borrowers who perhaps lived in the home, at least part time, and could afford to ride out the bad economy longer than investors who ran for the hills when values turned upside down and were over extended. While higher priced borrowers too may well have been over-extended, many had the wherewithal to ride it out, but their days have also been numbered.
Case in point is our newest listing, which is a spectacular bay front home in Bonita Springs. It is a 2 story home and features an elevator, a large black pool, a Viking grill on lanai for superb outdoor entertaining, and a gourmet kitchen with all the extras.
Every bedroom features a bay view. The property has 2 docks both with boat lifts, a 3 car garage, and wide open views from the family room. The property is located at the end of the street on a cul-de-sac so the home is essentially at the end of a peninsula. The property is very private and is an entertainers as well as a boaters dream home.
The home was purchased for $2.25 Million in 2007 and is now on the market at $1.51 Million. The home has 3 bedrooms and a den along with 3 full baths plus 3 half baths. The home has 5,124 Sq Ft of living area. To view the home online take a virtual tour at http://bit.ly/q02wMz
We've seen a concerted effort by banks to avoid foreclosing on these expensive properties. A few large banks have contacted us with lists of and asked us tow work with selected borrowers to sell their home short now versus foreclosing later.
Imagine that fact. A few short years ago banks were reluctant to process and approve short sales, and now they're coming to experienced Realtors and asking for assistance with their customers to effectuate a short sale. Even though the banks have identified their own customers they'd like to do workout a short sale with, they recognize the short sale is a complicated process and they want experienced agents to counsel their borrowers and market the short sale to buyers.
You might ask why a bank would do this. The answer is it's less expensive to consummate a short sale than go through the foreclosure process paying whopping legal bills all the while the property is not being maintained. This process leads to a deteriorating property and a lower sale later on. Banks are simply attempting to minimize losses.
In these cases it may make sense for a buyer to consider a short sale, or one of these high end foreclosures. If you're finding today's economic environment challenging, call an experienced Realtor today and learn about options you might not have even known existed. We just might be able to help you in these tough times and help you move forward instead of looking back.
Insider Secrets from a Foreclosure Pro
With foreclosures slowing down, the competition to purchase these bargains has become even stiffer. Many people call each week hoping to land these bargain properties and few will win the prize, so we thought it might be helpful to buyers and agents alike to learn the inside secrets on being the successful bidder on these properties.Â
As a listing agent for many banks, we know what the banks are looking for. We speak to the asset managers. If you follow these tips your chances will increase as not every buyer knows what the bank considers when looking at multiple offers, which many foreclosures receive.
The first thing buyers must understand is there is a lot of competition for these homes. Typically bank foreclosures go fast, and for over asking price. Everybody seems to want them. So structuring your offer and submitting it correctly will increase your chances. Keep in mind, listing agents must have all the required information, so if they ask for something upfront, they mean it. Listing agents don't have time to track your agent down for this info. We attach a document to each MLS listing specifying what is required with the offer. Make sure your agent completes every single field. We submit offers into an online system, and if information is missing, the offer cannot be submitted.
The bank never sees your offer until one is accepted. The listing agent must enter information into an online submission, and it must conform to what the bank asks for, and all fields must be filled out. If a foreclosure has 20 offers, the listing agent doesn't have time to call 15 agents and beg for information that is required by the banks online system. Keep in mind, it takes awhile to upload 20 offers, and the listing agent may be dealing with 20 properties.
Listing bank foreclosures is very time intensive, and the listing agent coordinates everything from repairs to working out HOA fees, title issues, code violations, etc. Providing the required information is the first step.
Secondly, consider that you're probably competing against other buyers, and that many will be above asking price. So how do you compete? Consider a higher escrow money deposit, shorter closing time, and definitely a shorter inspection period. Bank asset managers are also gauging the strength of each buyer, so you want to put your best foot forward in hopes of getting the property. Banks are on the lookout for buyers tying up properties then using contingencies to escape later. Banks want solid deals, so you want to dress up your offer to make you look like the best buyer in the batch. The price will be close to asking price or above because it's a deal anyway, so you have to compete in other ways. In many cases banks will counter multiple offers with highest and best. Buyers are shocked when the bank doesn't and just accepts one offer, so it always pays to pony up early on and go for it. If you do get a highest and best form, assume the other buyer wants it as bad as you do, and act accordingly, because if you don't, chances are you won't end up with the home.
Be careful that your offer is written well and clearly states all fees and costs. It is difficult to impossible to make changes later, and it could cost you the home. Any change to the contract later on opens up the possibility the home goes back out for rebid and you could lose it, so it pays to write offer correctly the first time. Same applies with names; make sure everyone who wishes to take title is on contract from beginning. You may not be able to add names until after closing, which could require new title insurance and additional fees.
If you're purchasing as an LLC, make sure you provide documents upfront that you're authorized to sign for the LLC. The bank will ask.
These are some very useful tips by an experienced foreclosure agent. Each bank has their own rules, so be sure to follow directions well. Make sure you're working with an agent who understands contract language. Many times we see financing contracts that don't match up or specify some costs buyer is not allowed to pay under the buyer's financing program, and the offer cannot be presented to bank until language is cleaned up which could cost the buyer the sale because of delays. Be sure to work with an agent who has experience writing clear and concise contracts and understands financing in and out.
Following these tips will increase your chances, and ignoring them will most assuredly have you scratching your head wondering why the bank selected another offer. Good luck and happy house hunting.
Washington may not be smart right now, but the money always finds the way. Let's just hope the money stays in the US and we remain relevant. Stay tuned.
Sales Decline as Listing Inventory Falls
As you can see from the SW Florida Sales chart, SW Florida single family homes sales have been somewhat seasonal the past few years with sales peaking around April and declining after June or July. Although it's too soon to tell, early indicators tell us 2011 may repeat recent history as pending sales are trending even with last year and closed sales have begun their descent.
Even more importantly this year may be the lack of inventory compared to previous years. We've seen a major decline in inventory in recent years. Currently single family inventory stands at 6.89 months supply, but even that number is a little high because many of the short sales are tied up and not closing. In fact, last month only 13.8% of the pending short sales closed which is much lower than traditional pending sales. It's unreasonable to think all pending sales will close, but 13.8% is practically nothing.
If we took out active short sales from the equation, the month supply of inventory would be lower. I believe the'month supply of inventory is deceiving as many homes on the market aren't really on the market as they'll never close.
As you can see from the listing inventory chart, it's really come down in the last 18 months. Lehigh Acres inventory'is below 1,000 homes for the first time in years. Of the 975 homes on the market in Lehigh, 470 are short sales and 117 are bank foreclosures. 60.21% of all homes on the market in Lehigh are distressed, and last month 63.06% of all single family sales in Lehigh were distressed.
Cape Coral and Fort Myers inventory has come down too however the ratio of distressed sales is much less. For instance, Cape Coral distressed inventory now stands at 44.15% compared to 60.21% in Lehigh. Fort Myers distressed inventory stands at 37.18%. On the closed sale side, Cape Coral distressed sales were 50.51% last month and Fort Myers distressed sales were 42.97% last month.
Buyers are finding they just don't have as many choices today. They love the prices, and they realize homes priced $150,000 or less have seen rising prices, but they've been increasingly frustrated by competing with other buyers with multiple offers, or long wait times on short sales. This is just all part of the SW Florida housing market and it may last another few years.
Foreclosures will run their course in due time assuming the economy picks up in the next few years, but short sales may remain for awhile until prices return to points where a seller can afford to sell. We see increasing prices in the low to moderate end going forward; however we don't envision a return to 2005 levels. The market has reset and people are accepting the new reality of the market.
This is good news for the younger generation as they'll be able to purchase the American Dream and not be saddled with debt their parents have endured. It's a fresh slate and we can only hope generations going forward can study the past and learn from it.
While we believe buying real estate today may be a great investment long term because eventually prices will rise, we also recommend buying a home that suits your needs versus focusing strictly on investment potential. Investment potential is what caused so many people to buy into the last market frenzy and some forgot the whole purpose of buying real estate is to fulfill a need, especially if it's your primary home.
If you're buying a second home or investment home, there are some factors to look for that may assist you in making the best decision for you. Real estate can be a good investment, and it helps to clearly define what your goals are and think long term. If you're buying a primary residence, it's rarely a good idea to buy solely on investment potential if you don't like the home or it doesn't meet your needs. Plan B is always to keep it awhile longer until the market works in your favor, and if you're unhappy with the home, that's harder to do.
It is a good time to buy, so if you're in the market, seek professional advice on current market conditions, and put your best foot forward. Don't be afraid, be informed. Call us at 239-489-4042 if we can help.
ÂHow Will US Debt Downgrade Affect Local SW Florida Real Estate Market?
Because this is the first debt downgrade from AAA+ for United States Debt we are entering unchartered territory, but we can offer some clues on what to watch out for and how this could affect Main Street going forward.
Nobody I know would say a downgrade to US debt is a good thing; however there may be a silver lining after all. First off, the downgrade was inevitable. S&P telegraphed this downgrade and stated so much when they announced it would take $4 Trillion in deficit cuts to protect our credit rating. Congress finally sent a bill promising around $1 trillion in cuts now, and other unnamed cuts later on. The reality is we cut about $21 Billion from this year's budget, which is at a deficit of around $1.6 Trillion, so it's really a drop in the bucket. We just added over $2 Trillion to the debt to get us through the next election. Wall Street is concerned Washington isn't serious about cutting costs, and who could blame them with fuzzy math like this?
The blame game has begun with Democrats blaming the Tea Party for the downgrade. This is kind of funny as it was the Tea party that pushed for cutting costs, something Standard and Poors said was necessary to protect the US credit rating. So Congress dropped the ball and blamed the only people working towards a solution to protect our rating. Washington doesn't get it, and now they're in recess. The world gets it and they realize we're flat broke. We've spent and borrowed beyond our means and nobody wants to pay the bill. Unless we change, we're in for more downgrades. Even Republicans have said "The Tea Party Won. They changed the conversation from automatic debt increases to deficit reduction." And this is the problem with Washington. It's all talk. They cut nothing. All they did was change the conversation, and somehow that's good enough for Washington. This is the way it's always been and that's not good enough anymore. Our debt is being downgraded.
Now, here comes the silver lining for local real estate. Don't take this as good news, because it's not, but it's not all bad like you hear in the media. When there is uncertainty in the market, which there clearly is right now, investors seek a flight to quality, which as traditionally been the US debt. We look good compared to many nations' debt, so we're still considered a leader, but our days are numbered.
Part of the flight to quality in uncertain times is seeking out tangible assets that have a value behind them. Obviously one is gold, and another is real estate. The difference is gold is just gold, but you can rent out or live in real estate. You can actually derive an income from real estate. Both can go up and down in value, but only one can provide a yield while you wait.
The other silver lining is investors worldwide have flocked to the 10 Yr Treasury note, as this is safer than the 30 Yr bond. Today's mortgage rates are closely tied to the 10 Yr note Vs. the 30 Yr bond, and as investors seek safety, the yield is going down making mortgages more affordable, for now. 30 Yr interest rates are down today to 4.375% with no points.
There is a hidden double whammy working in the real estate market's favor right now. Wall St is skittish, and this could all change on a dime. The final silver lining could be that the S&P downgrade was a shot across the bow of politicians. Perhaps if the American people speak out and tell their politicians we cannot continue living this way, they'll have the political will to make necessary cuts. America is still a great country, we just spend too much. We have an opportunity to make these cuts voluntarily now, or we can wait until the markets do it for us like with Greece. There were riots in Greece as the public wasn't ready for the tough choices. Let's hope the American people are ready today and send that message to their politicians so we don't have tough choices Forced upon us later on.
In the meantime, take advantage of low interest rates, low prices in Florida, and watch to see if investors take money out of the stock market and invest in real estate markets across the US. Median prices have risen 30% locally, and with any luck we can keep that trend going. Of course, with any luck, Congress and the president will pass a real budget that pays the bills. We can always hope, and maybe, just maybe, this downgrade will wake people up and address a situation that has gone unchecked far too long. If not, there's always church on Sunday. Maybe that's what they meant regarding separation between church and state. And if that doesn't work, watch where the smart money goes.
Washington may not be smart right now, but the money always finds the way. Let's just hope the money stays in the US and we remain relevant. Stay tuned.
SW Florida Real Estate Prices Holding Steady
Median single family home prices increased slightly in June rising 1.91% from $114,900 in May to $117,100. The 2nd qtr of 2011 was the 3rd highest on record trailing only 2010 and 2009. Inventory levels have been falling and median prices have been rising.
Perhaps the most often asked question is, if prices have risen 30% since January, does that mean all prices have risen that much? The answer is unfortunately not. The official number is simply a median price, which means half the sales occur over $117,100 and half under that amount.
Foreclosures have dried up which has taken many sales away at the lower end of the spectrum. While this does alleviate some pricing pressure to the downside, it doesn't automatically make higher priced properties worth more. Supply, demand, and economics dictate that. In addition, of the foreclosures we are seeing hit the market, some are at the upper end of the spectrum.
Currently we have 2 properties pre-listed that will be well over $1 million. One is a large home near the end of Captiva Island, and the other is a 5,500 sq ft bay front home in Bonita Springs that features an elevator, pool, 2 docks, and much more. While you would think these eventual sales would pull up the average price, keep in mind they are only 2 sales out of over 1300, so they don't influence the median price as much as they would the mean average price.
Interest rates may begin rising with the uncertainty over the United States credit rating. Inevitably it looks like Congress will fail to adequately address the root cause of our debt crisis and will place bandages over gaping wounds and $54 Trillion of unfunded debt which will not settle the credit markets long term. What we see today is all political posturing and kicking the can down the road, all the while Medicare may be broke in 6 years and not there for anybody.
It just seems funny that we're hemorrhaging $1.6 Trillion dollars this year alone which equates to us losing $4.38 Billion every single day. Congress has been talking about cutting between $1 Trillion to $2 Trillion dollars out of deficit over 10 years in return for raising debt ceiling $1-2 Trillion dollars. So in other words, we'll reduce our deficit about $100 Billion each year for 10 years while we increase it that much today, and it will only carry us through 6 months. The deals pay off nothing and we're nowhere close to a balanced budget, let alone paying off any of the debt. I think if the American people realized what Congress and the president are really doing, or not really doing they'd demand some action. We're not really doing anything until we begin balancing our checkbook and paying off some of the debt. Until then, we're making it worse everyday.
For every 1% increase in interest rates it robs borrowers 9% in purchasing power. Let's say you were going to buy a $100,000 property today but waited and rates shot up 1% due to a downgrade in US debt. For the same money you would now only qualify for a $90,000 home, which is not good because prices have been going up and you're still paying the same monthly payment for less home. That's assuming you can even find a home for 9% less money that meets your needs and isn't gobbled up by investors. It's getting tougher for first time home buyers on every front to purchase a home, from banks lending money, to interest rates, decreasing selection, etc.
This whole debt crisis and the excuse of a US debt downgrade is a farce. The credit agencies will downgrade us anyway even if we continue to keep raising the debt ceiling unless we get our fiscal house in order. It's kind of like a family that agrees to take on more debt. If you take on too much, your credit rating will suffer. So don't let the politicians fool you that they're making significant cuts or we need this to avoid default and protect our credit rating, because that's just Washington speak.
Housing has come under enough pressure in recent years without politicians devaluing our property values because they can't agree on a budget. Prices have been rising in SW Florida, which is good for a change. Let's keep the positive momentum going!
SW Florida Home Sale Prices Highest Since December 2008
Median SW Florida single family home prices in December 2008 stood at $106,900 and were on their way down. In fact, the very next month in January 2009 prices stood at $94,900 and bounced around in the $80’s and $90’s until April of 2010 when prices jumped unexpectedly to $101,500 before settling back down in the $90’s for the rest of the year.
2011 is a bit different as we've been predicting prices could rise. Back in 2010 we had some equilibrium in that inventory was almost keeping up with home sales, so there wasn't room for prices to jump much. This all changed in the latter part of 2010, and that trend has accelerated in 2011. Pending sales are strong, inventory is way down, and prices jumped 7.15% over last year.
Median prices jumped 11.37% last month alone, and are up 15.14% from January. So what is driving these price increases, and why were they so predictable? Two reasons stand out. Inventory has been shrinking because demand is high and buyers are scooping up properties because Florida has been on sale and they realize the train is leaving the station for the best buys.
The second reason is banks have had difficulty bringing foreclosures to the market in light of investigations into bank practices submitting proper documentation in the foreclosure process. Many of these mortgages were sold as securities and banks must prove that they are the owner of the mortgage and have the authority to foreclose. Banks don't always have to produce the original note, but they do have to comply with certain procedures. Now the courts are even under fire for their role in pushing these through so quickly. Lee County adopted the Rocket Docket which included hiring additional judges for the sole purpose of hearing foreclosure cases. There was a huge backlog facing the court and the Rocket Docket helped ease that pressure.
Were some of the past foreclosures rushed and fully documented? We'll let the legal professionals answer that one, but it's fairly safe to assume these processes are being followed much better now as banks, attorneys, and the courts are taking their time and crossing the T's and dotting the I's.
We do know more foreclosures will be released. The question is when, at what rate, and how many more? We've been hearing starting in about May or June to get ready for more. We don't believe it will be a slammed pace like it was back in 2009. We also don't believe it will be in those quantities, unless the economy deteriorates further leading to more foreclosures.
Under these assumptions, prices should hold steady and/or continue to increase going forward, at a sustainable pace. We don't believe prices will skyrocket back to 2005 prices anytime soon, nor should they. They were artificially too high back then, just as they are artificially too low now.
Additionally, the initial foreclosures were at the lower end of the price spectrum. Newer foreclosures have tended to be larger homes at higher price points, which should also lead to higher median prices as these properties sell. It's getting very difficult to find homes under $100,000 in Cape Coral or those $30,000 Lehigh Homes we used to see. The only $30,000 homes we see now have defective Chinese Drywall or other problems. So don't be surprised if prices stay where they are, or bounce along with a general trend higher in the coming year.
SW Florida Real Estate Market Going Off a Cliff
When you hear the market is falling off a cliff it brings back memories of the past 5 1/2 years of a real estate market in freefall. Anyone reading headlines for the past several years would believe any such headline is another bad story and perhaps would bury their head in despair.
Well SW Florida, a part of the market has fallen off a cliff, and it's actually good news. Inventory has been eaten up by buyers faster than it has come on the market, and buyers are actually competing with other buyers to buy the best properties. It's not uncommon for a property to have multiple offers.
For historical reference, I just checked overall Lee County single family inventory numbers for October 2006 which stood at 12,669. They peaked at 16,694 in February of 2008 and basically held firm until December of 2008 when they began to fall. Currently single family home inventory stands at 9,785.
We've included inventory charts for Fort Myers, Cape Coral, and Lehigh Acres because overall inventory numbers can be deceiving. You'll notice there are some minor differences, but for the most part the lines look similar and all three show a steep decline from January 2011 to present.
While national news outlets report the rest of the country could be in for a fall, nationwide analysts fail to recognize SW Florida has fallen for over 5 years and is actually on its way up. All real estate is Local, and our market is artificially priced too low, as much as 40% below replacement cost in some instances. As distressed inventory is shrinking, we've seen median sales price increases because the market cannot sustain these artificial low prices forever.
We do expect more foreclosures to hit the market as the legal system has been working through some challenges pertaining to the validity and legal documentation provided by the banks. We don't believe however there will be enough foreclosures to satisfy buyers' appetite and we could continue to see rising prices. We don't believe the next wave of foreclosures will be as large as the first waves, and our market absorbed all those foreclosures just fine.
We've seen rising prices, increasing pending sales, and decreasing listing inventory for several months now. The fundamentals point to a recovering market in SW Florida. Wildcards can always influence any market, such as gas prices, terrorism, the United States mounting debt and its effect on interest rates, inflation, Middle East flare-ups, and so on. Last year we had an oil spill that had the potential to influence our market, and in some respects probably did.
Nobody knows for certain what wildcards might present themselves. For instance, not many people predicted a 9.0 earthquake that would lead to a tsunami which would lead to a nuclear crisis in 2011, but it happened. Each event led to and compounded the following event.
Absent any major wildcard events, it would appear that the SW Florida real estate market is on solid ground and mounting a comeback. We'd like to see sustained job growth before we're ready to see sales prices take off, and this is why we know prices will increase, we just can't say how fast and how high until more of the picture comes into play.
Using Video to Augment Your Message
Let's face it, as agents we're either promoting properties to sell or educating the public about changes in the real estate market or tips professionals know that the public may not. For years agents used traditional print marketing, TV, radio, billboards, mail outs, signs, banner advertising, and more. Many of these are still very effective and they're used by large and small companies to this date, however video has exploded on the scene as a medium anyone can use to further illustrate a message.
Newspapers are using video as a way to compete with TV stations. Large news organization post videos provided by viewers, Viewers become extra eyes in the field. Courts are using video from police cars, and defendants are using video to tell their side of the story.
Video doesn't replace older media, but it does open up new ways of reaching consumers. The Y generation would just as soon search the Internet and watch videos about a subject than watch the news or visit a library, so reaching younger consumers requires change. If I comment to my children I'm having difficulty hooking something up, they'll have a YouTube video up in about 15 seconds thoroughly explaining the task. I guess those bad instructions in the box don't matter so much now.
High definition video cameras make it easy to produce video. The trick is proper lighting and sound. We've created some high quality videos and some quick videos that tell a simple message about the market without all the bells and whistles. What we've found is viewers don't seem to care about the bells and whistles as long as the video is informative, timely, and matches what they're looking for.
We've created a YouTube channel www.youtube.com/brettellisfl. Currently we have 113 videos uploaded and about 45,000 views. Our property tours are located on another channel, so these 45,000 views are simply people tuning in to hear about the market or timely news affecting real estate.
Marketing really works when you tie all the media together. For instance, our print ads show our website. Our website has links to our YouTube channel, property tours, MLS search, and more. Our MLS search has links to the others as well. In this way we get all the marketing tools we invest in to work together, in concert. Together these tools can be so much more effective than if we just used on over the other.
Consumers are like cable TV viewers. If you've ever flipped channels you'll notice there are a lot of things on at any one time, and they’re competing with each other. Younger viewers like MTV, while older viewers might like the History channel or national news. There is a place for each, and while they cross over, each definitely has a certain target demographic.
Marketing is similar. Each method could potentially reach everyone, but realistically there are target demographics, and getting them to work in concert with each other increases frequency and reach. It also sends out a message to the public when they see you more than one place. They think you're everywhere. No matter where an agent puts their marketing dollars, the message is critical. It pays to be clear, concise, and topical. The public enjoys getting this information in print, on smart phones, and certainly in video form.
Look for video to play an increasing role in the dissemination of real estate information. Video will help companies and agents differentiate themselves and allow consumers to decide who they best want to do business with. It could be the information, the look, the professionalism, etc. Video opens up an array of ways a consumer can evaluate who they do business with and assist in making a choice. And if you ever want to know how to unclog a sink or hookup a BluRay player, consider doing a video search, or ask a 10 year old.
Market Breakdown
The past few weeks we've laid out in detail how prices have increased and some reasons that would explain why. This week we thought we'd illustrate how the distressed market is faring versus the traditional or normal resale's and look at how that impacts prices.
As you can see from the chart, distressed sales are down about 4% in 2011 versus 2010. We all know distressed sales have weighed down the SW Florida real estate market for several years. Prices didn't just fall in half, they fell in some cases to about 25% of what they were back in 2005 or early 2006.
We've often said sale prices have fallen artificially too low and the only thing holding them that low was a flood of continuing foreclosures entering the market to keep the prices down. For the most part, investors and 1st time buyers bought every foreclosure they could and prices stayed low because there were new foreclosures coming on to satisfy buyers appetite.
The foreclosure machine hit a snag in late 2010 due to legal concerns in Florida and 10 other states; however we expect that foreclosures will return in the 2nd qtr of 2011. The question is how many more are left, and how long will it take the banks to work through them. I guess the other question is how long will the economy be stagnant further forcing teetering homeowners over the brink?
Assuming we're in the 7th inning of the foreclosure crisis and that any wave of future foreclosures won't be as robust as past waves, prices should continue to rise. Official numbers for March won't be released for about 3 weeks, but preliminarily we're seeing median prices rising about 3.45% over last year and mean average prices rising about 16%. Stats were pulled as of March 29, and it does take several days for all sales to be entered into MLS, so these are very raw and preliminary numbers, but they do coincide with what we've been seeing and predicting the last several months.
As prices rise, more and more sellers will qualify to sell without being a short sale or foreclosure, which will also change the charts. Nobody should expect an overnight turn around as our market is still healing, and even though we're in the latter stages of the correction, healing can be painful. Sellers expecting a return to 2005 prices might be waiting years or a decade or more.
We'll also be anticipating Congress submitting and passing a budget. Many do not realize that last year's Congress didn't do that, so we haven't had a budget in 2 years. They've kicked the can down the road and left it for others to do. Because Congress didn't do their job last year, it's making it tougher this year, and everyone knows we need steep budget cuts. Inflation will rise as we cannot continue deficit spending. This throws the capital markets off and interest rates could rise, which could also affect real estate prices as increased rates dig into buying power for buyers. When rates go higher, buyers have to offer less for homes in many cases to afford the property. Increased interest rates are like a hidden tax on real estate, so we'd hope for our country to get it's spending in order for a lot of reasons.
Stay tuned and we'll watch together how these forces play out and affect our market. Nothing is as simple as one variable dictating prices. We have several variables at work, and time will tell.
Jumping to Conclusions
One of two things will happen, and possibly both. Banks may start releasing more inventory in the coming months, and home prices could begin to rise as inventory levels drop off.
We've been noticing a distinct pattern the past few months. Inventory levels have been dropping just as pending sales have been increasing. We can thank the banks for this as they've withheld inventory due to legal concerns over title and the foreclosure process. We've also seen an increase in closed short sales. Lastly, we've seen a rise in regular sales, all leading to a decline in inventory levels. County-wide levels were down 4.32% from last month, and yet we're seeing sharper declines like Cape Coral which had a 7.18% drop, or Lehigh Acres which experienced a 10.22% drop in available listings.
Combine this with season and buyers from up North scooping up bargains and it would be easy to jump to the conclusion that home prices have to rise. In fact, we predict they already are. Last month's numbers showed a drop in prices, but we're not too concerned with that. Next week official numbers will be released and we believe they will be higher. Sales may be down from last year because the inventory isn't there, but prices could very well be up. We wouldn't be surprised to see prices gain close to 10% from last year's numbers.
If you read this article weekly, or our blog, you know that we've been predicting a decline in sales transactions combined with price increases at some point in the future. That point could be now. We would say definitively, however there are still some external wildcards that can influence transaction volume and prices in the short term.
Those wildcards are banks releasing backlogged inventory once the title issues are worked out, and every indication is banks will start releasing again in the next month or so. The question is how much do they have left in SW Florida. We believe nationwide there is much left, however nobody knows about SW Florida as we've been in this crisis the better part of 4 years now. Possibly we'll emerge as the rest of the country deepens, but something tells me we still have more to work through as well.
Other wildcards include the US economy, oil, and Mideast stabilization as it pertains to energy. If the Mideast settles down and oil returns to normalcy, there are signs the US economy is headed for a modest recovery. Combine all this with the fact we believe we're in about the 7th inning of the SW Florida foreclosure crisis, and we could be on our way to higher prices. We're not predicting a return to 2005 prices, but rather a sustainable march to replacement cost prices. Once we reach replacement cost, builders will start building again, which will further fuel our local economy.
Should the governor be successful in landing some companies to relocate to Florida, this could be a wildcard on the positive side. Bottom line is many factors are at play, but for the past year or so investors and Northern friends have realized Florida is on sale, and they're buying.
If we don't see the negative wildcards, prices almost certainly have to rise. The reason we don't believe they'll double or triple anytime soon is because appraisals won't support that, consumer spending may not support that, and we have hidden inventory that may enter the market. No, we're not talking about the shadow inventory of banks, but rather shadow inventory of regular sellers who would sell if they could, but can't because they're currently upside down on their mortgage and do not want to suffer financial implications of a short sale. Once prices rise, we could see more sellers test the waters and attempt to sell.
That's a lot of variables influencing the market, and the most likely outcome we believe will be modestly rising prices, at a sustainable and healthy level. Once this becomes well known, more buyers will line up because they will have seen we've hit bottom and bounced back up. They will have missed the bottom, but this will be close enough to make them feel good and jump back in.
We also believe banks will loosen credit standards this year. They've been too tight with the money looking for any reason not to lend, and this will change in 2011. Combine this with buyers realizing the bottom has passed, and we the conclusion we jump to is modestly rising prices. Let's watch for the numbers next week. What conclusion do you reach?
Big Changes Coming in Mortgage Market
On April 17 rates are going up. How do we know the date? We know because that’s the date fees change under guidelines designed to attract private money into the lending system and reduce or eliminate FNMA, GNMA, and Freddie Mac, the three quasi-governmental agencies that insure mortgages and bundle them for securitization. They're not really governmental, but they might as well be as the government has funded them until now. They are private companies that pay investors profit, but tax payer funded when they lose money, so something had to change.
So what is changing? First off, rates are going up. This will increase yields, which will attract banks, hedge funds, and other large sources of capital into the market. Large companies will actually compete to make more of this money. A lot of money has been bottled up sitting on the sidelines and this may be the conduit to free up that money.
When rates go up, home prices usually go down. Not so fast! In this case, prices could eventually rise. Many ask how this could be. The answer is complicated, but noteworthy, so we'll do our best to explain.
Under the new guidelines to get the best priced loans, borrowers will have to put more down. The old 20% down will now be 30% down. However, credit scores will also be lowered for qualifying. Imagine many of those people that sold via short sale being told they wouldn't qualify by FNMA for 5 years. It turns out they may be eligible after just 12 months under certain conditions.
While rates may go from 4 7/8% today to possibly 6.5% in April, more people will qualify. We still have FHA for low down payment options. Some people are predicting another real estate boom coming sooner than later nationwide as pent-up demand for housing intensifies, and more borrowers being eligible to purchase.
Imagine having a 540 credit score and being able to purchase a home. Those days may be coming again, if you can scrape together a down payment. Home prices are artificially too low in SW Florida and are in fact below replacement cost. This has caused multiple bidding situations for prestigious properties in short supply even in the upper price ranges in certain parts. Naples and Bonita have experienced a resurgence in prices, and many feel this is bleeding north up into Estero and Fort Myers. We are currently being driven by 2nd home buyers looking for deals.
As prices get closer to replacement cost, building will begin to pickup, which will bring jobs. As the SW Florida economy grows, the real estate market could gain traction very quickly, especially with Snow Birds and existing residents qualifying sooner than expected for their next mortgage.
Keep in mind 7,000-10,000 people are retiring or entering the social security income stream everyday. Florida stands to gain from the Baby Boom generation relocating or buying 2nd homes.
Many on Wall Street are anxious to cash in on the looming change to the capital markets coming in April. In fact, Wall St is waiting like a tiger to pounce. Some are predicting a feeding frenzy for housing and rapid price gains.
Some people believe the change to FNMA and Freddie Mac will damage the markets by increasing borrowing costs and raising down payment requirements. Others believe borrowing was next to impossible anyway the last few years and banks only lent to those who really didn't need it. I don't know who is right, but I will say if we open the door for more people to buy, the market could recover quicker than most expect.
2011 could really be a year to watch and keep an eye on the financing markets. If Wall Street gets greedy like last time, it could be a boom for real estate. The difference is, FNMA and Freddie Mac, and the US taxpayer won't bail out bad loans, only systemic losses due to financial meltdowns. Hopefully we’ll enjoy the next boom with no meltdown, and higher down payments will help with that. If our markets stabilize like we think they will, even low down payments won't affect the market because the market won't be in freefall, and we'll be adding jobs to the economy versus losing 8 million like we've done the past 3 years.
Bottom line, keep an eye out for sunny days ahead in the real estate market and we just might see them sooner rather than later. And mark your calendars for April 17. This will be the beginning of something. Time will judge the ending.
Housing Roler Coaster
It seems every on every appointment we go or every speaking presentation people want to know if our market has stabilized and finally headed up. The answer is it seems that way, but our market is still in the process of healing. The more complete answer is we are headed for better days; it's just a question of where we are in the process.
To illustrate where we are, we made a new chart that shows a timeline of median sales prices compared to sales volume, or # of transactions. Sometimes as prices go up or down it can affect transaction volume, so we thought we'd study that and show you. We've also included a graph of the Emotional Housing Cycle we brought to you in a State of the Market Report several years ago.
When we first presented this concept we were illustrating that our market needed to go through a healing process and there would be pain ahead. Back in January 2006 when prices peaked we were in the Euphoria stage. We went on TV in October 2005 telling people this market had run its course and wasn't going to sustain price increases and people had better start looking at the fundamentals of the market. We pulled investors from new opportunities.
We bring all this up because back then it was a herd mentality, and we weren't afraid to alert the market to a forthcoming change. People of course made fun of us and said this market was a run away train and we couldn't stop it, as if we were trying to. Fast forward to 5 years later and you'll find that we've gone through the painful process and we're probably past Desperation and approaching Hope.
I know if you're home is in foreclosure or has been foreclosed and times are desperate, you might not be feeling the hope. From an overall market perspective, there is hope. A few weeks ago at the CCIM Outlook a question came from the crowd asking where we are in the foreclosure crisis. I answered I think we're at about the 7th inning. We do see more foreclosures coming, but they are not at the pace and intensity we've seen in years past. Once we get to the point of fewer foreclosures, and fewer short sales, prices can increase rapidly. We're not there yet.
We'll also keep an eye out for signs the overall economy is improving, and of course we always need to pay attention to wildcards like foreign oil supplies, interest rates, and financing availability. Fannie Mae and Freddie Mac may be privatized and lower down payment options may dwindle to FHA and VA loans.
2009 was a record year for sales. If you look at the graph, even though prices are down from last months numbers, transaction volume is higher than 2009. 2009 pumped out foreclosures at a record pace, so we probably will see less volume in 2011 simply because we're seeing fewer foreclosures. Short sales are still a tricky proposition and not guaranteed to close in a timely fashion, if at all. Someday we'll write a book on all the shenanigans we've seen banks play with short sales. We have sold several, we're just saying don't always count on banks to do the logical thing or what’s in the best interests of even the bank.
We wouldn't be surprised to see a rise in median prices next month and good sales volume as we are seeing a backlog in pending sales. We'll be releasing our 2011 State of the Market Report soon which will cover some of these trends.
Sales Prices Drop Unexpectedly
The Florida Association of Realtors released official numbers, and as expected the number of sales were down, but fairly steady with last year. We predicted in last week's article they'd be right where they are. We also said last week that we didn't study the sales prices, but that we wouldn't be surprised if we saw them rise again in January. Perhaps we should have studied those numbers because they did not rise, they actually fell 3.86% from last year's numbers and fell 4.32% from December's numbers.
We can't put too much emphasis on one month's numbers, especially January numbers because there was a flurry of activity in December to get homes closed by the end of the year. Many sales have stalled or pulled due to title issues. We're just now getting a few listings back from the banks in the higher priced end that were stalled due to this, so this can have an impact on closings and prices temporarily.
Just the same, we half expected prices to rise again as we believed fewer sales would equate to rising prices. Because more of the foreclosure sales in the past have been in the lower price points, fewer foreclosure sales means the median sales prices gets pulled up from the top and pushed up from the bottom. This evidently did not occur. It is possible that as more short sales went through they were in the lower price points.
It is season now and we have pent-up sales and rising pending sales, so again going forward we will not be surprised to see rising prices. In fact last year this happened as evidenced by the chart.
This past week we attended the News Press Market Watch National Association of Realtors Chief Economist Lawrence Yun gave some insightful statistics that may impact the US and SW Florida markets. He expects interest rates to hit 6% by the end of the year and 6.5% sometime in 2012 as rising deficits lead to inflation.
Mr Yun still believes we will see 50-60% distressed sales in the SW Florida real estate market this year, and we have 2-3 years total before all foreclosures are worked out of the system. If President Obama enacted an elimination of the mortgage interest deduction it would have an immediate effect of lowering prices nationwide by 15%, and our economy doesn't need another big hit from real estate.
He expects about 3% GDP growth and unemployment to be around 9% in 2011 returning to a normal 6% by 2015. Businesses are making money, but they're afraid to hire due to uncertainties with new health care costs and banks aren't willing to lend to businesses due to blank pages written into new banking rules. By blank pages he referred to pages that state a future committee will determine actual rules, so banks are hoarding cash and not lending.
Mr Yun says Washington DC is to blame for businesses not hiring due to uncertainty. If we could give certainty back, business may hire more quickly, and this would speed up time lines for recovery dramatically. For instance, we've lost 8 million jobs since Obama took office, and in 2010 we created 1 million jobs. 1 million jobs is pretty good, but nothing compared to what we lost. At this rate we'll create 2 million jobs in next 2 years, but we're still way down from levels just 2 years ago. If we could speed up businesses hiring, we could speed up the recovery, which would help real estate. Wall Street is doing OK as we’re seeing record profits, but no motivation to hire due to Washington.
Sales are near record levels. To put this in perspective, in 2001 we had 376 single family home sales. We had 443 in 2002. In 2011 we had 1,072, down slightly from 1,115 in 2010. Our sales are on fire. Our prices leave a little bit to be desired, unless you're the buyer. Buyers realize SW Florida is on sale and they're buying as fast as they can. We can see light at the end of the tunnel, and prices should increase going forward. Just don't expect 2005 pricing to come roaring back anytime soon. We're looking for modest gains, and as Dr. Yun says, cities like Las Vegas and Fort Myers might even see some occasional surprises on the upside of pricing going forward.
New Ways to Market Real Estate
Marketing real estate has definitely changed over the years. We like to say it has evolved to meet the changing ways consumers react to seeking information. Some media are effective at reaching actual buyers and some not so much. When evaluating a marketing idea, we must first look at the target market, and whether its use will be effective in reaching that market.
We've been sitting on a piece of technology for over a year we've been pretty excited about. We didn't start using it until recently because we felt its application wouldn't be realized by the masses, until now. As an agent we can be Leading Edge or Bleeding Edge. Last year would have been Bleeding Edge, so why introduce something until the public is ready?
This new tool is called a QR Code. It's basically a barscan format that allows a Smartphone to read a code and do something with it. The typical uses of a QR code are to direct someone to a website, to text message, call a phone number, or just text information.
Google has promoted QR Codes so business can place a code in their store window, in print advertising, or on flyers or billboards so consumers can get detailed maps and directions to the business from their phone, store hours, and basic information about the business. Google even places QR codes now on Google Places accounts.
We've been placing QR codes in our newspaper ad directing people to our website, our Google Places account, and to our Virtual Tours of our properties. Agents can even place QR codes on their sign so prospective buyers can obtain much more information right on their phone, instantaneously. Anywhere you can print or display a QR code becomes potential business.
The more information you place inside a QR code, the larger and denser it becomes, which means it will take up more print space. Certain readers have a hard time reading dense codes, so we encourage you to keep them short and to the point. Every technology has a purpose, and must not be overused in ways it wasn't designed. A QR Code is best for someone who's visited your business, at a property, or sees your message online. Its use is to provide information to a mobile user in a mobile world.
Did you know that over 200 million people access Facebook via their mobile phone? Did you know 6.1 trillion text messages were sent in 2010. Did you know the mobile market is more than doubling every year? The mobile Internet is growing fast and will overtake the PC as the most popular way to access the web in coming years.
So the question is, what do you do once you get them to your site? Is the site optimized for the mobile experience, or does it load just like a regular webpage that is hard to read on mobile phone. The people who solve this issue will win in a mobile world.
So take out your phone and have some fun. The next time you see a QR code, you'll know what to do with it. If you're interviewing agents, be sure to ask if their utilizing this technology. Next year you'll see the Yellow Pages incorporate this into their larger ads, and you'll start seeing this code popup on more websites and more real estate signs.
Make sure your Smartphone has a reader. I recommend Barcode Scanner but there are dozens. It's fun to price shop at a store with your mobile phone. This is especially neat when the store offers price guarantees. There's no bigger thrill then when you whip out the scanner and scan the UPC code of the product and find out the store down the street has it for $20 less. The store you're in will verify and match that price.
Barcode scanner scans UPC codes and QR Codes. If you've never heard of a QR Code, or wondered what that funny looking graphic was next to a real estate ad in the paper, now you know. We've provided some examples. Good luck, and good scanning.
SW Florida Real Estate Prices Gain Slow Ground in 2010
Official sales numbers were released both nationally and at the statewide level, and the good news is SW Florida's real estate median prices rose 3.65% from $90,400 in 2009 to $93,700 in 2010.
Does this mean we've experienced the bottom and on our way up? The answer is possibly, as foreclosure sales have fallen and prices have risen in the lower end of the market. As this lower end of the market rises, which comprises a large part of the Lee County home sales, it automatically drives the median price up.
Higher priced homes could actually be falling and also raise the media price up. You might ask yourself, how could this be? A Median price simply means that half the homes sold over a certain price point and half under. So in 2010 half the single family homes sold at or below $90,400 and the other half sold at or above this number.
For the sake of illustration, let's say 20 homes sold in a given month at $400,000. Now let's reduce all the $400,000 homes down to $300,000. Do you think more would sell? Of course they would. So now let's imagine the new bargains at $300,000 generated 60 sales instead of the previous 20. This could pull the median up from $90,400 to perhaps 93,000.
I know this example is hypothetical. We also know there are less and less $50,000 homes, so as there are less home sales at the bottom end, and more above the median, the median price gets pulled from the top end and pushed up from the bottom. It is not however a great indicator of what could be happening at all price points.
We're not saying the $400,000 market is still falling, although it could be. What we know for sure is the bottom has firmed up. It feels like anything priced correctly today at $150,000 or less is firm. Priced correctly is the key term. Homes priced at $200,000 today were priced much higher several years ago, and we are noticing these homes selling too. In fact, we believe this season will produce more sales $150,000-$300,000 than we've seen the last several years.
Northerners are just plain tired of the awful weather up north, and they realize home prices are great deals now and they're becoming increasingly afraid they may miss out on the bargains.
Speaking of inclement weather, this past week we had several buyers place offers from up North and they commented they just couldn't take it anymore. Several agents I've spoken with shared similar stories, so the bad weather up North may be good for business down here.
As you can see by the graph, SW Florida home prices are at 1997 levels. This sure is a steep curve on the downside but the worst may be over. We believe there will be more foreclosures, but it feels like we're at about the 7th inning. Most of the investors have already lost their homes, and now we're down to average people who have lost a job, or lost household income and cannot afford the payments, and they just cannot sell at today's prices. How much more of these we see will depend on the national economy and how long the recession persists. Uncertainty in the Middle East and oil prices will be a wild card, so let's all hope for Egypt, Tunisia, Jordan, and anywhere else to remain calm and shipping lanes open.
Banks look like they're bulking up to increase short sale business, although we've heard the talk before. We can say Bank of America has been much better to deal with recently and we've gotten several short sales approved and closed. It would be nice if other banks sped up their processes too.
Inventories actually rose in December despite an increase in distressed closings due to backlogs. We expect this inventory could go down; however we believe there is much shadow inventory. Many refer to banks holding back properties from the market as shadow inventory, but the shadow we're referring to is regular homeowners who would put their home on the market if they could, but they just can't because they owe too much and can make the payments. There is now way to measure this, but typically most in SW Florida would move around every 3-5 years, and people just haven't been doing that these past five years. The reason: See Graph
Sales Rise In December
Official sales numbers haven't been released yet, so we study inside the numbers to see what the market is doing. Our analysis shows single family home sales in December shot up 32% over November, and condo sales shot up over 54%. We've been reporting the past few months pending sales have been building which could lead to a surge in closings. December began that surge.
Foreclosure closings in Fort Myers proper almost doubled from 65 to 123. Short sales climbed from 49 to 68. 57.19% of the Ft Myers single family home market was distressed, up 10% from the previous month. This tells us banks allowed more short sales to close, and we were finally able to close some of the foreclosure sales that were tied up.
Cape Coral experienced a 35.81% rise in home sales. All facets of the market rose, foreclosures, short sales, and regular sales.
Countywide foreclosure sales were up 55.19%, while short sales were only up 13.33% So of the 32% increase in overall sales, a large part was due to an increase in foreclosure sales. Like it or not, foreclosure sales are not only leading the market, they're almost dictating it. Distressed sales countywide last month accounted for 59.90 of all single family home sales, and foreclosures accounted for 41%.
So here's the breakdown. Traditional sales 40.1% Foreclosure sales 41.3% Short sales 18.6%. Distressed sales are driving this market, and probably will for some time until employment rises in the area. Many national news outlets are running with stories that Florida and our area will see further declines. This is a case where the authors really don't understand the market.
We're not ones to fluff up the market. In fact, we predicted declines in prices, and most would say we've been pretty spot on in our price and volume predictions. While nobody can be perfect about something that hasn't happened yet (The Future) we believe SW Florida was the first in crisis and our crisis may last longer because it was more widespread, but we're in the later innings of the foreclosure crisis.
Most of our investors have already folded their cards and ran. Today we're left with more foreclosures, but they're due to people losing jobs and income versus legacy investment choices. Oh sure, there are some investors still losing their properties, but the debt issues (Resetting Adjustable Rate Mortgages) set to reset later this year isn't much of a factor here as those investors are already gone. This will be an issue up North more than here.
I hear people say today's foreclosures are a result of bad loan decisions. Again many of the early defaults were, but today's defaults are more from average people losing one or more incomes. These loans were a good decision at the time, but things change when unemployment exceeds 14%.
We look for solid sales volume going into season as visitors realize our prices are bargains and they're trying their best to scoop them up. A few are going for blood and are realizing they're not in competition with the bank, but other buyers and they're losing out in multi-offer situations.
Buyers in this market are wise to listen to local experts rather than national experts who haven't studied our market and what factors are influencing it right now. If I had a dime for every buyer who said they should low-ball because our market is going lower I'd probably have more money in my pocket than I do now. Those same buyers would have a nice home at a nice price and wouldn't be on the outside looking in wondering how they're going to buy their little piece of SW Florida paradise.
Sellers are the last to realize a market has topped and buyers are last to realize a market has bottomed. While all segments of the market may not have bottomed, many have, and the wise buyer will reset their expectations and go get their piece of paradise before someone steals their gem right out from under them.
