December 2011

Looking Ahead to 2012

Now is the time that we all look back on the year that has passed and forward to the year ahead.  The perspective is different for each of us but one thing is for sure, we all hope to make the upcoming year better than the last.  I am always entertained and refreshed by the optimism professional sports teams have at the beginning of each season.  Why is it, on the other hand, that every news source is obsessed with negativity?  They tell us it is what sells and I suppose that is true. I for one, in my final newsletter of the year, intend to note the negative but dwell on the positive in looking ahead.

The past 7 or 8 years have been marked by extremism in the real estate world.  First, we had the extreme optimism that homes had turned into money machines.  Banks and buyers alike had the attitude that it did not matter who bought or how much they paid.  Everything was predicated on the assumption that values would rise and rise at a rate that would turn even the worst deals into viable transactions.

Along came the bursting of the bubble and we entered the phase of extreme pessimism.  Real estate transactions came to a screeching halt as everyone stepped back and waited for the world to come to an end.  Unfortunately, it did just that for many.  Prices were unrealistically depressed to a point that they were a mere 40% of replacement value and even so, nobody was buying.  Ever so slowly people re-entered the market and homes began to sell, albeit at ridiculously low prices.

I am calling for 2012 to be the year of “Regained Sanity”.    Of course, the news continues to tell us that there is a recovery but that it is lame at best.  We are inundated with news that new housing starts are up but that they are still only a fraction of what they were in 2005.  We are told that housing prices are recovering but ever so slowly.  We will never see the end of negativity but if you take a closer look some of this news is actually encouraging.  I, for one am happy to see a measured recovery as opposed to a dramatic uptick.

Here in Florida, I will tell you as one of the troops on the ground that sanity is returning. According to the December issue of Money Magazine, Fort Myers has seen the highest increase in home values in the country in 2011 at 5.1%.  Fort Myers Florida Weekly recently published an article revealing that the median price for homes sold this year has risen a whopping 28.27%.  This indicates that the bottom feeding has subsided and a normalcy has returned.  The homes that were built for investors who were over extended and went into default were sucked up by new investors positioned to cash in on the opportunity.  Now that this activity has subsided we see more traditional transactions taking place in the vacation and retirement home category. Finally, it is important to note the distinction from the 2 different numbers provided by Money Magazine & Fort Myers Florida Weekly.  One is reporting home values & the other is reporting MEDIAN sales price.

Indeed November numbers appear to indicate that this trend will accelerate now that we are in season.  All of this having been said, values are still extraordinary.  This area was hit hard and fast in the beginning and struggled for a long time but it appears that the low point was about this time one year ago.  I for one am happy to see slow and measured increases in values.  I believe that it is a sign that people have learned a hard lesson and are now being careful in their decision making.  I look forward to this election year when we as Americans have the opportunity to give direction to our country and send signals to Washington about where we want to go.

Brad and I want to take this opportunity to thank all of you who have enriched our lives.  We truly value the relationships we have established in the course of our business and look forward to the New Year with eager anticipation and hope that you do as well.  Above all else we hope that it brings peace, joy, and happiness to you and your family.

Happy New Year,

Dick Dohack

2011 – By the Numbers

We could spend a lot of time going over all of the big events of 2011.  It was, after all, a year of major current events, however, our main focus is the economy, specifically relating to how the economy has affected the Southwest Florida real estate market.  I will be the first to admit that I was WRONG about the market in 2011.  I thought we would continue the trend towards stabilization in the market and have minor appreciation of values.  Well, I was accurate about the stabilization part, but appreciation overall has been higher than I would have expected.  Here are the numbers.

Lee County:

In a superb article from Fort Myers Florida Weekly (seen below), the numbers speak for themselves.  Since January 2011, the median sales price of homes in the Greater Fort Myers area have risen 28.27%.  The overall number of transactions has inched down by 5.5% when compared to this time in 2010.  They go on to explain the increase in median sales price to be a product of an increased number of traditional (non-distressed) sales.  The number of traditional sales has increased from 33.5% in January 2011 to 52.2%.  Certainly this is an indication that sellers are FINALLY seeing a better opportunity to sell…and for good reason. Even more interesting is the fact that the overall amount of inventory is down 30% from just a year ago.  We only have 3 months worth of inventory at current demand level.  Very impressive.

Collier County:

Collier County has seen its share of good news in the marketplace as well, but not nearly to the extend of Lee.  The graph below shows you the average sales price of single family homes in Collier County.  The trend line has remained somewhat flat for the year, but I would expect that December & January numbers would help increase it.  Obviously the average price is much higher than Lee overall, but that is to be expected.

2012 Prediction: While I certainly do not have the super powers of predicting the future (my crystal ball speech), I believe 2012 will be another positive year for real estate in Southwest Florida.  We are not through the woods yet when it comes to foreclosures & short sales, as I think it will be several years before we see that pipeline dry up.  However, we will see less short sales & foreclosures coming on the market which inevitably means continued appreciation.  Demand will remain high even though prices are heading northward.  Consumer confidence is likely to keep rising, especially with the upcoming elections.  Mortgage rates are at record lows now, but it will remain difficult to obtain financing.  We have been seeing the majority of our clients purchasing with cash, and I would expect that to remain the same.

Conclusion: We are still in a buyers market, but the tide is slowly changing in favor of sellers.  There is still time to buy at great prices.  If you’ve been holding off selling hoping the market would bounce back, you may want to have us look at the numbers and give you an analysis…you just might be surprised.

 

Below is the Florida Weekly article mentioned above.