SW FL Real Estate

I indicated in an earlier blog that I would "deal" with this portion later.  Well, it's later.

Why are developers the last nail in the resale market coffin?  Simple:

There is a hugh over supply of resale properties available, right?  Right

• Developers (primarily publicly held) started many new communities
• Developers are still building in these communities (nothing on hold)
• Developers are offering all kinds of incentives to try to entice buyers
• If they can drop prices and offer 20% discounts and free pools and or give you a new car and or upgrade packages and or 1.5% interest (using their finance company) - why couldn't they do that before?
• Why couldn't they just price the damn property right in the 1st place?
• If they have the kind of margin available two years later, they were really gouging 2 yrs. ago.
• Developers are actually getting up to 70% of all transactions (according to public records).
• This drives resales down further and forces sellers to make deeper concessions to try to move properties
• Another thing this is bringing about - sellers helping buy down mortgage interest rates for buyers as a concession to their closing net.

So, if this is true - and it is - if you are a buyer in this market - why wouldn't you be looking at new?  You can be if:

1. You don't need immediate occupancy (or occupancy within 6 mos.)
2. You want to live in a new community where construction will be ongoing for a number of years into your ownership experience.
3. Resale properties are continuing to reduce to get them moved.

Talk to me... I know where the "deals" are.

Thanks for your time.. this time.. til next time...

Today, Fri., March 30, 2007 - A Major developer in this region, Centex, laid off 140 workers (or more).  These cuts are made in their operations from Naples to Sarasota. 

Ken Smalling, a corporate spokesman for the Dallas based company said, “We had to decrease volume to match the declining demand.” “In situations like this, the decisions are always difficult and it’s not about an individual or their work. We had to adjust to the market.”

Projects where Centex is building include

• TwinEagles, 1,115-acre community in North Naples;
• The Quarry, 1,700-acre community in North Naples;
• Hawthorne, a community in Bonita Springs; 
• Lely Resort & Country Club in south Naples;
• Plantation, a 1,600-acre community in S. Ft. Myers
  

Centex isn’t alone in laying off workers. Bonita Springs own, WCI Communities Inc. previously eliminated almost 600 workers and First Home Builders has experienced large lay offs.

New home permits have fallen by 60% in Lee county and 80% in Cape Coral for February compared to February one year ago (which was off substantially from the prior year).  Naples (Collier county) won't report that information.

The housing markets continue to deteriorate here in SW Florida.....

Your thoughts?

Here are the real market conditions:

WCI has had to completely reinvent "Tuscany Reserve".  They have admitted what a callosal failure it is and decided to convert it to a completely different type and priced community.  This community was originally set out to contain homes w/ starting values of $2.5M and require a golf membership cost of $200,000.  Now, the CEO of WCI has announced that coach homes (multifamily) can be purchased for $500-$800,000.  Like the comments say, "wow - WCI has really found the combination for affordable housing"!  A S.F. home for only $1M.  I bet the line is forming now..... Don't you?  I bet those poor sob's that bought for $2.5-7.0M are really proud of their investment, huh?

Lennar reports earning only down 75% from the same quarter only a year ago.

Nationally - single-family home sales fell in February by 18.3 percent from last year and 3.9 percent from January.   Their slowest markets were Southwest Florida and the area north of Palm Beach County.

Instead of dropping prices further - this might be a viable option for many....

Here is the scenario: in leiu of dropping the price of the home further - seller offers to buy down the interest rate for the buyer....for maybe two years.... How it works.....

Amount financed = $225k - 2 and 1 Buy Down, 30 Yr. Fixed Mort. - Yr. 1 (4.375%), Yr. 2 (5.375%, qualifying rate), 3rd Yr. - mortgage returns to the 6.375 % for the remainder of the mortgage which in this case would be 28 Yrs. The cost for this Buy Down is $5,592.00 (for the seller).

There are numerous examples of how this can be creatively made to fit your situation.  Talk to me about any scenarios you would like to consider.

We have a lot of renewed optimism over the increased activity in the SW FL real estate market during March.  Here are some points worth consideration:

• March is historically the busiest month of the year in this market
• The number of pending sales appear to be double that of prior months
• The number of active properties (4 sale) on the mls continue to rise
• The price of existing properties continue to fall on an individual basis

Based on the above notes, the market is not better.  The amount of activity is typically increasing -as I have indicated in prior ramblings - as March and April are always the busiest months of the year in this market.  I think the best analysis is this:

Buyers think:

1. This market is still falling - therefore
2. They don't want to buy yet - as they think -
3. Sellers will become more desperate after "season" is over and -
4. Prices will drop further to rid sellers of the expense of maintaining -

AND they are probably right....... For example:

• I have a seller with an estate home site
• in a totally upscale private golf community
• in Naples 
• this lot is @ .75 acre -
• lake view -
• estate home section.....
• the seller is willing to take a $50,000 loss (based on his purchase price) to "unload" it and
• I can't find a single interested party.  
• Not a single soul -
• not one. 
• this seller is willing to lose "boo coo" and I told him -
• it doesn't matter whether we price it at $1.50 or $1.5M no buyer equals no buyer irregardless of the price. 
• That is the reality of this market.... in my opinion

what do you think?

Here are some comparative numbers for Lee county real estate.  Typically, Collier (Naples) refuses to provide this data.  When the data sucks - Naples refuses to acknowledge it......

Feb. '07 compared to Feb. '06 (which was down dramatically from Feb. '05)

• Sales of single family homes were down 38% 
• Single Family home prices down 9% 
• Condo sales were down 24% 
• Condo prices were off a staggering 39%

Combine that with the fact that similiar numbers were reported for the prior year and you have home sales drops of more than 60% from Feb. '05 - the peak of this market.  For example: the small market of Estero had transactions of 37 ('05) 26 ('06) 17 ('07).  That is approx. a 60% drop in sales from the market top.  Estero prices have jumped then dropped and actually compare to be about the same as '05.

Sprawl....  Toll road.... Developers dream....   There are over 1 million acres in Central FL. exposed by 8 different sets of plans either submitted or in the pipeline for approval. 

This would make Central Florida from Polk County (SW of Orlando) to Lehigh Acres (Lee County) look like the I-75 corridor between Ft. Myers and Naples.  In a perfect world this would take 10 years and 7 Billion $ to complete.  But, it is worth consideration because the "big dog" developers are working on this project day and night......   I swear, Florida is the only place that roads and futures are planned by developers and their needs for growth not by growth and the obvious needs that growth has created......  Current proposals would have this toll road coming into SW FL near Alva and connecting to highway 82 near its junction with 29 on the E. side of Lehigh Acres. 

The demographics guru's still say: more than 6 million additional Florida residents will exist - South of I-4 by the year 2030.

That is the question.  The FL legislature has taken this up.  It is a difficult situation.  Here are some thoughts:

• The state economic slowdown is projected (state economists) to result in a $956M loss in revenue between today and the end of next year.
• Florida is sitting on $2.7 Billion in reserves (check other state coffers).
• This current downturn in revenue is primarily from 1) miserable real estate sales and 2) rebuilding from hurricanes ending
• Over the next 4 mos. the state tax revenue income will drop by over $300M to end in the red for the first time in 30 years.
• County Government budgets have grown a whopping 99% in the past 6 years.  Whatever is done in the legislature.... this should not have been allowed to happen.  Local govt. should not be allowed to balloon exponentially just because they can....
• Will the legislature do away with property tax in this state?
• Will the legislature replace property tax with the highest state sales tax in the nation (8.5%)?
• Would business in the state flourish under this proposed sales tax or will the neighboring states of SC, GA and AL be the big winner?
• Surprisingly, the tax revenue documentation is a lot more stable than one would think and has shown steady slow growth.
• Under a sales tax only plan, Floridians would have zero state income tax and zero property tax (homestead) and 8.5% sales tax....

The Republican side of this has a web site touting their plan for sales tax at: www.nomorepropertytax.com  The end result will likely be somewhere in between and almost all these would require voter approval in November....

What do you think?

If this were to pass (which I doubt), would all the seasonal people sell their homes and go somewhere else?  After all, seasonal property owners would pay a rolled back (2001 equivalent) property tax vs residents paying none?  Here is a thought - would anybody ever buy another car or wouldn't everyone just lease?  8.5% on a $50,000 vehicle would be about $4,250. or not....

11 properties went pending in Bonita - Estero today.  For the entire month of february - only 46 properties went pending.

If the property has a Naples address - it still has a chance to move.   Naples is by far - like triple - the most active market in all o SW FL...  But don't think it is a panacea again.  I have an estate lot (.75 a.) in TwinEagles (one of the most prestigious golf communities in all of SW FL.  We have it priced about $35k below what the seller should consider - even in this market.  We have it priced below what the seller paid for it 2 yrs. ago.  We have it priced lower than any other lot in the development.  AND I can't even get a call or an insult.....  Have we hit the bottom?

This is the most activity seen in the market for at least 1.5 yrs.

Any good stories or comments?  Thanks for your time - this time - til next time....

Probably more appropriately referred to as the "Empty House".  Here is the truth on the Open House concept - at least in this particular market area.

Give it up - don't do it - it is a waste of time and money - it is mentally and emotionally damaging to both the seller and their realtor....  As a professional, I must have the intestinal fortitude to tell me seller what might have a chance to work and what won't (in this market).  Well, this won't help anyone.  It only discourages everyone and has a tendency to skew their vision.

For example; I personally held two open houses this weekend.  Actually, these are very good examples to use.  One property was brand new - entry level pricing and the other was 2 yrs. of age - higher end - in a high end - private - gated golf community.  However, the result was exactly the same.  ZERO people attended either one. 

Was it the fault of the property?  The advertising?  The time slots?  Absolutely not.  These types of results are so frustrating to the realtor that has spent more money (good money after bad) and their time to obtain the worst result possible.  The only reason you hold an open house, in this market, is to satisfy your seller.  Then you have to tell your seller that not one single person came to their open house.  Well, that is never good.  As a note - these two properties are absolutely priced right and in the money for the market.....

The only entity making any money in real estate for the last 1.5 yrs. is the media.  The only consolation to that statement is they are finally beginning to feel the hurt too.  For years, the print media has been the biggest waste of money in this industry but that is for another blog.....

thanks for your time - this time - til next time.....

The numbers for single family home permits issued for Lee County - Feb. '07

First of all - 299 total permits issued represents a 60% reduction from 1 yr. ago which was a substantial reduction from Feb. 05.

A brief breakdown shows:

• Cape Coral accounts for a total of 98 which is down 20% from the prior month and a full 80% drop from the number issued for Feb. '06 (1 yr. ago)
• Ft. Myers accounts for a total of 20 which is a full 84% drop from the number issued for Feb. '06 (1 yr. ago)
• Lehigh Acres represents 80% of all permits issued.  This is also a substantial reduction from a year ago but accounts for the predominant amount of all permits issued.

The primary reason for the large portion being in Lehigh would seem to be due  to the dramatic drop in lot pricing.  Two years ago, s.f. lots brought $50k +.  Today these same lots are closing at $14k-18k!

Collier County permits are not published yet....

What don't we understand?  I will deal with developers in the next rambling -

One of the local "guru" realtors got slammed for telling the truth about the market here.  Unfortunately, he is right and I have been right (look at my blogs for the past year). 2006 blogs can be found:

• Overall growth in this market averaged 17% from '99-04
• Growth went uncontrollably wild in '05 (47% min.)
• This market experienced @ 90% increase in median price
• The market died in '06 due to many factors that are not corrected
• With market downturn comes increases in inventory.... oops
• The inventory just keeps growing and growing and growing

What don't we all understand about inventory and the results of over supply?

1. If a seller does not absolutely have to sell right now - take it off the market.
2. If a seller does absolutely have to sell right now - take the hit - bring the price to the market and get it sold.
3. We have a full 3 yr supply of homes on the market (if no other listing were added).
4. If you have far too much of something than the market wants, what happens to the price of that item?  It is reduced.
5. This market is on the clearance rack!
6. Sellers have to come to grips with this fact and price accordingly or take it off the market.
7. If this were to occur (we are 1.5 yrs into it not occuring), the market would level off
8. You cannot have a change of direction (stop the drop) until the inventory numbers change.

thanks for your time this time - til next time..........

Think about these headlines

• Construction on 2nd park at Ave Maria begins
• Road proposals in Lehigh Acres to handle growth
• Cape utility costs
• Ft. Myers Beach traffic in gridlock with demolition removal
• Corkscrew road project awards bidder
• I-75 widening for 30 miles gets approval
• Bonita Beach Rd. is booming
• property taxes and portability will dominate legislative session
• spring training in full swing

The Southwest Florida region is not exactly in a complete depression.  Actually, the economy is seriously hurting and full time residents are being hurt economically.  But, the growth continues.

All Bonita-Estero sales compared to 1 & 2 yrs. ago = down 40% & 65%

All Ft. Myers sales compared to 1 & 2 yrs. ago = down 45% & 65%

All Naples sales compared to 1 & 2 yrs. ago = down 30% & 60%

All Lehigh Acres sales compared to 1 & 2 yrs. ago = down 64% & 55%

We will compare prices in another blog but suffice this to say it is a buyers market and prices are dropping.  The activity (pendings) level in Feb. tells me the # of closings in March and April will be up (compared to Feb.).  I am telling buyers - there is no better time.... than the present to be a buyer.  Irregardless of what happens over the next 12 months, todays buyer is a winner over the long term.