This column is dedicated to real estate in Southwest Florida so why, you ask, does this title refer to the DOW Jones Industrial Average? Well, unfortunately it is impossible to separate home sales in Southwest Florida from the overall economy. Here we have a significant number of “Snow Birds” to drive the market and Snow Birds like everyone else are unsure what is going to happen in this unstable climate. The common response is to run for cover.
I found it most interesting that as the US lost its AAA rating everyone fled from stocks and bought Treasury notes. We all saw in the news that Apple Computers has more liquidity than the federal government. Why then did investors flee from investments in companies with sound financial positions and move to Treasury notes which had just been downgraded?
What followed were wild vacillations in the stock market. The buy and hold investor was eaten alive. The insiders however use this movement to make huge money. It is very hard to profit in a steady market but when there is movement there is opportunity. Some of these investors have deep enough pockets to move the market single-handedly then capitalize on the movement they create. My point is that unless you are very astute and lucky to boot you are a pawn in the big game. It is very difficult to have real control in such an environment.
Now, back to real estate. As you might imagine the real estate market has slowed as all of this has taken place. Sales numbers always post two months in arrears due to the fact that a transaction is not recorded until closing. This being said, I assure you sales have certainly slowed as of late. This is always a slow time of the year in Southwest Florida, but I have seen even the active buyers pull back while they re-evaluate this new environment. The macro-economic client is mostly to blame here.
On a local level, our recent trends have been very good overall. Forbes just posted an article today (thank you Tom) and mentioned Fort Myers as one of the cities where real estate is “resisting the recession.” Here is the excerpt:
“Take Fort Myers. The Sunshine State’s retirement haven, where home prices tumbled 58.6 percent from their 2006 peak, had a 2.9 percent appreciation rate in the first quarter and a 3.7 percent rate during the second. Those numbers have been steadily inching back up since November of 2010, following the home price dip felt throughout the U.S. (including in many of the cities that grace this list) after the first-time home buyer tax credits expired. In spite of that dip, homes in Fort Myers have appreciated 3.8 percent from June of 2010 to June of 2011.” Full Article
All of this leads me to my point. For those with liquidity and a desire to own a home in Florida for either retirement or vacation this is a stellar time to buy. The dismal macro-economic news has put fear into many would be buyers and opened opportunity for those who see the true value in today’s real estate market.
While there are steadily fewer and fewer foreclosures there are nonetheless enough of them to create a climate of value. The real advantage of a foreclosure is that they are actively priced to the market. A time like now creates opportunity for buyers. While there are carrying costs associated with holding real estate most properties here will cash flow if they are purchased and rented properly. For the person who is looking to retire in the next 5 to 10 years, this may indeed be a very good time to buy. Resale properties are currently selling for about 50% to 80% of replacement cost. While we all look at home ownership a little differently than we did 6 years ago we all have to agree that prices are indeed very low right now and there is intrinsic value in real estate. Regardless of what happens with our economy a home is going to retain value since we all need a place to live.
I hope that you agree and will give us an opportunity to discuss the market and the opportunities that are available. A strong argument can be made that Southwest Florida real estate has never been more affordable.