Archive for May, 2006

The Silver Lining in the Real Estate Cloud

May 24th, 2006

I don’t know about you but, if I see one more article that focuses on rising interest rates, increases in taxes and insurance rates while counting down the days to another hurricane season, I may consider cancelling my newspaper subscription.  Oh it gets better, my next door neighbor just returned from a trip to Arkansas and on page one of a small town newspaper was a story about how Boca Grande is being over run by Iguanas.  What they didn’t mention was the 50 mph winds and mothball sized hail that tore through their area.

I find it amazing that in the past year alone, there have been devastating storms throughout the world and yet the media doesn’t seem to sensationalize them like they do the “potential” storms that may hit Florida.  There have been blizzards accompanied by 80+ mph winds in the upper Midwest, hurricane force storms in Australia, tornadoes from Texas to Tennessee and most recently floods in New England, yet the stigma of these storms has not been long lasting.

The other night I saw an infomercial on television touting the Carolinas as a more affordable and safer place to live in, as if they have been recently discovered.  My immediate thought was, “Do you remember Hurricane Hugo?”  Perhaps I’m being a bit sensitive but the reason most people I know moved to Florida was for the tropical environment and of course the water and the beaches.   

Although life in the Carolinas, Tennessee and a few other southern states may have a lower cost of living, I question if they have the year round weather and diversity of cultural interest in the close proximity that we enjoy.  Just an hour and a half to our north we have three major professional sports franchises, not to mention many entertainment venues hosting world class artists.  If you enjoy the arts, Sarasota has the Van Wezel and Asolo, and for something closer to home there is the Barbara B. Mann that hosts many top line performers and Broadway shows; and let us not forget about Disney and Universal Theme parks just a little over 2 ½ hours away.  Of course there is plenty more to see on the east coast and for the truly adventurous, a quick three hour flight can put you right in the heart of New York’s Theater district on Broadway.  How many states offer this diversity of interests?

A few short years ago, Money Magazine and Forbes selected us as one of the best places to live in the United States.  Unfortunately, Hurricane Charley and a brush with Wilma seemed to over shadow the positive national exposure we were enjoying.  Now with the real estate slump we are currently experiencing, many are now questioning, “What is wrong with our area?”  Until you realize this is a national issue and not a regional one, you are going to wonder if our fifteen minutes of fame has passed us by.

Now for the good news!  Did you know that recently INC. magazine selected us as one of the top 17 small cities in America to live in?  Are you aware that Friedman Billings Ramsey & Company’s veteran analyst Michael Youngblood not only dispelled rumors of a housing bubble in our area in the May 15th issue of Business Week, but he specifically chose Punta Gorda as the number four market for the greatest price gains at 35%!  Only Bakersfield, CA (43%), Fort Myers, FL (42%), and Stockton, CA (39%) had higher projected price increases.

What I found particularly interesting is that Youngblood does not use the traditional methods to measure a market’s strength such as inventory-to-sales ratios and the number of months a house is on the market.  The indicators he uses are employment and personal income growth which means that from an economic perspective our area is on a healthy track.

If you look at the number of major projects that are planned for our area as well as the increasing presence of national chain stores that are calling Charlotte County home, it should become more obvious that we are only in the beginning stages of our explosive growth.  With investors now out of the market, we are seeing a more balanced growth in all sectors of our area, and that to me is exciting.

We live in a great country that offers enough diverse climates and geographical features to please most anyone.  For me, living in a place that most people consider a vacation destination makes me feel very fortunate and with the exciting new developments and master plans for our area makes me realize that I am not alone in realizing the best is yet to come.

 

Is This Really A Buyer’s Market?

May 15th, 2006

Over the past few months we have been updating you on the changes that our market has been undergoing; and there have been many.  We went from a red hot market where sellers enjoyed unprecedented profits as they watched the value of their homes go up almost on a daily basis.  Then as if almost overnight, we saw a dramatic change that have left sellers and now buyers scratching their heads wondering, “Where do we go from here?”

 

During most of 2005 rumblings of an “over heated market, bubbles bursting and expected tax and insurance increases as well as rising interest rates,” started to dampen  the feeling that the real estate roller coaster was going to continue upward for years to come with the arrival of the “baby boomers.”  We first saw the change from a psychological perspective with the buyers who started to question the long term stability of the market.   

Last July the market literally came to a stand still as buyers, one year removed from Hurricane Charley, decided to take more of a wait-and-see approach.  No longer were we immune to the slow down that was occurring around the country, and no longer was Florida a place where you could purchase a home for half the price of the home you sold up north, living off the balance you put into your “nest egg.” 

With inventory levels increasing, we started to realize the impact of the investors, as the number of homes on the market and the prices they were listed at, were at an all time high.    As quickly as they came, they left, and our market has been trying to adjust since that time.  However, it is the psyche of both the buyer and seller that need to adjust even more than the inventory levels. 

Recently I wrote an article aimed more at the seller, challenging them to take a hard look at the listing price of their home.  It is no secret that sellers have been spoiled over the past few years with enormous returns on their real estate investments.  The reality, I wrote, is more of a realistic expectation of return on the original purchase price of their home.  To expect a 200% or greater profit that some experienced these past few years may not be realistic in today’s market, especially after owning the property for just a short period of time.  But then again, some of the offers we are seeing put on the table are equally unrealistic. 

Just in the last week alone, we had offers on two brand new homes that bordered on “Grand Theft.”  Not looking to be an accomplice to such a transaction, we respectfully declined.  In one case, the home which was built in 2006 and had over 2000 sq ft of living space had been lowered over $30,000 making it the least expensive home on the market in it’s category by far.  An out of area agent called with an offer almost $30,000 below the new list price with no money down, 100% financing contingency, a significant portion of the buyer’s closing cost to be paid by the seller, a home warrantee and an additional $1,000 from the seller to pay for a new water filtration system.  My answer to the buyer’s agent was, “Why stop there?” 

The other home was a brand new custom home overlooking the golf course in prestigious Burnt Store Isles.  Priced already over $100,000 lower than what you could possibly build a home like this for today, (and with less upgrades); I received an offer over $150,000 below the list price.  To compound matters, the agent said he had a piece of vacant waterfront property on the same street he would be willing to trade on an even exchange for the house.  My reply to him was, “Perhaps if you want to add the parcel of land to your offer, we might have a deal.” 

It is no secret that this market is sending mixed signals.  Has it bottomed out?  How much more does it have to go?  These are the questions we are fielding everyday that are keeping the buyers on the sidelines.  For those who are willing to get into the “game,” many of the offers are reflective of what I described above.  My suggestion, if you are selling your home, price it at a fair market value and if you are buying a home, don’t be insulting.  Look at what it costs to build a home and what you would expect as a reasonable offer if it was your home. 

As I have written before, sellers like to use active comps when listing their homes and buyers go by sold comps when looking to purchase a home, and the two may not see eye to eye.  In this market, I suggest we look at things a little more from each others perspective if we are going to see our market return to a healthy balance.