While the median resale home price in the Fort Myers, Fla., area has been sawed in half in the past year, according to industry data, real estate professionals say they are seeing a sales boom that may hoist the market from the doldrums.
On Wednesday, the National Association of Realtors reported that the median price of previously owned single-family homes in the Cape Coral-Fort Myers metro area in Southwest Florida flew down 52.8 percent in one year, from $178,100 in second-quarter 2008 to $84,000 in second-quarter 2009.
It was the sharpest year-over-year drop in the second quarter among 155 U.S. metro areas tracked by the Realtor trade group. Next on the list was the Las Vegas-Paradise, Nev., metro area, which experienced a 39.7 percent drop: from $235,300 in second-quarter 2008 to $141,800 in the same quarter this year.
Both areas — not by coincidence — are also hotbeds for foreclosure activity. The Las Vegas metro area had the highest rate of foreclosure filings (one in every 47 housing units) in July among metro areas tracked by data company RealtyTrac. And the Cape Coral-Fort Myers metro area was fourth on that list, with one in 64 housing units receiving a foreclosure filing.
News of the high foreclosure rate and plummeting prices in the Cape Coral-Fort Myers area has not been lost on investors and other bargain-hungry buyers.
"Ultimately, as long as you can buy houses well under replacement cost we’re going to have people want them," said Steve Koffman, a Realtor who leads the Steve Koffman & Associates Inc. team for Century 21 Sunbelt Realty in Cape Coral.
"Right now we’re having record sales months. We’re also having near-record listings coming on the market. There are a steady stream of foreclosures coming on," said Koffman. "We are literally slammed."
The Realtor Association of Greater Fort Myers and the Beach Inc. reported 1,446 single-family home sales in the area during July, up 94 percent compared to July 2008 — there were 397 single-family home sales in July 2007, 682 in July 2006 and 868 in July 2005.
June sales totaled 1,586 — up from 717 in June 2008, 468 in June 2007, 884 in June 2006 and 1,062 sales in June 2005. The association cited low prices, low interest rates and first-time homebuyer tax credits as contributors to the jump in sales.
Koffman’s team is ranked No. 3 in the nation within the Century 21 system for both sales volume and units sold, he said. "We’re selling tons of property — we’re just selling them for one-third of the price" that they used to sell for.
About 90-95 percent of the properties that his team lists for sale are bank-owned (also known as real estate-owned or REO) foreclosure properties, and his team’s business is roughly divided between working with sellers and buyers.
While there are hundreds of short sales — properties in which the owner is underwater, owing more to the lender than the house is worth — those properties are a tough sell, Koffman said.
"Although there has been some push recently to make those a viable option (for buyers), they still aren’t. They’re still too time-consuming," Koffman said.
He said that waiting for the approval on short-sale offers can be onerous and time-consuming, and many buyers don’t want to wait. While there are hundreds of potential short-sale properties on the market, Koffman said most will likely end up as bank-owned properties.
Several real estate professionals working in the Cape Coral-Fort Myers market area told Inman News that cash buyers are commonplace these days, as are multiple offers — Koffman said roughly 60 percent of the sales he participates in involve all-cash buyers.
"We see a mixture of first-time homebuyers, investors who will probably never live in (the homes), and pre-retirees who view this as probably the best buying opportunity they will ever see in their lifetimes," Koffman said.
"If you’re not cash, you’re not even in the running," he said, in some cases. "Banks don’t even want to deal with you." …CONTINUED
And new appraisal rules (see "Living with the code") and the generally tightened lending environment are tearing down some transactions. "We’re having houses that aren’t appraising," he said.
Even so, homes are selling faster than new inventory is hitting the market, he said, and the inventory of single-family homes in Cape Coral has fallen from almost 6,000 in early 2008 to about 4,000 as of June 2009.
"We’ve hit bottom," he said. "We may have even bounced a little bit."
Buyers are pouring in from out of state and even abroad — Koffman said he has seen interest from New York, Ohio, New Jersey, Canada and Europe.
There is some flipping going on, he said — a house that sold for $52,000 in February was resold for about $80,000, he said. "That was unheard of here last year."
And when buyers can purchase homes for roughly $60 per square foot that cost roughly $90 per square foot to build — he said the market conditions are obviously not adverse for buyers.
There may be more pain for sellers, but "we’re going to evaporate a lot of this inventory," Koffman said.
Denny Grimes, broker-owner for Denny Grimes and Co. Inc. in Fort Myers, said that 2009 will be a record year in the number of home sales, "driven by the falling prices." He said the median price for the area — now in the ballpark of $80,000, has fallen from an all-time peak of about $300,000 during the boom years.
"Land values have fallen as much as 80 percent — in some cases 90 percent," he said.
Like Koffman, Grimes said that many first-time homebuyers are beaten out of purchases by investors paying cash.
"It’s not unusual to have 30-35 offers" on individual properties, Grimes said, noting that he saw a strong buyer demand return to the market in fourth-quarter 2008 and first-quarter 2009.
Grimes and other real estate professionals said much of the for-sale inventory is relatively new — built within the past few years. And with the low prices they say some investors can quickly draw in income by renting out the properties.
The media focus on the dropping prices in the Fort Myers area has actually stimulated sales activity, Grimes said. "A lot of eyeballs have been on this market. A lot of people … (are) wanting to take advantage of a super deal."
Grimes estimated that about 70-80 percent of the properties his company sells are distressed — either short sales or REOs, and with spiking interest from buyers it’s not unusual these days for properties to sell for 130 percent of the asking price.
"We’ve had to get an education on how to work with REOs, how to work with short sales. We’ve had to streamline this process," he said, though he acknowledged that the short-sale process can be "lengthy" and "inefficient," making REOs more attractive to many buyers.
There are many months of excess inventory to work through in the region, Grimes also said, and he said the supply of $1 million-plus homes is particularly inflated. …CONTINUED
"When you look at our sales last month, only 2 percent were above $500,000 — 80 percent were below $200,000."
As for a recovery, "We’re approaching equilibrium, or near bottom — if it was a hurricane we’re in the eye. We have the back-half yet to go."
Mike Lombardo, who like Koffman operates an agent team through Century 21 Sunbelt Realty Inc. in Cape Coral, Fla., said so many sellers are pursuing short sales that it’s clogging the system — it can take several months to close short-sale transactions.
He has hired two assistants to help sort through the paperwork and follow-up with companies to close short-sales.
"About half of our business right now is the buying and selling of distressed properties," Lombardo said.
Joan Psarros, an agent for RE/MAX Realty Team in Cape Coral, said loan-modification programs don’t seem to be stemming the tide of distressed properties.
"I know a lot of sellers have been trying to do loan modifications and they are not getting anything they can handle. These homes will be short sales or the banks will sell them as REOs," she said.
While Psarros had earlier hired a third-party company to handle short-sale negotiations with banks, she said she has learned through the "frustration of not getting the short sales approved that I needed to learn to negotiate with the banks directly."
This acquired experience has paid off with a high approval rate for short-sale transactions, she said.
REOs often get multiple offers, and the banks can take several weeks to respond to those offers, she said.
Because prices have fallen dramatically, some buyers expect to come into the market expecting unrealistic prices — "I get e-mails and calls all the time from buyers thinking they can buy a home for $10,000 with a pool," she said. "Oh, also in good condition with no work needed and city utilities in and paid for." …CONTINUED
Pricing on lower-end properties is starting to rise, Psarros said. "We do not have many people building and we still have many who want to buy sunshine."
Real estate professionals working in the Cape Coral-Fort Myers who spoke with Inman News agreed that the market for mid-range and high-end homes is most impacted.
Properties priced at $500,000 and above are taking the longest to sell, said Dave Sage of SageRealtor Group, based in Cape Coral. "Gulf-access homes under $250,000 and pool homes under $150,000 are big sellers. There is also a lot of activity at $75,000 and under … most (of those) are multiple-offer situations," he said.
"Homes under $125,000 are already seeing competition and prices are headed up. More expensive homes around $500,000 will need to bring prices down to sell."
And the flow of distressed properties isn’t expected to end anytime soon. Sage said unemployment will likely add more distressed properties into the mix. "I sense that there will soon be a wave of $250,000 to $1 million homes around year-end.
Sage said that about half of his clients are Canadians, 10 percent are from the United Kingdom, 20 percent are from the Northeast states (mainly New Jersey) and about 20 percent are from the Midwest.
Susan Milner, broker for Florida Future Realty Inc. in Cape Coral, also noted a mix of out-of-state and out-of-country buyers, in addition to local first-time homebuyers and investors.
REOs and short-sales are definitely setting the market trends, she said, and estimated that the two property types account for perhaps 90 percent of the local real estate market.
Questions about the use of Chinese drywall in some recently built homes are on buyers’ minds these days, noted Milner and other real estate professionals. Milner said buyers are also concerned about water and sewer issues, while sellers worry about competing with short sales and REOs.
Next: Click here to read a report on the Davenport, Iowa, metro area, which according to National Association of Realtors data experienced a 30.6 rise in the median price of single-family resale homes from second-quarter 2008 to second-quarter 2009.
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