As Southwest Florida Inventory Goes Down, Prices Come Up

As published in The News-Press HomeSeeker July 3, 2010

By D. Michael Burke

The Southwest Florida real estate market has made some promising improvements this spring. Inventory is down, foreclosures are way down, and prices are on their way up. Although the decreasing inventory may be due in part to the first time homebuyer tax credit, which just ended, there is no doubt that the decrease in foreclosures – which have more than halved since last year – have also played an important role.

My point is, with prices on the rise, now is an ideal time to sell – but if you are buying, it means you had better hurry. Right now prices are still very competitive, but as the foreclosures are weeded out of the market, it will get more difficult to find the bargains that are currently available.

May statistics show many promising trends in Southwest Florida’s real estate market. For instance, Lee County reports that total home sales for the month increased 3 percent over last year – from 1,417 in May 2009, to 1,460 in May 2010. Although there was a very slight drop in sales from April to May of this year – 13 sales out of nearly 1,500 – that number really isn’t large enough to be significant. It is probably more accurate to say that home sales held steady between April and May.

The first time homebuyer tax credit is no doubt part of the reason for the increase in housing sales. The tax credit gave homebuyers who hadn’t owned a home in the past three years up to $8,000 back on their taxes. Homebuyers who wanted in on the tax credit had to be under contract by April 30th, and had to close on the home by June 30th. Now that the tax credit is over, with no hope of being renewed this time, skeptics are arguing that we are sure to see a slump in home sales.

I don’t deny this. The tax credit encouraged people to buy who might not have without that extra little push, and provided incentive for folks who were already planning to buy, to do so before June 30th. I don’t doubt that we will see a reduction in sales over the next few months, as the effects of the tax credit wear off. But I think May’s statistics also show many positive trends that have nothing to do with the tax credit.

For example, there is the issue of inventory. In Naples, Bonita Springs, and Estero – my area of expertise – the year-to-date statistics for May show a huge decline in inventory. In the first five months of 2009, 11,167 homes were listed, while only 10,346 were listed in the first five months of this year. That is a decline of more than 7 percent! And since that is the number of homes listed, it doesn’t have anything to do with the tax credit causing a reduction in inventory.

The most astonishing change, however, is in the number of foreclosures. Rather than filing foreclosure suits, banks are becoming more willing to do short sales, which is where they accept a sale for less than what the seller owes on the home. Therefore, the number of foreclosures filed in Lee County dropped from 847 in May of this year, down considerably from 1,823 at this time last year. That’s less than half of last year’s numbers!

The decreasing inventory, but most especially the drop in foreclosures, is contributing to an increase in prices. Lee County reports a 9 percent increase in the median price for houses, from $88,500 in May 2009, to $96,900 in May of this year. Likewise, in Naples, Bonita Springs, and Estero, the median price jumped from $186,000 to $195,000 over the course of the year. Average prices showed a similarly impressive increase, from $354,500 in May 2009, to $373,433 in May 2010.

The increase in prices is most likely due to the decrease in inventory, especially the decrease in foreclosures. The high number of foreclosures on the market had set a standard for lower housing prices, which in turn drew out more buyers who were looking to get a good deal on a home. As the number of foreclosures dwindles, therefore, and the market becomes less saturated, buyers are finding they have also fewer choices.

This is great news for buyers and sellers alike in Southwest Florida. Right now, sellers can expect to get a little more for their home, not to mention a quick sale if they price their home appropriately. Buyers need to act fast if they still want to buy at a good price, since prices will continue to go up, but that also means that any purchase right now is sure to be a good investment.

These trends demonstrate how important it is, whether you are buying or selling, to have an agent who is intimately acquainted with the local market. If you would like to discuss the current trends in Southwest Florida’s real estate market in more detail, please don’t hesitate to call me.

Contributed by D. Michael Burke, P.A. Keller Williams Elite Realty
Michael@CoconutPointRealEstate.com / www.CoconutPointRealEstate.com