National new home sales market weak – SW Florida local market looks stronger

Estero – Bonita Springs – Naples Real Estate Market

By D. Michael Burke

While the word on the street is that home sales are increasing here in Southwest Florida, it may not necessarily mean that the market is coming back strong – not as of yet anyway. Nationally, speaking, new home sales are increasing, but the overall market is still weak. The point is will Southwest Florida follow suit or can we expect a different outcome based on our market’s unique attributes?

First, let’s look at things on a national level.

Sales of new U.S. homes rose in March and the number of new properties on the market was its lowest since the 1960s, but further gains will be hampered by the broader property glut.

Single-family home sales rose 11.1 percent to a seasonally adjusted annual rate of 300,000, the Commerce Department said on Monday, up from a near record low pace of 270,000 in February when harsh winter weather hit the economy. Analysts had expected a 280,000-unit rate in March.

The market for new homes is being squeezed by competition from previously owned homes and a deluge of foreclosed properties, even though inventories of new properties in March fell to 183,000 units — the lowest since August 1967. Builders, hurt by the weak market, are holding back on new home construction.

While housing now accounts for a fraction of gross domestic product, indications that it continues to struggle may weigh on consumer confidence and have a negative impact on spending. Standard & Poor’s Ratings Services described conditions for U.S. homebuilders as still tough and said it did not expect a significant improvement until next year.

A report last week showed there were 3.55 million previously owned homes on the market in March, well above the natural rate of between 2 million and 2.5 million. Including foreclosed homes and those on the verge of being repossessed by banks, economists say supply is anywhere in the range of 8 million to 9 million. Existing home sales rose to an annual rate of 5.10 million last month. The new home market accounts for less than 10 percent of the overall housing market. Underscoring the risks for new homes, distressed properties accounted for 40 percent of existing home sales last month. Such sales typically occur at 20 to 30 percent below value.

The overall housing market has been hamstrung by a scarcity of jobs and will likely continue to cast a shadow over the broader economy. Bad weather depressed new home sales in the first two months of the year and held back building activity. Much of the anticipated slowdown is blamed on the bad weather that blanketed large parts of the country in January and February and a spike in gasoline prices.

Manufacturing has led the recovery but with the labor market showing some signs of strength, there is cautious optimism that resales could see some modest gains. A recovery for the new home sales market remains far off. The median sales price for a new home fell 4.9 percent in March from a year earlier to $213,800. The spread between the prices of new and previously owned houses is now about $54,200, off a record high of $80,500 reached in January.

At March’s sales pace, the supply of new homes on the market fell to 7.3 months’ worth from 8.2 months in February.

What about Southwest Florida?

As season draws to a close in Southwest Florida the real estate market continues in an upward and promising direction. However, based on national findings, do we still have a long way to go to reach market recovery? No doubt our market was affected just as much but all others, but with great weather and our winter visitors, we may not be heading for as slow recovery as other markets on a national level. Why? The bottom line is that people still want to visit, live and retire here in Southwest Florida.

Let’s look at recent activity in our market.

Mortgage rates rose slightly with the average rate on a 30-year fixed-rate mortgage climbing for a fourth straight week, according to Freddie Mac’s weekly survey of mortgage rates. The 30-year fixed-rate averaged 4.91% this past week, up slightly from the prior week’s 4.87% but down from 5.07% this time last year. Financing is clearly available with 33% of the last 12 months’ sales being financed — compared to 67% of the market sold to cash buyers.

According to local real estate statistics, March 2011 sales increased an amazing 112% from March of 2008. Sales were posted at 1,217 units compared to only 573 units in 2008. The 2010 to 2011 increase was exceptional with a 70% increase overall. This is good news for buyers and motivated sellers as increased activity creates better prices and more offers.

The number of properties under contract rose to an even higher percentage gain with 140% more properties under contract in March 2011. Figures show 1,907 units were under contract in March 2011 verses 791 units in March of 2008.

The median price property in Southwest Florida continues to be consistent and is hovering at $175,000. This trend has remained the same for the last six months which covered our season of October through March.

The median price has remained rather consistent for past three years only moving slightly up or down. March of 2011 the median price, as mentioned, was $175,000. March 2010 was slightly higher at $200,000 and March 2009 recorded the median at $180,000. Overall, the Southwest Florida seasonal market, January through March, closed with a 3% increase.

Collier County was ranked 29th in the State for foreclosure activity with a rate of one in every 196 homes filing. The total was 992 properties in foreclosure which was a decrease of nearly 55% compared with last quarter, and a decrease of 70% from the first quarter of 2010.

The best news is the inventory continues to decrease. We have dropped below 9,500 units on the market. This figure gives us an average of nine months a unit will be on the market in the overall market. New inventory or units on the market was reduced by 16% compared to last year’s new inventory. Basic economics of supply and demand continue to have created some areas of multiple offers on properties for sale.

It is becoming popular for banks representing foreclosures to set the ‘low end’ list price verses an average price. By setting a lower list price, banks are creating multiple offers and have posted sales above the listing price.

The local market saw more activity from area developers this season also. Developers have stepped back to the playing table with huge incentive programs for general realtor sales. It is expected that new development sales will increase as well. WCI is back in Naples with ground breaking at Manchester Square off Livingston Road. Prices start in the $200’s and Andalucía off Whippoorwill Lane has begun a new sales promotion with a new development team where prices start in the $300’s.

Nationally speaking, recovery seems headed in the right direction, but the overall market is still weak. In comparison to Southwest Florida and based on our recent numbers, it seems that Southwest Florida may experience a quicker path to a stronger market. This is surely a sign of better times for this market and the surge of winter visitors, retirees, and homebuyers still continue in an upward trend…and why not? Who doesn’t want to live in Southwest Florida – even only part-time?

Thinking of buying? Now is a great time. Before you start your search, be sure to contact a real estate professional that is keeping a close watch on the market and knows how to interpret the trends!

By D. Michael Burke, P.A. Keller Williams Elite Realty

Michael@CoconutPointRealEstate.com

www.CoconutPointRealEstate.com