Saturday, March 28, 2009

Some Real Estate Markets Warmimg Up

I might need to create a new category called housing boom; but for now I will keep this in the housing bust category. Whenever I read these stories it always assures me that no matter what the government does, the forces of Economics 101 still work. Lower prices = higher demand. Even Ben Bernanke cannot stop that law. As I've said in the past half year we will be seeing a surge in USED home sales/foreclosures as prices plummet. (remember we are now seeing 45-50% of all sales in the country as "distressed"). While in theory this should not help new home builders very much since inventories are still enormous, the market is about dramatic "themes" not logic - hence people will run into anything home related instead of being selective. Also, as I wrote in 2007/early 2008, while this housing price demolition will be a 1x unpleasant hardship for current homeowners- it will actually be a great thing for society overall since the % of income needed to be devoted to keeping a roof over head will soon allow concepts such as "saving money" to return. Lower prices would also be good for renters because lower prices mean the cash flow needed to be a successful landlord would be less (hence lower rents). [but again only after a painful 1x adjustment as many landlords now own very overpriced property] The gubberment does not like this thesis, and tries to do everything in its power to keep prices elevated from the "free market" price. Hence you have situations like this ---> [Sep 26, 2008 : 15% of Americans Spend 50%+ of Income for House Payments] Short term thinking (government) versus long term (mine).

Unlike the Midwestern industrial hubs which are suffering from secular losses in employment and population, the areas of the country where people are still moving (and prices are falling dramatically) will see some solid times in due time. But I expect most of the benefit to accrue in the next few quarters to first time buyers, as people who already have a home still have the big issue of needing to sell a home to buy another home.

This is the second such story I've read that focuses on the Fort Myers area - prices have dropped so low in some of the suburbs if you can find work (or if it's a retirement home) you can get away with $300-$500 monthly payments in some cases.

  • When Carole and Jim Gourley started looking at vacation properties in Florida last December, they weren't all that serious. The retired couple, who live in Ontario, had rented in Panama City Beach for five winters. Stuck at home with a sick pet this year, Jim Gourley started browsing for foreclosures down south for fun. "One thing led to another and we found a condo we liked the look of and decided to pursue it," Carole Gourley says. "We could not believe the prices that some of the properties were being listed for, especially since the one we liked is only four years old."
  • They ended up buying a three-bedroom condo in Bellasol, a development in Fort Myers, where prices currently range from $39,000 to $170,000. "We paid 25% of the original selling price," she says. "We feel that we got an extremely good deal.
  • The Gourleys are part of a new surge of buyer interest along Florida's Gulf Coast, where real estate websites are seeing a dramatic increase in traffic and local brokers are experiencing an uptick in inquiries and sales.
  • Obviously, this isn't boom buying, wherein people are investing their money because prices are rising dramatically. "Basically, the market crashed so hard, prices have fallen so much, that places have become interesting to people again," says Mark Washburn, a realtor at Island Coast Realty in Ft. Myers who blogs about the local market.
  • Sales for Lee County, Fla., which includes Fort Myers and Cape Coral, were up nearly 80 percent from 2007 to 2008, he says. "That's pretty impressive. The caveat is the prices are half."
  • To get a handle on these rebounding markets, we asked real estate search firm Trulia to tell us the cities in which they have seen the greatest rise in searches -- a proxy for buyer interest -- over the last year. The result: Seven of the ten cities were in Florida, a poster state for the real estate boom and bust, and five were on the Gulf Coast side of the state. "Those are all places that have seen a 30 to 50 percent decline in prices over the past year or so," he says. "From the peak of the market they may be down even further than that."
  • According to the Office of Federal Housing Enterprise Oversight, in the fourth quarter of 2005, home prices rose 36 percent in the Cape Coral-Fort Myers area, 38.3 percent in the Naples-Marco Island area, and 28.2 percent in the greater Miami area. In just the last quarter of 2008, prices fell 32.9 percent, 32.8 percent and 24.1 percent respectively.
  • "Those areas saw the greatest levels of overbuilding, the greatest levels of speculation during the bubble," says Geberer. "[Southwest Florida] was a heavy area for starter home investors."
  • Those price declines are luring bargain hunters. Some are vulture investors, Geberer observes. Washburn is seeing people from north of the Mason-Dixon line, and many from Canada. In the comeback markets, many of the deals are short sales or foreclosures. In last quarter of 2008, according to the National Association of Realtors, 45 percent of real estate transactions in the US were so-called distressed sales.
Search Rank in February 2008
Search Rank in February 2009
Fort Myers, Fla.
Cape Coral, Fla.
Miami, Fla.
Sarasota, Fla.
Naples, Fla.
Fort Lauderdale, Fla.
Scottsdale, Ariz.
Washington, D.C.
Charlotte, N.C.
Queens, N.Y.
Tampa, Fla.


[Mar 23, 2009: Housing Sales Surge 5.1%...err Drop 4.6%...err...umm]
[Feb 13, 2009: US Home Prices Fall to 2003 Levels]
[Dec 24, 2008: Median Home Prices Fall Most Since Great Depression]
[Feb 10, 2008: Kedrosky - The Next Wave of Mortgage Defaults]
[Dec 8, 2008: More than Half of Homeowners with Modified Loans are Back in Trouble]
[Jul 10, 2008: Foreclosure Activity Map]
[April 13, 2008: Unintended Consequences of the Coming Socialization of the Housing Market]
[Mar 25, 2008: WSJ - Wave of Foreclosures Drives Prices Lower, Lures Buyers]
[Mar 19, 2008: Alt A Mortgages Beginning to Break Down]

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