Lehigh_Acres

Lehigh Acres – REO market 2008

Lehigh Acres is located in eastern Lee County, Florida, between Fort Myers and Hendry County. According to Wikipedia, Lehigh Acres began development in the mid 1950s after Lee Ratner sold his pest control business in Chicago, IL and needed a tax shelter to avoid the high capital gains tax of that time. Rather purchased 18,000 acres and named it the Lucky Lee Ranch.

In 1954 (and without real estate development experience) Ratner joined with Gerald Gould (a Florida advertising executive), Manuel Riskin (a Chicago CPA), and Edward Shapiro (a former Chicagoan who was in the real estate business in California) and began land sales at Lehigh Acres, with Gould as president of the corporation.

Since its original formation 1954, the boundaries of Lehigh Acres have expanded to encompass more than 61,000 acres. By 1997, there were more than 152,000 quarter and half-acre lots (90% of which were vacant) along with over 1,000 miles of roads and various lands set aside for commercial and other uses.

Despite continuous growth of neighboring Fort Myers and Cape Coral, Lehigh Acres remained largely undeveloped. In 1992 Lee County declared Lehigh Acres a “blighted community” and authorized a Community Redevelopment Agency to provide infrastructure for the area and encourage growth.

After years of minimal development, from 2001 through 2005, Lehigh Acres experienced phenomenal growth. There was migration to Lehigh during this period from populations in western Lee County and from Miami-Dade to the east, as Lehigh’s conforming streets and homes with 1/4 & 1/2 acre lots allowed for growing families.

Like other communities that experienced a rapid rise in housing during 2003-2006, Lehigh Acres housing prices peaked in 2006 as affordability became an issue. The graph below illustrates the correlation between housing demand and median prices during 2003 through early 2008.

Driven largely by affordability, the housing market reached equilibrium in early 2005. As speculators entered the market, flipped homes and reinvested in the market (seeking another quick profit) “speculative purchases” drove prices beyond sustainable levels and the volume of quarterly home sales declined as quickly as they rose in prior quarters.

As speculators, investors and homebuilders held prices at unsustainable prices points, inventory climbed. Unable to make payments on unsold and vacant speculative homes, builders, investors and speculators have abandoned properties or let banks take them back. Today many of these homes and unfinished construction sites remain vacant and abandoned, which in turn has affected prices, dropping them from a median of $230,000 in 2006 to $117,000 today.

This chart represents value trends for a large segment of housing built in the Lehigh Acres area (1600-1900 square feet of GLA, ¼ acre site, no pool and new to 6 years old).

As this chart and the chart from City Data reflect, home prices in Lehigh Acres are returning to pre-2004 levels. As you can see on the chart, the more current sales reflect a wider distribution from the trend line, likely due to market conditions, variances in property condition, and “market rate sales” vs. “REO” or “Short-Sales”.

To understand the buyers’ motivations lets examine the current inventory of homes in the marketplace. In the subjects marketing area there are 606 active listings of which 368 (or 60%) are offered as short-sales (the lending institution agrees to let the owner sell the home for less than is owed on the mortgage loans) and 166 are REO (bank/investor owned). Essentially, 90% of the listed inventory represents “properties being disposed” by banks or investors.

Sales trends further tell the story. One year ago there were very few foreclosure sales, 21 short-sales and 19 non-distressed sales. The number of sales has declined throughout the year and currently in the month of May no non-distressed sales have occurred and the number of foreclosure sales have caught up with short-sales.

It is clear to see that these types of sales have had a negative impact on market values with overall price declines in the Lehigh Acre marketplace. Typically, when homes are sold at foreclosure or offered as a short-sale they are offered at prices that will result in a quick sale, within 60-90 days.

How much does the bank need to reduce the price to create a quick sale? The following chart illustrates market trends.

The green line represents properties on the market for more than 90 days.
The yellow line represents properties on the market from 60-90 days.
The yellow and green lines show that the 60-90 day prices are quite similar to those who sold after 90 days.
Home that sold within 60 days, the blue line, reflect a consistent and dramatic effect on the prices sold.

As shown in this chart the bank or investors are taking a big discount off of the sale price in order to dispose of its property in under 60 days. Does this discount justify this ‘quick sale’ or would it make economic sense to market for a slightly longer time?

Conclusion

The Lehigh Acres housing market was driven by speculative purchase and builder activity during 2003-2006, setting price points at levels that could not be sustained over the long-term, increasing housing supply to a level that has caused a significant market correction. A tightening national credit market and declining consumer confidence level is creating further uncertainty in the market place and contributing to additional price reductions to induce potential purchasers and reduce lender/investor-held inventory.

Let us help you determine what the price point should be to maximize your sales in the least amount of time.

Kathleen Bryce, Inc. - appraiserkat@earthlink.net – Phone 239-940-2225