SOUTHWEST FLORIDA MARKET TRENDS

General Market Trends

Investor and speculator buying activity of 2004-2005 resulted in soaring real estate prices and a large inventory of investor owned property. At the height of the marketplace the average home became no longer affordable for the typical buyer. Fewer buyers led to an oversupply of properties available for sale and a downturn in new construction starts. The southwest Florida job market had been driven by the construction trades for the past nine years, this slowdown has led to decrease in the areas population, as the typical construction worker have migrated out of the area. Further recent increasing credit standards have taken my buyers out of the marketplace and further decreasing the sales demand.

Lack of demand by investors, lack of affordable housing and a tightening of the national credit market has lead to increasing inventories of properties available for sale. This has been further exasperated by increasing unemployment and migration out of the area for jobs. 

Many of these unsold homes were bought pre-construction by speculators. In many cases these speculators are walking away from there investments, leaving a large supply of new homes available as a short-sale or bank-owned. Vacancy rates remain high and the current marketplace could be considered a renters market with many homes available well below typical rental rates.

The rate of bank-owned properties is anticipated to continue to increase as more borrowers are unable to refinance there current adjustable rate mortgages. At this time these sales are influencing the resale marketplace and further pushing values down.

This overall lack of demand has lead to declining values in almost all of the area markets.

From the Office of Federal Housing Enterprise Oversight OFHEO it is clear to see that overall housing prices in the Cape Coral/Fort Myers MSA which includes the community of Alva, that prices are correcting from the peak of 2006. These corrections are greater than those for the United States average. While declining ‘median prices’ are evident in the general market, it is important to note that the OFHEO index represents the ‘overall housing price trends” in the market and that trends at the neighborhood and subject property level may be different. While FNMA, VA, FHLMC, etc. have cited Case-Shiller, OFHEO and NAR trends in their guidelines, these indexes reflect the metropolitan area housing trends.

The overall Lee County economy continues to do poorly, with high unemployment rates and a slow Real Estate Marketplace. This slowdown is primarily contributed to over inflated housing prices from 2002-2007. It is expected that once prices return to a level that is sustainable with traditional mortgages. Due to an extended slow down of the housing marketplace it is expected that pent up demand will return the marketplace to stable in the future. It is unknown how long this process will take and as such the client should consider this analysis along with any other available economic data when underwriting loans or investments in the current marketplace.