Michael Polly Fort Myers / Cape Coral Real Estate News Blog

June Single Family Activity

Here we are 18 days into June, let's see how we are shaking out. There have been 237 single family resale homes go pending. Of those 76% have been priced below $300,000. Another 34 were below $400,000 and $33 where above $400,000. That means that 90% of the sales so far have been below $400,000.

If you prorate the sales per day out to the 30 days in the month of June the total sales fall under 500! Now take the fact that we are averaging our sales month to month being 27% less than 2006. Looking forward to year end our total sales could fall below 7000. Lots of coulds and ifs and buts. All based on the facts of what is real in real estate today. Decisions that are made based on fantasy or what someone wants the facts to be hurts the market.

Five hundred sales would have been great in 2000, today they seem pale and weak. What is normal appreciate? 3%, 6%, 10% pick one. If you apply it to 2000 prices we still may have a way to go before we reach normality of value and price in our real estate market.

Where do we go from here?

I am sure we will dwell on this issue from time to time for a few years to come. Where do we go from here?

Inventory is softening for the summer which is our usual trend. Sales are in the mid 500's for the past month which puts us at or just under 2000 levels of sales. New inventory is our major competitor for resales. homes from $300K-$600K are competing with new home communities that are dumping inventory to raise cash and reduce debit. They are offering such discounts that resales are suffering from what we call the "Slinky Effect"         

You remember the Slinky from your youth? You start it on the top of an incline and step by step it release the energy generated from coil to expansion and works it way down the steps.

Robert Hooke identified this principle in 1678, on the basis of his experiments with springs, stretching wires, and coils, stated a rule between extension and force.This led to Hooke's law which states that strain, the relative change in dimension, is proportional to stress. If the stress applied to a body goes beyond a certain value known as the elastic limit, the body does not return to its original state once the stress is removed. Hooke's law applies only in the region below the elastic limit.

That is exactly the way our market is behaving. The changes happening in our market are proportional to the stress applied to it. A seller in xyz development has to sell, he prices it below the competition and accepts an offer less than everyone else, the slinky just went down one step. Investors with 3 properites that have to sell, the bank has accepted a short sell and the bank is willing to take less than what is owed. Ching, the slinky just went down another step. Our under $250,000 inventory is growing at 15%-20% per month as homes fall into the just sell it category.

Other inventory price ranges are staying fairly consistent overall. With this type of data it is hard to see any relief in the near future. Builders are still dumping inventory meaning they are not purchasing land. Land prices continue to drop which eludes that the basement for first homes has not been reached. Many investors and builders have been dumping lots or not exercising options. I've seen builders offering on your lot homes for, get this, $119,000 including lot prep! Names you would recognize.

With the statistics for sales and inventory currently in front of us it is hard to see relief or any flattening of the market in the short term. The pipeline of new inventory still looks to be 1.5 years away from selling out. I see many developments with concrete block showing where they have just started building so those with development orders in had have not yet pulled back. I know one such development off of Challenger has just closed down. Be careful of purchases in upstart communities as they may not finish in the promised time frame. 

These are all ramblings of what I see coming with the future but buyers and sellers need to know and need realtors willing to express the truth to clients. We are very positive on our region, our state and our market  but for the short term, 1.5-3 yeras we see much of the same and continued downward pricing pressure.

Michael Polly, Vice President, Denny Grimes & Company