Foreclosures remained high and building permits remained low in March, but this is about as bad as it gets for Lee County's housing market, experts said Tuesday.
A recovery, however, may be months or even years away.
"We're starting to drag the bottom now and we'll drag for just a little bit longer," said Bob Knight of Paul Homes, the president of the Lee Building Industry Association.
Paul's company is based in Cape Coral, where only 12 single-family home permits were pulled by builders in March - half the 24 pulled in February and less than a tenth of the 122 in March 2007, according to a report released Tuesday by the city.
In unincorporated Lee County, 47 permits were pulled. That's down from 63 in February and only 15 percent of the 318 pulled in March 2007, according to a release Tuesday by the county Department of Community Development.
The county's numbers also include Fort Myers Beach and Bonita Springs, which contract with the county for permitting services.
Meanwhile, in a separate report Tuesday, 1,784 foreclosure actions were filed in Lee Circuit Court in March, according to statistics compiled by the Southwest Florida Real Estate Investors Association.
Knight said the flood of foreclosures has taken its toll on the home-building industry by forcing prices down to the point builders often can't compete.
"You just can't replicate the prices with new construction," he said.
People having a house built now, Knight said, typically "already own their lot and they've owned it for years. They have no interest in buying something existing."
But Knight warned that at some point, that will change and builders won't be able to offer the deep discounts a buyer can get now.
Jamie Pirrello, president of Vision Homes USA in Fort Myers, said it may be a while before large numbers of people start wanting to build homes here again.
"I don't see any hope in the near future" because of the huge numbers of foreclosures, he said. "If it were a short-term deal where there were a few foreclosures, that's one thing, but I think it's a long-term problem in Southwest Florida. A lot of these banks haven't even started to put the homes on the market yet - the numbers are so overwhelming, they don't have the people and systems to do it."
Charles McKinney, 74, recently completed a house in Pine Shadows Air Park in North Fort Myers and is living there while he tries to sell it.
He's not worried about getting a good price even though he know it won't go for the $800,000 he could have made two years ago at the height of the market.
"I think there are people out there" who will be interested because Pine Shadows has a rare amenity: a 3,200-square-foot, blacktop air strip. McKinney's house has a hangar that could accommodate most private planes.
"I'm not a professional builder," said McKinney, who was in the farming, real estate and movie theater business in Ohio before moving here 14 years ago.
Still, McKinney said, the higher end of construction in Lee County isn't dead yet.
"I've noticed there's still a lot of nice homes being built in the higher scale," he said.
Pirrello said that's true - wealthy buyers aren't feeling the same financial pinch as most people.
Charlie Green, clerk of courts in Lee County, said he doesn't think foreclosures will go much higher than the current rate.
He recently hired five people to do nothing but work on foreclosures but is already thinking about what to do when that work slows down and the number of sales starts picking up.
"I think we've hit bottom," Green said. "I think we've turned the corner."
There's no backlog of foreclosures waiting to be filed because the law firms handling them have geared up for the work, Green said.
"These mortgage mills are set up and they can crank them out," Green said.
Jeff Tumbarello, sales manager of real estate agency Engel & Völkers Fort Myers River District in Fort Myers, said he's not so sure the numbers have reached a plateau. The pace of about 80 foreclosures per working day may be as much as the attorneys, process servers and other people in the system can handle, he said.
Still, Tumbarello said, it's likely that in about two years, retiring Baby Boomers born in the late 1940s will rejuvenate the housing market here.
Permit figures for Fort Myers were not available Tuesday.
In the unincorporated county, single-family permits pulled last month were for a total value of $19.5 million. There were also six duplex permits for a total of $1.9 million and two apartment buildings for $2.3 million.
Commercial permits totaled $6.5 million for 18 buildings.
There were 1,556 permits of all types in the county - including additions and work such as swimming pools, fire alarms and fences - totaling $61.8 million.
I have good news and bad news. Which do you want first?
Let's start with the good news.
Last month, more than 900 existing homes went under contract, thus making February the best sales month in Lee County since March of 2006. In fact, February's pending sales were up more than 60 percent from the same month in '07.
We are on a 60-day winning streak. The first two months of '08 show that single-family home sales are 36 percent ahead of '07, and condominium sales are up 16 percent for the same period. Notice, I am talking about "pending" sales, which are contracts written and accepted, but not yet closed. Even though there will be sales that fail to close, we will still post a significant sales increase. So, for those that thought our market was flat-lining, put the body bag away, because it appears it has a pulse.
Before you roll the market out of ICU, let me give you the bad news: Many people will misinterpret, dismiss or ignore this positive news.
Sellers and agents may misinterpret this surge in sales and believe it signals the return of the glory days. If they do, they will react in a way that would be contrary to further recovery. This is my biggest fear.
Skeptics and nay-sayers may dismiss this information and file it in the folder titled "Propaganda to Trick Fence-sitting Buyers." Many will even wonder how this tidbit of positive news made it past the good news censors, who seem to be working at every media outlet.
The die-hard wait-for-the-bottom buyers will chalk up this two-month trend as a seasonal blip. They believe sales will tank about the time the last snowbird's taillights cross Lee County's northern border.
The continuation of the market's recovery beyond the winter season is directly related to the correct interpretation of this long-awaited surge in sales. Does it mean the market is fully recovered or that the market has bottomed? No. Does it mean that prices have stabilized? No. Does it mean agents can finally eat something other than peanut butter? That depends ... do you like Spam?
The surge in sales was not caused by an influx of European or Canadian buyers. It wasn't caused by sunburned snowbirds from Sheboygan, Baby Boomers or ball players looking for a spring training home. In fact, buyers did not cause it at all.
Sales are picking up because sellers are getting closer to where the buyers are. After 30 months behind the wheel, sellers are finally driving their prices into the outskirts of buyer's territory. This is dangerous territory for our market because some sellers will be tempted to slow down, stop or put the car in reverse and drive their prices back up, thinking that the buyers will follow them. All of these reactions will stall our recovery, and heaven knows we don't need any stalling going on.
Our market began its recovery 2.5 years ago, when prices started falling back toward real values. It's been a long journey, but we are finally beginning to see evidence that we are getting closer to our destination. We are now faced with the most important and difficult question since the recovery started, and that is "Will we have the fortitude to finish the trip?" We must press on to the final destination, the tipping point, which is the epicenter of the buyer's territory.
Would you like to see our market fully recovered and prices stabilized? That will not happen until prices in each sub-market reach the point that makes that market tip back toward equilibrium.
So, it really isn't a question if prices reach the tipping point, it's a questions of when. For some market segments, like developer homes that can be bought below replacement cost, that's just around the corner. Other markets should start counting cows or Burma-Shave signs, because there's still a lot of road ahead.
Regardless, every market segment must meet buyers where they are. Therefore, the more downward pressure sellers keep on the gas pedal and prices, the sooner their journey will be over. Sorry, there aren't any shortcuts.
Sellers, I know you are tired of driving, but don't slow down now. There's a lot of open road ahead because the traffic jam is behind you in seller's territory. Over 900 sellers entered buyer's territory last month and picked up a buyer. If you keep pressing forward, you will begin to see buyers thumbing for a ride. When that happens, stop and give them one.
Keep the faith.
ECONOMIC REPORT
Home resales up first time in seven months
Median sales prices plunge record 8.2% in past year
By
Rex Nutting, MarketWatch
Last update: 12:43 p.m. EDT March 24, 2008
WASHINGTON (MarketWatch) -- Boosted by a record decline in prices, the U.S. housing market showed signs of stability in February, with sales of existing homes rising modestly for the first time in seven months and inventories falling, the National Association of Realtors reported Monday.
Resales of U.S. homes and condos rose 2.9% to a seasonally adjusted annualized rate of 5.03 million, ahead of the 4.85 million pace expected by economists surveyed by MarketWatch. It's the strongest sales pace since October. Sales are down 23.8% compared with a year ago.
"We seem to be finding a bottom in home sales even as prices keep falling," wrote Joel Naroff, president of Naroff Economic Advisers. An economist for Wachovia greeted the news with "cautious optimism."Inventories of unsold homes fell 3% to 4.03 million, representing a 9.6-month supply at the February sales pace. Inventories are not seasonally adjusted, but a decline from January to February is unusual, the Realtors said. Inventories remain too high, but are moving in the right direction, wrote Tony Crescenzi, chief bond market strategist for Miller Tabak & Co. "While still about 1.5 million above normal, when combined with the 200,000 decline in the supply of unsold new homes, it is obvious that the trend in inventory levels is moving more favorable now."
The median sales price plunged to $195,900, down 8.2% from a year earlier, the largest price decline recorded since the Realtors began tracking both single-family homes and condos in 1999. Prices of single-family homes fell 8.7% in the past year, also the most since the records began in 1968.
Since the credit crunch first hit in August, resales have been "stuck" in a narrow range around 5 million, said Lawrence Yun, chief economist for the real estate agents' trade group.
Sales rose in three of four regions, with the West still lagging. Sales rose 11.3% in the Northeast, 2.5% in the Midwest and 2.1% in the South. Sales fell 1.1% in the West.
Median sales prices are down 13.4% in the West, largely because the market for jumbo loans above $417,000 remains frozen, Yun said.
The median sales prices can be affected by the mix of homes sold regionally and within different price ranges. Two other home price indexes that track resales of the same home over time will be released on Tuesday.
Sales of single-family homes rose 2.8% in February to 4.47 million, the second increase in a row and the fastest sales pace since August. Inventories of unsold single-family homes fell 5.5% to 3.43 million, a 9.2-month supply.
Sales of condos rose 3.7% in February to 560,000 annualized. Condo sales are down 29.7% in the past year. Inventories of unsold condos rose 14% to 604,000, a 13-month supply.
The Commerce Department will report on sales of new homes on Wednesday, with economists looking for a decline to 575,000 annualized sales from 588,000.
Rex Nutting is Washington bureau chief of MarketWatch.