Florida Real Estate Market Review - end of 2016

I just spent the last hour scouring over data charts from Lee County, Florida  MLS trying to help my readers get a sense of what’s happening in the local real estate market.  I’m not much wiser now, I have to tell you, but there are a couple of key takeaways I will share with you.   

Over the last week I received three phone calls from readers of my weekly newsletter all with a similar tone.  They went like this, “My spouse and I have been coming down to the Fort Myers area for a few years and would like to buy our retirement (or vacation) home soon. Should we buy now and if so what should we buy?”  Never bashful about sharing my opinions, I resist that and insist on probing for what my readers goals are, their financial picture, and what their expectations are.  In order to help perhaps some other readers I will list a few frequently asked questions below as well as my response.

First my key take-aways from this morning’s preparation.

The months of inventory in our market has jumped from 6 to 9 months in one year. The months of inventory is measured by the total number of listings divided by the number of homes sold per month. In other words at the current sales velocity, how long would it take to sell all the  homes currently on the market? Today its nine months, a yaer ago it was only six.  This statistic alone would seem to make light of comments by buyers and Realtors alike that there are not enough homes on the market, until you hear this second statistic:

The median listing price of homes in now $300,000. This is up from $275,000 one year ago.  The median SALE price of homes has not changed much – it hovers around $240,000. So seller’s expectations are outpacing buyer’s wallets. The inventory of homes that meet current buyers needs (like price) is low.

Some frequently asked questions:

What would you recommend I buy if we are only going to use the house a few months a year and rent it (on VRBO) the rest of the year?
  
I generally asked a great deal of probing questions about beach, golf, financial expectations etc. But my unqualified answer is to buy a new(er) pool home thirty minutes or so from beaches, ideally with a double master bedroom or at the very least a 3/2.   I like newer because of the cost to maintain.  The price range –of around $400,000 - is a good target

Can I make money on my home if I rent it out?  “How much do you need to make?”, is my response. If you expect the rental to DEFER some costs like taxes and insurance, then yes.  If you expect this to be strictly an investment, you probably will have to sell it to realize your profit. Which brings me to appreciation:   (Want to know more about investing? )

What should I buy that will have the best probability to increase in value?   There are no pat answers to this questions, but that won’t stop me from trying to give you one.  I have said many times that you make money when you BUY real estate, not when you sell, so the first thing you need to do is to buy a property that will go up in value, if it is not going to go up, don’t buy it.  (My apologies to Will Rodgers).  Seriously, however, to increase your chances, buy a home that either you can improve in value (physically or financially) or because of its location will always be in higher and higher demand.   New homes in communities that are young are my favorite recommendation for this. Historically as communities add amenities and their programmed prices increases kick in, your home will increase in value as well.  You can improve a home physically (additions, upgrades, pool, etc.) and financially  (making it finance-able, more energy efficient, less expensive to maintain and lowering insurance costs)  All these things help the of chances of increasing value. ( Good article here about functional obsolescence)

What are the costs of owning a home in Florida you wish I knew? ( I never get this questions, but it is one I wish I got).  Taxes, Insurance, HOA and Condos Fees, and the cost to cool and maintain. All these factors are why I like my clients to buy new.  I have shown homes that were on the water and were priced below market. I insisted on my client getting an insurance quote BEFORE we even made an offer. Due to the age and the elevation, the insurance cost alone put the house out of the financial reach of my  buyers.  Energy efficiently is another hidden factor, new homes are built to very high efficiency standards and the cost to cool may be as low as 1/5 the cost to cool an older home  Real estate taxes will be about 1.5% of the purchase price annually, insurance about 1% ( unless – and there are a bunch of exceptions – they are higher). Here are some good “rules of thumb “ about costs and life expectancy of costly items

Should I buy now or wait?  There is a time value that I cannot speak to, but I do know this: The cost of building and the cost of land are going up. For these two reasons alone I would say buy now. This does not address your personal situation, however.   I have said many times that you will DO NOT KNOW NOW what you will  want to retire to in five or ten years.  So anything you buy you should figure that you may have to sell in the future, so buy something you can sell in the future and make money on. I wrote an article about this here.  Without getting political, I can tell you that after the election and seeing what happened in the stock market and the economy – we saw a definitive uptick in showings and the amount of buyers. Confidence has returned.

When does “season” start?  Snowbirds are coming down already but traditionally after Thanksgiving the tidal wave begins.  April is our biggest selling (closing) month. December is slow for sales, but lots of lookers.

Are there deals?  With out a doubt yes. All real estate is local. Some areas are hot, some are not. But buy smart. (let me help you).

That’s  all for now.. Let me remind you that I can help you sell your home in your home state as well as finding you the best opportunity here.   If I can answer any of your questions, don’t hesitate to ask.

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