No Disrespect Market Watch 2016 But There is More Data to Consider!

CAPE CORAL, Fla. - March 16, 2016 - PRLog -- Southwest Florida real estate is always a hot topic of discussion amongst buyers, sellers, industry experts, and so many others calling Southwest Florida home!   Recently, the annual Market Watch had the community buzzing once again about real estate.  No doubt Market Watch has developed into a "take notice" event that people look forward to each year.  I have the highest respect for the presenters and for the sponsors that put on the event.   As the broker/owner of RE/MAX Realty Team, I have personally tracked and analyzed data of our market for the past 7+ years.  It is vitally important to inform our agents as well as our clients.  This year, I take exception to some of the data shared.  So if you allow me the courtesy - here goes:

1.       Realtors do not establish the market and never have.  True market value is what a willing, able, and ready buyer will pay for a home and a seller will sell.  Realtors are the medium to bring those parties together but realtors do not set the prices.

2.       Yes - sales were down 30% if you compare December 2015 closed sales to January 2016 closed sales but that is very seasonally.    There is always a push to get sales completed before the end of the year for variety of reasons (income taxes, real estate taxes, homestead, etc.) thus a spike in sales in December is always followed by a lower amount of sales in January.  Our market is a very cyclical one and follows similar patterns every year.  This year is no exception.  It is not an indicator of something unusual for this year. In fact, there was an increase of approximately 4% in sales from January 2016 to February 2016.   But taking a snapshot of December-February does not tell the whole picture.

3.       Though our area has a "peak season" of visitors and snowbirds - our real estate market is better defined by the normal "cycles" we experience rather than a peak selling season.

·         First Quarter always brings an increase of inventory.  Many sellers believe they need to put their home on the market as the snowbirds and visitors arrive.  Every January, we see an increase in the number of homes on the market.  In Cape Coral alone, we went from 1594 active single family homes on the market in December 2015 to 1834 single family homes on the market in January 2016.    Often this pushes our market into a buyer's market for the first quarter as there are more homes to select from and buyers may take their time.  When there are many homes that are priced and appear similar, there is no sense of urgency for a buyer to purchase, thus sales in the first part of the year tend to slow down.

·         Second Quarter is when sales become stronger.  Our strongest months in terms of home sales are in the second quarter.  Typically, we may see some price reductions due to the increased inventory from first quarter.  Then buyers start to buy and the inventory shrinks - often reversing it to a seller's market.

·         Third Quarter typically brings a healthy balance of listings coming on the market and listings sold.  Listing inventory usually begins to fall Quarter 3 as sales begin to rise nudging us further into a seller's market.

·         Fourth Quarter sees an increase in sales as people want to get it done by the end of year.

4.       There are five indicators that I diligently track and monitor each month:

·         Existing Home Sales

·         New Home Permits

·         Mortgage Loan Defaults

·         Foreclosures Sales

·         Interest Rates

What I have found is at least three of these need to flow in a certain pattern to define market conditions.  These numbers vary from month to month but we watch for any significant changes for three months in a row before defining a shift in the market.   For example, if we start to see existing home sales decline, new home permits decline, and increase in mortgage loan defaults, then we will take notice that a downward shift is occurring.    In January of 2006 the real estate market began to show signs of prices plummeting, permits began to fall and distressed properties (short sales and REO's) began to rise by approximately 5% each month.

I also track the number of homes on the market, number of closed sales, the average list price, the average sales price, and the amount of inventory we have on the market.  When we have 4-6 months of inventory, I call that a neutral market.  When we have more than seven months of inventory, then it becomes a buyer's market.  When our inventory is less than three months, it becomes a seller's market.  When we are in a seller's market, appreciation can increase quickly but it is typically non sustainable.  One of the biggest ironies in a seller's market is that when buyers should be concerned they are paying too much for a home often they do not (supply and demand) and in a buyer's market when they shouldn't be concerned about paying too much, they do.  In a buyer's market, we find buyers sitting on the fence with no urgency to buy.  There is a healthy amount of inventory and they feel prices will continue to fall.  In a neutral market, appreciation is sustainable and affordable.  Neutral markets do not linger for too long. Our local market typically ebbs and flows between these markets with the various cycles discussed above.

In 2015, we experienced a 10.3 % increase in appreciation in Cape Coral and a 9% increase in appreciation in Fort Myers.    We are still too early in 2016 to say with certainty what this year will bring in values and sales but thus far it is appears to be following a similar trek as in 2014.  In January, 2014, there was a large increase in the inventory that came on the market, we saw typical slower sales for January and February and quite a few price reductions. That did not stay long.  We ended 2014 with a 5.3% in appreciation for Cape Coral and a 9% increase in appreciation for Fort Myers.

February 2016 sales were 13.8% less than February 2015 sales.  There are many factors that may enter this equation including an election year, the strength of our dollar, the rollercoaster of the stock market, and quite honestly our crazy weather that we experienced in January bringing us over 12 inches of rain, much cooler temperatures, and devastating tornadoes.  No one wants to go house hunting in torrential rains.

I predict we will continue to have people moving to beautiful Southwest Florida - Baby Boomers continue to retire or make plans to retire and they very much prefer sunshine to snow.  Our state's income tax-free status also substantially helps retirees and high income earners.  Real estate agents don't hold a crystal ball, however our market is constantly showings us signs, and knowing where to look at how to interpret is our greatest asset to our clients.

For more information, contact Yoselyn Hollow at (239) 443-1055 or yoselynh@remax.net or http://realtyteamswfl.com/