Residential Market Watch: Chance to buy newer home at low cost fading

By Michael Polly

Tropical Storm Fay has come and gone, but the rain it dumped on Lee County lingers. The ground is saturated and some streets are flooded. As much as we needed the rain, we are anxious for the way things used to be, like being able to walk to our mailbox without wearing our slickers.

Likewise, we witnessed our real estate market raining inventory for the past couple of years. It rained so hard and long that you could forget about walking to the mailbox, because the only way to get to it required something with Evinrude on the back of it. Our inventory is still at record levels, but we may have reached the high-water mark. In fact, in some sub-markets, inventory is receding.

A few observations after looking over the resale home contracts for July:

The number of homes for sale in specific submarkets is starting to dry up. Buyers are recognizing the value being offered today. Our real estate market, like the recent rain, had a problem with "run off." Buyers would make an offer on a property and if the seller didn't accept the offer, the buyer would just "run off" and make an offer on a different home.

Single-family homes that went under contract in July sold within 2 percent of the original list price and were on the market less than 45 days.

In contrast, homes that sold for more than a 2 percent difference from where they were originally priced and where they were priced when sold, took 148 days to find a buyer on average. More importantly, they averaged only 80 percent of the original list price. What this tells me is that when the numbers are in line, so are the buyers. Being realistic up front can save sellers money and time.

Buyers are recognizing a value priced home. In July 40 percent of the homes that went under contract had been on the market less than 30 days and went pending within 98.8 percent of the original list price. There was no run off as the buyers absorbed the value-priced homes. Having young families and first-time home buyers own and live in these homes is a foundation our market needs to be strong.

Last month in Lee County, under $100,000 there were 138 homes sold that were less than 5 years old. At that pace there is 9 months of inventory, while for homes older than 5 years old there are 12 months of inventory. This is a sale and a beauty contest all at the same time. The prettiest house at the best price goes first. In this case the newer homes that are value priced are the first to go.

Looking at Cape Coral there is 12 months of inventory for homes under $100,000. However, there is only six months of inventory for homes built in 2003 or newer. This puddle is drying up.

The opportunity to own a home less than 5 years old under $100,000 is limited. Homes under $150,000 will be the next to dry up. Most of these homes are below reproduction costs. The rain has stopped falling as the number of building permits being pulled has averaged less than 50 per month. There is now less than 14 months of inventory and only 12 months of inventory of homes built in 2003 or newer. New construction starts at $100,000 or just under with most builders. This typically does not include the home site, sewer, and/or water expenses. Buyers, the time to take advantage of the value is now.

This is not just true for the lower-priced homes. Homes in certain areas and at different price ranges are being recognized for the value they represent.

If you are a seller, the critical time is during the first few weeks. Ask yourselves "How many showings have I had?" If the answer is zero or a low number you need to act quickly and get your property priced to get noticed by the buyers that are out there.

There are still foreclosures that are flowing into our area like tributaries feed rivers. Foreclosures look to continue to add to our inventory levels and slow the drying-out process. The quicker this storm passes the faster our market will recover.

The media may paint a gloomy picture but you can still get sunburned on a cloudy day. So buyers, listen up: If you ever wanted to own a newer home the time is now. You better get those Ray-Bans on and start looking because the ground is beginning to show in a few areas. Remember it is better to buy one day early than one day too late.

As published in the News-Press