Market Watch 2010 – Residential

March 16, 2010

This is a follow-up posting regarding my attendance at the February 25th Market Watch event at the Harborside Convention Center in downtown Fort Myers, FL.  Last week I provided a summary of the commercial portion of the presentation given by Stan Stouder.  This week I will focus on the residential presentation by Denny Grimes.

As background, Market Watch has become a major annual business event in Lee County and is sponsored by the Fort Myers News Press.  This year’s event was attended by over 700 real estate professionals and featured presentations on both the residential and commercial real estate markets. 

Denny Grimes is President of Denny Grimes & Company, a residential real estate broker located in Fort Myers, Florida.  He has been presenting for the Market Watch program for many years, first teaming with the late Frank D’Alessandro and now Stan Stouder who presents the commercial segment of the program.

Like Stouder, the Grimes presentation was filled with slides laden with statistics that told the story of the residential crash.  As Grimes stated during the presentation, “Our market had to crash, we were the world’s fattest market.”  Grimes believes we have now reached the bottom of the market as prices have begun to turn upward.

market-watch-sales-price_numberHis main question this year is “how much longer we’ll have to hold on?”

His slides on existing single family homes sales (Lee County) tell an interesting story.  In 2007, Lee County sales hit an all-time low at 5,920 units.  September 3rd was the day in 2009 when sales tied the previous all-time high at 12,701 units.  For all of 2009 sales set a new record, eclipsing the previous record set in 2005.

market-watch-lee-county-home-sales

 

 

 

 

However, even with the record sales achieved in 2009 there remains excess inventory in the market as the following slide indicates.

 market-watch-excess-inventory

The excess inventory resulted in lower average prices.  In Lee County, prices finally reached a point in 2009 that triggered a wave of buyers as 71% of sales were either bank owned or short sales. 

The median sales price for an existing house was $278,200 in 2005 but only $90,400 in 2009. In 2006, just 12 homes were listed for sale in Lee at under $100,000. In February 2009, there were 4,285 listed.

The median price of a home on the market is currently $98,000. That is 18% higher than the median price of $79,900 in June 2009.

Despite a 40% increase in the number of sales over 2008, sales rose only 16% in total dollar volume as a result of significantly lower sales prices. For real estate agents, the average real estate commission has sunk to just $3,750 in 2009, down from a peak of $10,250 in 2005.

market-watch-average-commission-per-saleAs a result of falling prices, owner’s equity hit an all-time low as well. More than 77% of all homes with a value under $100,000 have negative equity.  Even market segments with higher home values are significantly over leveraged (SOL).

 

market-watch-solAnother interesting portion of Grimes’ presentation was his introduction of “buyer’s market indicator” (or BMI) in which he analyzes the various sub-markets based upon the relative length of time necessary to sell a home.  If the length of time is between zero and six months, it is a “seller’s market”.  If the time period is six months to ten months, the market is in “balance” and if the time period to sell a home is ten months or more, the market is a “buyer’s” market.

market-watch-bmi-by-submarketBased upon this BMI, Grimes believe the Bonita Springs/Estero market is the best area to find bargains in 2010, as sellers begin to move prices downward in an effort to move inventory.

 

 

Posted by Scott R. Lodde

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