Why do I think it’s time to buy…
Naples, Florida, February 21st 2009
I recently read an article in Moody’s Economy.com called “Housing in Crisis”. Mentioned in the article was the fact that Naples Area Real Estate is poised to take the biggest hit in average home prices in the country.
According to Moody’s, average home prices will have fallen about 70% from the peak prices in 2006. They also predict that the Naples Real Estate Market will hit bottom in the next 12 months.
Looking at past housing statistics, we’ll find that the increase in Naples Area home prices was one of the highest in the nation. What went up has come down.
If average home prices have dropped to the 2001-2002 levels, we are basically there. The drop in prices has been 57-60% below peak prices in 2006. But keep in mind Moody’s does not control the market, the buyers and sellers do. And the Buyers are coming back.
Recent statistics shows that statewide; sales of existing homes in December 2008 have increased by 27% from the same time in 2007 making it the fourth increase in monthly sales in a row. Just from November 2008 to December 2008 sales have increased by 28.9% in the State of Florida. As a matter of fact, just in Naples and Bonita pending sales in the month of January 2009 have increased to 830 from 326 of January last year.
What has changed? Prices.
If we look at the recent FAR (Florida Association of Realtors) statistics, we find that the median existing homes sale prices dropped from $213,600 in December of 2007 to $155,500 in December of ’08. Please note that median sale price is a number that separates the lower half from the higher half of sale prices. Median sale price should not be confused with the average price. Given that most sales are registered in the lower end pricing, the median home sales price moves lower even if the average sale price would move higher.
So, the news is that home sales volume is going up. Buyers are making their way back into the market tempted by the low prices. With the increase in home sales and almost zero new construction, the inventory of exiting homes is decreasing. Admittedly, there is large overhang of inventory but once prices stabilize and buyers continue to snap up inventory, it will take builders time to ramp up and in the long term we may see demand out pacing supply.
Some would say that we have not reached “the bottom” yet. I say, you won’t know when we reached bottom until after it is done. I am not saying that real estate prices will see the same unsustainable increases as in the past cycle but I am saying that the parameters will change with the decrease in inventory and increase in demand.
To paraphrase a man most investors would like to emulate, Warren Buffett. What is his opinion on the bottom of the market? “If you wait for the robins, spring will be over.”
Another good reason to get off the fence: low mortgage rates. Let’s say you decided to wait. Well, interest rates are still at the lowest levels since the 1960s. Interest rates are bound to move up. Even an increase from 6% to 7% can be a significant increase in monthly payments.
And one more reason, painful for some: the stock market. Many investors have reduced their exposure to the volatility of the stock market. With so many investors in a cash position every drop in the price of desirable Naples property brings more buyers into the equation. Buyers who disregarded a $649,000 property in 2006, and waited when the same property went to $459,000 are now saying I love it at $369,000. This is the trend I see here today.
Everyone knows we are in a “Buyers Market” but how many people will wait until it is not? Come and see why it is. We have lots of inventory, low prices, increase in existing home sales, low mortgage levels, volatility of the stock market, all together lead me to believe that the buying trend that has started will continue and grow with more and more buyers bringing their checkbooks to the negotiating table.
So call me : 888 243 2435 or email me: carmen2bestbuynaples.com
