By Mark Alexander, CCIM
Originally published at SVN Florida
Thud! Did you hear that? It sounded like the Florida residential real estate market just hit bottom. Most cities across the country have reported a stabilization of average home prices and a number of cities have actually shown small increases. Stable home prices should help to more accurately value the toxic mortgage-backed securities which should help ease our battered banking industry.
It is nice to see these other cities apparently turning the corner in front of Fort Myers during these tough economic times. This can only mean it will be our turn soon, right? Hope is alive, but I fear that thud heard round the U.S might be a hollow knock on a false bottom as we tread water before diving for the real bottom.
If you look at the price of home sales closed each week in Southwest Florida, you may notice the vast majority of sales are between $50,000 and $250,000. It appears the lower end of the home sale market is dominating sales activity which naturally skews our average home prices downward.
But what about the high end of the residential market? I bumped into broker Trae Zipperer at the car wash last month. Trae got his MBA from Harvard and specializes in high-end waterfront home sales in Lee County.
He said his market is slow and asking prices have come down dramatically. Trae said homes that were selling between $800,000 and $900,000 just a few years ago are now being offered between $400,000 and $500,000. He said many wealthy homeowners also own commercial real estate which is pulling them down. Plus their local businesses are off 40 percent to 50 percent in some cases due to the economy. The problems of commercial real estate, with its high vacancies and lower market rental rates, coupled with the slow economy, may cause a small wave of higher-end residential foreclosures over the next six to 12 months. The wealthy have the resources to hold on longer than others, but even they can only go so long with negative cash flow from their businesses and negative cash flow from their commercial real estate holdings.
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