by Office Staff
on Wednesday, February 10th, 2016 at 1:34pm.
House prices are rising in Southwest Florida and, thanks to that, Southwest Florida sellers are seeing a rise in the average price of homes since 2015. A rise that’s so high it’s about twice the national average.
RealtyTrac reported that sellers made an average of just over $20k across the nation in 2015. This is an increase of 11%. RealtyTrac, based in Irvine, California reports that this is the largest percentage seen since 2007.
Sellers in Collier County on the other hand made around $50k on average. This is higher than the national percentage and is an increase of 21% compared to when the house was purchased. There was only a 7% gain, which is about $17k, in 2014.
Lee County Sellers also enjoyed a high return. It was around 23% in Lee County in 2015, which was about $33k. This is around four times the 6% ($9k) they saw in 2014.
These gains do sound impressive but they still don’t compare to the returns experienced when real estate was at its peak.
This peak was back in 2006. This saw Collier’s sellers receive an average of just under $170k. This was a 73% gain on the original purchase price. Lee County Sellers enjoyed a gain of 92%, or around $121k.
The vice president of RealtyTrace, Daren Blomquist, believes that even though the real estate market is always speculative, Southwest Florida home sellers can’t expect these kind of gains to come back soon.
One reason they won’t come back is because of the restrictions the government has placed on lending. There are now checks and balances that didn’t exist back then.
The percentage of sales is shrinking for investors, cash sales, and distressed sales. Though the average percentage gain of sales that are backed by loans given by the Federal Housing Administration is rising.
Blomquist believes that this shows the real estate market in the region is stabilising now.
He believes that this is a good sign Southwest Florida’s real estate market is broadening rather than depending on wealthy cash buyers.
Blomquist says that these “vulture funds” that picked up short-sales and foreclosures between 2008 and 2013 they aren’t as common anymore. The bargains that they were hunting show up less and less.
Bank-owned sales dropped to just 7.3% in the Collier market. That amounts to 960 sales in 2015, a drop from the 11.1 percent (1487) sales made in 2014. Lee was the center of the housing crisis at a time. 10.5% of the sales made there, or 2,416, were made by banks in 2015. In 2014 this number was 15.9% or 3,552 sales.
This lack of cheap housing has lead the investors to markets that are cheapear than Southwest Florida according to Blomquist.
98 sales in Collier from 2015 were made to institutional investors. This was down from the 317 sales made in 2014. It was a percentage drop of 2.4% to 0.8%. In Lee County the sales made to these institutional investors fell from 5.7% (1,256) in 2014 to 1.6% (351) in 2015.
The reason that cash sales have gone down in Southwest Florida, at least according to Blomquist, is because investors will often buy in cash. In Collier 57.5% of the sales were cash sales. This was 7,603 sales, a drop from the 60.2% of sales, or 8,058 in 2014. About half of the sales made in Lee were cash sales in 2015, down from the 60% made the year before.
This drop in competition in the housing market has created more opportunities for traditional buyers to get a mortgage.
Collier County saw a rise in FHA-backed sales. In 2015 6.3% of the sales, or 829 sales, where FHA-backed. This was a rise from the 582 sales, or 4.3% seen in 2014. 12%, or 2,761 of the sales in Lee County were FHA-backed in 2015. This was a rise of the 8.2%, or 1,844, sales FHA-backed sales in 2014.
Blomquist does have some warnings for people though. The biggest warning sign is that house prices have risen 57 months in a row in Lee County, and 41 months in a row for Collier County. But the average income has remained generally the same that whole time.
This is inevitably going to lead to stagnation of the market as homes become less and less affordable.
Though a different report made by MetroStudy chief economist Brad Hunter pointed out two things that could counter the pressure placed on traditional buyers. One is that the job market is improving, and the other is that housing starts have risen in Southwest Florida by 35.3% over the past four quarters. This has loosened the tight supply. MetroStudy reported that these new home closings account for about 18% of the market in the region.