Special offer

Home Prices are Rising and Falling. The Market is not Stable. They Call it Fishing, Not Catching.

By
Real Estate Agent with Market America Realty and Investments, Inc. F3319348

Gail and I are spending the weekend in Boca Grande. Boca Grande is the only part of Lee County, Florida that can only be accessed by driving through another county  -unless you arrive by boat.   
We drove.  
If you visit Florida, Boca Grande must be on your "must see list". It is as different from the rest of Florida as Key West is, but in all the good ways. The Florida we have come to know as over built with cookie cutter concrete block on slab homes does not  exist in Boca Grande, and it never will.  Once you pay the four dollar toll to the private bridge owner for the privilege of visiting the island you will feel your blood pressure sink as your anticipations rise.    

The north side of the Island is a shelling Mecca while the south end is the Tarpon Fishing capital of the world.

 


Boca Grande wasn't always just for the rich and famous. The railroad once bisected this island and just as the spine of Boca Grande's famous Tarpon ran down the center of his body from head to toe, the railroad went from entry bridge on the north end all the way to the lighthouse on the south, The south side of the island is where you will find the picturesque lighthouse and was home of the  phosphate docks and current site of the "World's Richest Tarpon Tournament".   

 

Historically this town was about shipping phosphate and fishing. The railroad is now paved over and is now a golf cart highway of sorts as the local residents and tourist alike abandoned their cars  for the more quiet and ubiquitous golf cart - most of which have never seen a set of clubs.  The mansions are best viewed by boat;  after all it's about the water.

 
Gail loves it when we come here because my cell phone only works sporadically and internet connection is iffy.   I can actually relax.  Her brother Jake and I left around 6 AM for a half day of fishing;  First an hour to cast for bait on the flats off Bokeelia then to Turtle Bay for snook, snapper, and trout.  We came home at around noon with one keeper trout. (We accomplished a great deal of fishing and very little catching).  
Jake and Janice have a condo at the Silver King, actually it's the condo that inspired Gail and I to buy at Harbour Isle years ago in Fort Myers. The condo has a balcony on the first floor that looks out over the boat slips. You can actually have a conversation from condo to boat without raising your voice. Jake and Janice's home is  right down the street from the Famous Gasparilla Inn and its exclusive golf course. (The Bushes vacation here  and when they come, they stay at the Gasparilla Inn and G. W. goes Tarpon fishing.)  
Whenever we approach the condo by boat we idle past Boca Grande Isle houses on the right and the golf course on the left.  Gail and I have been coming here for 12 years and have never taken the time to look at the homes in Boca Grande Isles from the land.  

We took the golf cart and did so yesterday afternoon.  The gate house was empty and we were able to enter without incident.  The homes were almost as impressive from the road as they are from the water. It seems that front yards groomed like a putting green are the standard in Boca Grande Isles, as are manicured lush landscaping and luxury cars.


 We saw perhaps a half dozen homes for sale (There are a total of about 60 homes, perhaps more). Remarkably we saw five homes being built or rebuilt. This is something that we do not see very often on the main land in today's market.   There was no open house for us to snoop around in, but it was a pleasant tour.
 

Later that evening we had the chance to talk with a local Realtor about the Boca Grande real estate market. Prices are substantially down  (Houses in Boca Grande Isles are down to almost $3,000,000 ) but since most homeowners here count Boca Grande as a second or indeed a third home, many are choosing simply to not sell in  this down market. There are some relative bargains, but not to the extent of what we see on the main land. 

 
In Lee County, prices on the highest end are still falling. But let me talk about this a bit.  To put this in perspective, let's talk about the low end where prices are rising. Our office sold four houses this week. Every one of them went to contract at a price higher than the ask price we had post5ed on teh MLS  (I have a alink below for two more houses re recived orders on this week).  The ask price on these homes was established by using the closed sale prices of similar homes and setting the price based on this. 

 

The report that the pricing is based on takes us about two hours to compile. We generate a very detailed price analysis that take's into consideration many factors like total square footage, age, number of rooms, yard size, condition, appliances, etc. We also look at how long each of these homes was on the market. The analysis is very scientific and has little room for fudging.  If you would like to see a sample report, please call me and I will get you one. (You can see a blank one HERE) These reports are done for an institution as the customer (the bank).

 
The conclusion of the report, in effect, says this:  Based on previous sales over the last three months this house will sell for X Dollars.  The report also will give three examples of other homes that are ON THE MARKET. These prices are not entered into the calculation but are presented as a way to gauge competition. No where in this report is there a place to write down the emotional side of a sale or an expression similar to, "This is what I paid for the house so this is what I need to get".   
Houses priced in this manner, if the data is gathered and analyzed correctly, will, in today's market, sell for higher that asking price. This means prices are rising: The sales price is HIGHER than previous sales or similar homes.  I expect this to continue.  


On the other hand, houses that are priced not on the market but more on emotion, are selling for less than asking price.  Pretty simple. I have been saying for years that what one pays for something has absolutely no bearing on what it should be sold for. Very often I hear, after we do this lengthy report on value, "Yes but...."

 
We all think these reports apply to other people's house, not ours.  I am asked, "Have you seen the new kitchen drapes?";  "Have you seen our yard, we have a view of the preserve, those houses do not?" "What about the imported tile in the bathroom?"  


Ok fine. Even true, but these factors will make your house perhaps sell a bit quicker, but not raise the price.

 

Sales prices are rising at the low end and are lower than ask on the higher end.

 


In between?  It's a little bit of both. Most agents feel we have hit bottom.  For sure the inventory of the choicest homes is being depleted. If you are selling a  3/2 with a pool in a good location, your selling price is up from three or even two months ago.  What should you do?  If you are looking to buy - you need to be looking to buy now, because your selection is ether dwindling, or your prices will be going up. If you want to buy at the high end, make your deals now while you still can.

 


Commercial Opportunities.
The commercial market is changing. There are many reasons for this and most of those reasons have to do with the residential market.  But the residentail efect took some time.  There was a lag.

 

 What makes the commercial different is that when developers borrow money for a project, they also borrow interest reserves.  These reserves normally are scheduled to run out coincident with the original business plans forecast for when the project would be leased up or sold out. The forecasts were, of course, inaccurate,  and now that the reserves are gone  - the projects are in trouble. The banks are also  turning their attention to the current market values of these projects, based on the depressed rental rates, and rather that increase the lending reserves to make up for the lending requirements on these assets that have decreased in value, they are trying to clear their books of these assets.

 


All this means there are wonderful deals on commercial property.

 


I was lamenting with a friend of mine that owns a number of self storage facilities and has done quite well.  Joe Newman, like so many savy investors, sees opportunities when vacancies are down.  "Everyone wanted to buy when the storage units were  full.   Now that they are at 60% occupancy (This is the average for Lee County right now) no one wants to buy. Ridiculous. This is THE time to buy - when prices are down, rents are down and vacancies are up - listen to Joe!.

 
This phenomenon is similar to stock market "investors" buying when a stock in hot, buying on good news instead of bad.   When the local real estate market was hot, commercial corners were swelling for $20/sf.  I can now sell them to you at under $8.00 (See my point NINE on the top ten mistakes investors make - on the side bar.)  


The trick is to find financing. Banks like 100% occupancy, not 60%.

 


I have a few self storage deals and commercial properties with seller financing. If you are interested in these, please give me a call.  We are getting good deals financed and putting together seller financed deals with the right buyers.

 

 
Call me. 
 
As always, call me with questions or comments:  800-439-1580 ext 52 or email me at GFous@marketamericarealty.com

 

Gregg

Comments (0)