Southwest Florida: The Blueprint For a Stagnant Housing Market

A little air may be going out of the real estate market in Washington State, but the deflation there is nothing compared to the situation in Southwest Florida, the Spokesman-Review reports.

Once among the nation’s hottest markets, the area around Fort Myers has become a disaster. Moody’s Economy.com has rated the metropolitan area second on its list of markets facing the worst price collapses.

At this point, even local real estate experts, who are traditionally bullish, do not feel the need to sugar coat the dismal conditions surrounding the Southwest Florida housing market.

With 12,600 homes and almost 8,000 condos on the market, one of that area’s leading Florida mortgage brokers says it will take almost two years to sell off the available inventory even if all construction on new housing units stopped right now. That, obviously, is not going to happen.

Existing homes on the market are listed at a median price — $324,900 — 23 percent higher than the median selling price. Condos are listed at prices 35 percent above the median sales price. Combine that with rising Florida mortgage costs and you’re going to have many units sitting on the market unsold. Those condos, incidentally, sell for more than the average home in Spokane County, Washington.

Median prices are down 9 percent compared with a year ago in Southwest Florida, but that does not accurately reflect decreases across the market. In some areas, it’s more like 20 percent. Sales are down an astonishing 36 percent. There are 15 homes on the market for every buyer.

A year ago, many expected the market to hold its own as refugees from the Northeast and Midwest sought suntans along the area’s admittedly beautiful coast. The water views are wonderful, after all. New buyers were absorbing all the new units coming on the market.

Unfortunately, many of those buyers were speculators. When the market peaked, the smart ones got out. Now, falling prices have trapped owners with adjustable-rate or interest-only Florida mortgages. The result: Florida led all states in foreclosure filings during the third quarter of 2006.

Just the 1 percent increase in mortgage rates over the past year has added $125 to monthly mortgage payments on a $200,000 Florida home loan. Thanks to Katrina, Rita and Wilma, which swept through Fort Myers last year, premiums for property insurance have tripled or quadrupled since 2000.

Yet, despite sagging new-home construction, Lee County last month decided to triple road impact fees to help offset the costs of increasing traffic congestion. The burden on a single-family home will be almost $9,000, and that’s just one of six impact fees, albeit the largest, added to the price tag on new residences.

How’s that for an incentive for someone looking at a new home?

Liquidity has been foiled still further by the Save Our Homes Amendment, which limits annual increases in property tax assessments to 3 percent until a home is sold. Until there is property tax portability, many of Florida’s housing market problems are likely to persist.

Spokane, Washington, has an economy far less dependent on snowbirds and tourists. Imported home equity has certainly been a factor. But speculation, while present, has never become a market driver. Housing is more of a stretch than it used to be, but it can still be had.

Maybe things will get better in the Fort Myers-Sarasota area as the droves of snowbirds return and pick up on the bargains Realtors say are available. In the meantime, the current state of the market reminds us it does frost in Florida, even if it doesn’t literally.