Foreclosure epidemic changes market strategy
The Cape Coral-Fort Myers metro area, which had the highest rate of foreclosures for several months in 2008, also claimed the ignominious top spot on the foreclosure list for the overall year, according to Realty Trac, a California-based company that tracks foreclosed properties.
About 12 percent of all properties in the area received a foreclosure filing last year.
Realtors are adapting to the foreclosure epidemic by changing their tactics and employing what one Realtor calls the local market’s “new rules.”
“It’s changed a lot of rules in this sense — the better buys are getting multiple offers,” said Paul Symanski, a sales associate with Century 21 Birchwood Realty.
Because banks want to sell foreclosed properties as fast as possible, Symanski said, they set prices extremely low, sometimes inciting a bidding war where the final price is higher than the asking price. Houses that seem like a good deal can quickly turn out to be a little less of a bargain if multiple offers come in.
“The banks are out to get rid of these properties. They price them a little bit low to get multiple offers. I’ve seen people pay $25,000 or $30,000 over the asking price,” Symanski said.
The number of foreclosures has lowered home values in the area, even as sales have increased dramatically.
In the greater Fort Myers area 1,034 existing homes were sold in December, up 181.7 percent from the December 2007 total of 367, according to the Realtor Association of Greater Fort Myers and the Beach. The median price fell to $97,750, the lowest since 2003.
Contributing to the falling home values is the time it takes for a home to go through the foreclosure process before the banks are able to sell them. Currently there are about 25,000 foreclosed properties backed up in the county’s legal system, according to Lee County Clerk Charlie Green.
Green began a program in December to help push more foreclosures through the system to get them back on the market. He put more judges on foreclosure cases and asked for more time to be used to address the issue so more hearings could be held.
About 2,800 foreclosure hearings were held in the county last month, Green said, about 200 to 400 more than an average month.
“We’re pushing them through. Our objective is to have more going out than are coming in,” Green said.
Realtors react two different ways to his plan, Green said. The first is that dumping more foreclosures on the market will keep prices unreasonably low. The second, which is more prevalent according to Green, is that the foreclosures will be put on the market sometime, so it’s better to do it as quickly as possible.
Gary Tasman of Cushman & Wakefield, which deals in commercial real estate, falls into the latter category.
He said he views the collapse of the housing market as inevitable, and added that the residential housing market was 40 percent overbuilt.
“My reaction to this is I’m not one bit surprised,” Tasman said of the Cape area’s number one foreclosure status. “I’m glad this is happening as fast as it is.”
Tasman’s milieu, commercial real estate, also is being affected by the rampant foreclosures. Rental prices are down and vacancies are up, and because commercial typically trends just behind residential real estate, commercial foreclosures will be on the rise, Tasman said.
Consequently, a turnaround in the residential sector will portend a boost in the commercial arena, but the rising local unemployment rate must be brought under control first. Lee County’s unemployment rate in November was 9.8 percent. The U.S. Department of Labor will release statistics for December on Jan. 27.
“Unemployment rates are the best indicator for office space,” Tasman said.
Tasman and Symanski differed slightly how and when the local housing prices will hit the bottom and start to climb again.
Symanski saw a glimmer of hope in the number of sales, but declined to say when the market will bounce back.
“Prices seem to be going up on the foreclosures, but as long as we have foreclosures on the market, it’s still going to depress our market,” Symanski said.
Tasman sees the housing slide continuing through 2009 and 2010 before making a comeback beginning in 2011.
“Only when (the housing market) starts to expand and track upwards will you see businesses and the economy start to increase and expand again. And that’s what’s going to turn this thing around,” Tasman said.