For Sale in Sewalls Point

• 1,697 sq. ft., 2 bath, 3 bdrm single story – MLS® #320252 $370,000 – Charming Home

Sewall’s Point – Too enchanting for words; a traditional Florida-style home with French country flair!

Charming 3/2/1/ in a prettily landscaped Sewalls Point setting. Don’t resist a perfect opportunity to scale down without giving up a thing! Truly exquisite! Priced well to sell.

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Memorial Day 2007 Greetings

Time to Remember !

The Current Real Estate Dilemma (Part 2)

In part 1 I showed how investors drove prices up to an unsustainable level in the real estate market. Now the coming problem with foreclosures:

There are some different but related groups of foreclosures coming up in the next few years. Those with new homes or condos that never intended to move in and now can’t afford the payments. Then there are those that can hold on for a while but have adjustable rate mortgages that have rate increases kick in from 1 to 3 or 5 years. And, finally there are a few who took equity lines of credit during the peak times and now owe more than there home is worth.

By every forecast I see from the trade groups, banks, government, foreclosures will be a serious problem in the real estate market for the next few years. Many owners can’t sell their homes because they owe more than the current market value. In order to sell, they would have to bring cash to close in order to pay off the difference in their mortgage. Eventually the bank will take possession in a foreclosure and will sell the property through an agent, auction or through other channels.

Unfortunately, every estimate is for large numbers of foreclosures on the horizon. More homes on the market, more supply, buyers in short supply and watching as they attempt to time the bottom of the market. All factors continuing to drive prices down for the near future.

The good news is that builders and developers finally saw the light and the increasing supply of new homes has slowed considerably. Prices will drop to make housing more affordable for those that couldn’t before and the demand will eventually come back. The big question is when?

I don’t have a crystal ball but I can give you my best guess. (Not just my guess alone but from the consensus of local real estate, financial and commercial consultants.) Please keep in mind that any number of unexpected external factors (The price of gas, the economy, terrorism, hurricanes, taxes and insurance, just to name a few) can and most likely will effect these predictions either positively or negatively.

In Port St. Lucie, where growth was at a staggering pace and builders were a little slow to realize the impending peak, we’re expecting somewhere between 12 to 24 months before market equilibrium. (market equilibrium = supply of homes/condos equals demand)

And for Martin County where the growth and supply were not quite as great as in Saint Lucie County the estimates are from 8 to 14 months for market equilibrium.

Once we have returned to a normal market, we should see a period of moderately flat prices with some possible slow gains as the foreclosure problem will continue for a number of years. We will not see prices go back to 2006 levels for a number of years. A normal market will eventually result in historical 3% to 6% yearly gains and real estate will again be a solid safe long term investment.

At least until the next boom and bust cycle.

Any questions or comments please contact me through my website.

Gabe Sanders
Real Estate of Florida

The Current Real Estate Dilemma (Part 1)

Here on the Treasure Coast of Florida we are being bombarded by a continuing series of bad news articles about the state of real estate and how bad things are. How did we get into this mess? Was it hurricanes? Taxes? Insurance?

With this article, I’m going to attempt to give you a little history and explanation of how we ended up in the current state of affairs.

The real estate market was coasting along very smoothly in what many consider to be a ‘normal’ market through 2003. By normal, I mean we had ‘market equilibrium’, meaning supply and demand was roughly equal. For every seller there was a corresponding buyer, whether it was new construction or re-sale. Prices were moving up a the historical normal of between 3% to 8% per year.

Around the end of 2003 because of a number of circumstances such as a little stock market glitch, the availability of very inexpensive mortgages at great rates and a perceived real estate boom the market started to have an unprecedented price spiral. The buyers far outnumbered the sellers. Many of these buyers were not end users (meaning they never intended to occupy or use the properties they were purchasing) but investors betting on quick gains. Estimates are that 25% to 40% of these buyers were strictly investors. Most of these buyers saw the rising prices and saw what others were making in short term real estate investments and more and more investors joined the fray and exasperated the continuing upward price spiral. Builders and developers were more than eager to supply units to this frenzied demand. But, in real estate some one has to move in and use the property as intended. Sooner or later this ‘bubble was sure to burst’.

The preliminary warnings came from Fed chairman Alan Greenspan as early as 2004 about the frenzied price spiral and the Fed began a series of rate increases in 2005 to try to dampen the speculation by increasing the cost of borrowing. The sub-prime mortgage market was so aggressive during this boom that even the rate increases had little effect on the low cost of borrowing. It wasn’t until 2006 that problems with the overly aggressive sub-prime mortgage industry began to surface.

Those investors that never planned on moving into their new homes or condos soon realized that they weren’t in a position to carry the debt they owed. All of these investment properties came back on the market for sale. Demand quickly started to fall off as supply just continued to increase and the price escalation quickly turned into price declines.

Most investors coming into the market near the end of the speculation frenzy (late 2004 to 2006) ended up owning properties worth less than what they paid or owed on their mortgage. Some pre-construction buyers simply walked away from their deposits and didn’t close. Others that didn’t realize what was happening, or those that waited too long were now getting into trouble.

The big rush was on to sell and supply rapidly outpaced the demand. Thus prices started down and are continuing the downward spiral today. In part 2 of this article I’ll write about the effects of current and future foreclosures on the market and when we can expect to see the market equalize again.

(Part 2 coming next week)

Any questions or comments please contact me through my website.

Gabe Sanders
Real Estate of Florida

Open House in Windemere on Saturday & Sunday

Windemere, Jensen Beach – We invite everyone to visit our open house at 894 NW Sassafras Ter on May 19 & 20 from 10:00 AM to 5:00 PM.

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