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Florida realty market goes south
Great deals abound in southwest Florida due to credit crunch
Phone books that were delivered but never opened rot away next to empty driveways and overgrown lawns, telltale signs that once-booming southwest Florida is now the centre of the U.S. housing storm. Until two years ago, middle-class retirees vied with property speculators for houses and apartments in Cape Coral, a town near Fort Myers on Florida's sun-drenched Gulf Coast. Now almost every other house on some of its streets has a for-sale sign outside.
With a bloated inventory of unsold homes and a growing number of homeowners forced by mortgage delinquencies to sell – thanks to the subprime crisis and ensuing credit crunch – southwest Florida's once-warm clime for property has turned stone-cold.
Linda Setterlund, 61, owns a pristine three-bedroom, two-bath, Cape Coral house that has been on the market for about a year. At a reduced asking price of $183,900 (U.S.), she said, the house had been priced to match what she and her husband owed on it, after moving in three years ago with a 30-year fixed mortgage.
Setterlund said she and her husband had decided to leave the area to join family in Tennessee, but their decision was also prompted by growing real estate taxes and skyrocketing homeowner insurance rates after an active 2005 hurricane season.
"They're saying that we're heading for a recession but I think we're past that," said Setterlund, referring to the housing glut and its effect across much of south Florida. "I think we're headed more into a depression."
Setterlund and other local residents, many of them retirees from the U.S. Midwest, complained of low wages in the Fort Myers area, where leading employers include the Publix supermarket chain and the school board.
There was a nearly 27-month supply of existing single-family homes on the Fort Myers market last month compared with a three-month supply at the height of the local boom in housing in August 2005, according to Denny Grimes, a top real estate agent in Fort Myers.
At the same time, more than 40 per cent of single-family homes were listed at prices below $250,000 versus just 18 per cent at the market peak.
Making things worse, Grimes said, builders were still churning out new housing units at big discounts in and around Fort Myers, where many investors bought houses during the boom market without ever considering the long-term cost of holding properties.
Fort Myers "is by far the worst housing market that we're in," said Larry Sorsby, executive vice-president and chief financial officer of home builder Hovnanian Enterprises Inc.
Ever the realtor, Grimes said now may be the time for buyers to seek opportunity in adversity.
While business is slow for Grimes and other realtors, it has been booming for Jonas Elliott, a so-called "short sell" specialist at Southwest Florida Home Buyer Services in Fort Myers.
Elliott buys properties, from banks or other lenders, that are at a risk of foreclosure, usually at a large discount, and then "flips" them at a profit. "In this particular county I have about five years of good business," he said. "We have a ton of inventory, a ton of new properties coming into inventory."
He said losses on local properties have not been limited to medium-income retirees and "snowbirds" escaping harsh northern winters. One of Elliott's current customers is about to swallow a $1.5 million loss on four properties he could no longer afford to finance.
August 15, 2007 in World View [of real estate] | Permalink
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