Michael Schaefer

A crash in the housing market seemed inevitable during the early weeks of the COVID-19 recession. However, that bust didn’t come to fruition, in fact, the opposite happened: A combination of government support, recession-induced low-interest rates, and eager homebuyers set off a housing boom. Since the onset of the crisis, median home prices are up roughly 24%.

But much of that government aid and support is about to go away. The foreclosure moratorium, which prevents foreclosures of federally-backed mortgages, will come to an end on July 31. Then on Sept. 30, the mortgage forbearance program, which allows some borrowers to pause their payments, will lapse. Since the beginning of the pandemic, over 7 million homeowners have been enrolled in the forbearance program. However, as the economy has improved that number has fallen. As of July 11, there are still 1.75 million borrowers, or 3.5% of U.S. mortgages, enrolled in the forbearance program.

The foreclosure crisis following the 2008 housing crash was so bad, in part, because tens of millions of financially strained homeowners were underwater (meaning a borrower’s remaining mortgage balance is greater than the home’s value) and had no choice but foreclosure. That’s unlikely to be the case for financially strapped homeowners this year. These homeowners are likely sitting on sizable home equity (home value minus the outstanding mortgage), and if they can’t repay the mortgage they can simply sell into the currently red-hot housing market.

Currently, there are 1.75 million homeowners protected by the mortgage forbearance program. So far neither the lender nor the owner can’t force them out or force them so sell or pay the outstanding payments. If all these homeowners would sell instead of going back to repaying the mortgage it could have a big impact on the historically tight housing market. According to the National Association of Realtors, there are only 1.37 million units currently available for sale.

Over the past four decades, the US has averaged 2.5 million units at any given time. This year housing inventory hits the lowest level since the dater started getting tracked in the 80s.

The wildcard in the supply landscape is what happens to the homes where the owners are in mortgage forbearance. Some will have returned to gainful employment and will work with the lenders to adjust the terms of the loan, allowing them to remain in their homes. Others will not be so lucky and will lose their homes. According to a chief economist familiar with the data, I was told that unless the forbearance period is extended again we should expect some of those homes to hit the market over the next year.

That begs the question: how many of these behind homeowners are likely to sell? We ask a startup company called HOME LLC who provides down payment assistant to homebuyers in return for a share of profits to run the numbers. The finding: If the government doesn’t extend the mortgage forbearance program HOME LLC model forecasts an additional 11% increase to housing inventory later this year. But that may not be enough to lower prices because high positive home equity among delinquent homeowners results in a lower likelihood of foreclosure since people can refinance or sell the home to avoid defaulting on their mortgage. Those who do choose to sell are unlikely to shift the market. The forecasted uptick in inventory isn’t much given that inventory is at a 40 year low. So I project that home prices will continue to grow – maybe still rapidly – even if the forbearance program ends.

While lapse of the mortgage forbearance program is likely it isn’t guaranteed. The benefit, initially created by the 2.2 trillion care CARES Act  in March 2020, has already been extended three times. The last extension came from the buying administration in late June when it extended forbearance to September 30. However, so far the White House hasn’t suggested another extension is looming.

Many homeowners existing mortgage forbearance are returning to their pre-pandemic earnings and are no longer facing financial hardship associated with the pandemic. The homeowners who can resume the pre-pandemic monthly mortgage payment and where agencies have the authority, agencies will continue requiring mortgage-free services to offer options that allow borrowers to move missed payments to the end of the mortgage at no additional cost to the borrower.

Does this summon it up for you?

Yes and no. As I stated in the beginning of this article: The market was expected to crash when Cocvid hit but it didn’t. Under “normal” circumstances with “normal” supply and demand in the market, an expected 1.75 million units coming up for sale within a short period of time would likely result in a market downturn. Will it happen? My personal opinion and my gut tell me it most probably won’t. We have a decent President at the helm again who has enough experience and influence to make sure another 2008 crash won’t happen on his watch. I’m confident that his fact and science-based decisions in everything he does and did in the past, will lead to “normal” market up’s and down’s as we experience them since the beginning of time. Can you bet on this? Even with my 37 years in this industry I’m not and will never be 100% sure. I’m still selling Real Estate in this hot market and I have stopped waiting for the crash to invest my own money. I’ve again put my money where my mouth is and so far I didn’t regret it. How about you? Call or email me with any further questions.

Please don’t expect a guide where I tell you what to do or whatnot. This guide is supposed to support you with the tools for you to file a fact-based decision in this volatile market situation. I’m honestly waiting for a market correction since the Corona Pandemic hit us beginning 2020. Everything pointed to a correction then, but I’m man enough to tell you I was wrong back then. Now everything is still or even more pointing the same way, but I’m not telling you what you should do. But I can provide you a few stories I heard and information I got my hands on, that will help everyone to come to his own conclusion:

We are in a sellers market!

No question: we really are. Demand and supply regulate every market and our supply is dramatically down Equals: Prices are going up. Here comes an overview for what I’ve looked and what I’ve compared in the upcoming slides.

TMI – Too Much Information can hurt and confuse. I will therefore limit my information to the kind of properties most of MY buyers had purchased in the last 15 years through me. These are 95% Single Family Homes and a few Condos. ( HOA fee often make it hard to use a Condo as a vacation home or as a shorter-term investment ) I will only look at properties with at least 3 bedrooms but I don’t distinguish how old they are or how many bathrooms they have. I will show you the following slides marked in YELLOW in my video below:

You are already too late:

This is the message I got when I tried to place a CASH offer on a Single Family Home for nearly $500.000 that was listed in the MLS the same day. The seller’s agent already had 2 other cash offers. One of the buyers had already offered more than the asking price.

Yes, but this was yesterday:

One of my buyers was interested to purchase a brand new Duplex in Lehigh as an investment. New Duplexes come with a warranty and offered a seriously good investment income. He was interested in a Duplex under construction since his investment was still locked up for another 2 months. The home was listed for $325.000. I send the full price offer and received a counteroffer for $400.000. Immediately I thought the agent had mixed up homes., but he was serious. Material, as well as demand, had gone up THAT much so he was now asking $75.000 more. The worst: He had an offer already.

That was fast:

I listed a really nice Single Family Home for $895.000 and 2 minutes later ( I’m NOT exacerbating ) my phone rang. The buyers agent was in the area with his client and they asked to see the home. I got a cash offer 30 minutes later and they offered more than we had been asking. I closed this deal a few days ago and both parties are happy.

Time to investigate what’s going on:

These are only a few stories I either experienced or heard from other Realtors. Since I have a few more buyers lined up interested to purchase something I needed to put some serious hard evidence to what is going on. Here it comes and I promise it will blow you away:

1: Supply – Single Family Homes:

This chart shows how many months the current of Single-Family Homes in all price ranges, all sizes with 3 bedrooms in all ages and no matter how many bathrooms will last. We went down from 6.5 months back in January 2018 to only 1.2 months in 2021. Condos with 3 the same criteria went down from 9.9 months to 1.6 months.

2: How many are on the market?

As of March 2021 we had 1,709 Single Family Homes with 3 bedrooms in all sizes, all bathrooms and all price ranges on the market. This number is down from 6,246 in January 2018 and 7.476 from the peak in February 2019. Since then we are on a continuous decline in supply. Condos with the same criteria went down from 2,702 in January 2018 to currently 708.

3: Has everything really sold?

It looks like!! While only 297 SFH with 4 or more bedrooms in all price ranges sold in January 2018, we are now up to 841. In this chart, you can clearly see when the Pandemic hit and people thought the market might tank. The trend is similar again with Condos and 3 bedroom units.

4: Does it really sell this fast_

Yes, pretty much everything sells quickly. While it took an average of 58 days to sell a 4 or more bedroom home in January 2018, it now only lasts 22 days. During peak season it took 69 days. 3 bedrooms homes go even faster: On average they are only 10 days on the market before someone buys them. During the buyers market beginning 2019 it took about 60 days.

5: And finally: What about pricing?

After seeing all the above, you must know prices went up. Let’s take a look how much:

Quite some price increase: While the average sales price for 3 bedroom homes in January 2018 started at $341.073 we are now at a new peak of $488.992. All 4 bedroom homes in the same period went up from $767.867 to $1.341 Million. 3 bedroom Condos had been different: They on average sold for $632.629 in January 2018 and now you can purchase them for a little less at $614.482.

Now what? Still buy or not?

I don’t have the silver bullet and my connection to the guy up north isn’t reliable either. I can only speak for myself and as an investor: When prices go up like this while rent payments can’t keep up with the pace, my return goes south. For everyone who is in the business looking for an investment only, my advice is WAIT.

How is the rental / Vacation rental market?

( Regular ) Europeans aren’t allowed to travel to the States for over one year now. There is light at the end of the tunnel these travel restrictions might come to an end in the foreseeable future. I was just asked by a European customer who came to Florida usually 3 times each year before the Pandemic. He asked if we miss the Europeans. My honest answer: During the last 15 months we had been busier as ever before with just US buyers and guests. Most of my colleagues can’t even imagine how to handle additional customers. All our vacation homes are booked more than before. The inventory to purchase homes and Condos is gone. We haven’t been under strict Covid restrictions. In general: We didn’t even notice a difference. Yes: US vacation guests usually only stay for 4 – 8 days instead of 2 – 4 weeks, but therefore come more often each year. No difference in income for our owners. Even better: Short-term guests don’t ask for long-term rebates. And long-term rental income for annual contracts also went up about 10% within the last 12 months. Long-term rentals and vacation homes still make sense although your return will be a little less based on the higher purchase price.

Summary:

Buying a home in Florida often involves other reasons. Making money as an investment is only one. The constant warm and sunny weather makes up for a lot of other inconveniencies. So it’s still up to you if you want to spend your winters with snow and ice from November to April or if you bite the bullet and get a residents and enjoy the great life in sunny Florida. Since 1984 I’m your Realtor for all questions you might have in buying, renting, moving and much much more. See you soon in sunny paradise

The Corona Pandemic has hit our area. The Pandemic has of course hit everywhere but the symptoms and problems related to it aren’t easily visible. Looking at the traffic on our roads you don’t think anything has changed. Try to get a table at ANY restaurants in our area on a Friday evening: Good luck! All but the bad one’s are completely booked and you need to bring time to get a table. Do we really have a Pandemic? Does anyone think about all the people dying each day? Nope! No masks in restaurants – just the tables “seem” to stand apart a “little” further as usual. Drink, laugh and spread the news ( virus ) as much as you want. The stores and of course our beaches are as busy as usual during high season. We don’t even notice neither Canadians nor Europeans are “legally” allowed to be in our area. So it’s all Americans and they enjoy being in the Sunshine State.

And they keep buying properties

Before I get to the private market, let’s take a look at the hardest hit market: Commercial! To be honest: We’ve never been an area where big industry had their eyes on. We are a vacation hotspot and only smaller commercial businesses ( except Restaurant chains ) had a chance being successful. Now my list with the overall market supply and demand comes in handy. This will show us what’s going on. Let’s take a look.

Commercial as of October 10th 2020

For an easier comparison, I’ve color coded the most important issues. End of last year, we had 336 commerical properties for sale. About 84 sold if you devide the “Sold last 4 month” row by 4. But I also looked at what was sold in the last month ( September ) only and the number was down to 30. This was a clear sign the demand is gowing down. Only 22 properties had been withdrawn from the market between August and October. That’s about the usual average.

Same list as of February 1st 2021:

Oh boy: The signs are clearly visible: Instead of 336 properties for sale, we went down to 53. Not 84 per month in average sold and the last month instead of 30 only 4 changed hand. That’s about 86% fewer sales and this is met by about the same percentage of fewer supply. But on the other hand, 68 compared to 22 had withdrawn their listings. That’s an increase of over 200%. That is not the normal pace. With the Pandemic there was simply no demand for commercial Real Estate. Period. I guess this explains why a lot of people lost their jobs. In our area there aren’t too many “Home Office” jobs.

Let’s look at the private RE market:

This is a look at ALL Single Family homes in our area. This is how a healthy market looks. The supply in general lasts 4 about 4 months. But the 1958 homes that sold only in the last 30 days clearly stated a big buyers market. Prices went up although the supply still came in. I was seriously wondering when we would see prices drop because of the Pandemic. But look what happened instead:

Single Family Homes February 2021

The supply went DOWN. The average sales only went down 1.18% but the “sold per month went up 98%. Of course prices went up because on the other side 157% more people did withdraw their listings. These guys didn’t read my newsletter and I assume they expected the market to drop like I did. But I had the facts and I could tell and prove to my clients what’s going on and what’s going to happen in the close future. Now I see sales in the last 30 days going down about 24%. Although this is normally not a big reason for concern, I guess this time it might be. Remember: These are numbers of January. That’s already season. But we need to wait and see the numbers of February which is our strongest month of our season. If this number sharply declines again in February, then that’s the sign for the market to turn. Stay tuned next month.

A few words about myself at the end:

I’m in Real Estate since 1984 and now I can say I’ve seen it all. Normal markets, crazy markets, and now even a market during a health crisis. There are hundreds of Real Estate agents in our area. You won’t have trouble finding one you like, but you should also weigh in his or her experience. You probably won’t find a highly sophisticated 20-year-old with my 36 years of experience. Passing the exam does not automatically mean you know what’s going on and how to treat your clients. Check the background of the Realtor before you hire him or her. Experience cannot be substituted with youth and looks. Call or email me any time if you think about selling, listing or even just looking at what’s going on to get an idea of what kind of adventure you are about to enter.

Millions of people are unemployed. Traffic lines at food banks stretch for many miles. All over the US hungry people show up hours before the food banks open. They want to make sure they will get food for them and their kids before supply runs out every day. We have nearly 170.000 Covid related deaths in the US. In Florida we have 570.000 people infected and over 9.000 people have died.

All these negative news but the market goes UP

You need to see it in order to believe. All the above are signs for a bad economy – and especially for a Real Estate market that needs to collapse, but the opposite is happening. I entered listings into the Multiple Listing System ( MLS ) last week. 3 minutes after I had pushed the “publish” button, I had my first showing request. And from there on it got crazy. Calls never stopped. I had 25 showings in the first 2 days and 6 offers within this time. I was wondering if I had maybe listed these properties for too little. Remember: I’m in this business since 1984 and I was quite sure I did a good research before I listed these properties. But I went back and checked again. Result: I was dead on with my asking prices. Even worse: I was on the upper bracket of comparable. This means my listings weren’t cheap.

All offers over asking price!

Yes: All the offers I received came back higher than the list price. Now I had to start investigating what was going on. I started calling the other Realtors who had sent these offers. Their response was all the same: There are nearly no ( comparable ) properties on the market. Extremely many sellers had withdrawn their listings because of the Pandemic. They few properties left sell like crazy. We are in a sellers market again. Since I have all the numbers from previous months, I immediately went back to check if my collegues were right. And yes they were.

Facts from a few weeks ago: Single family homes

Compare it to the facts from August 16:

Let’s analyze it a bit:

Last month 432 property owners had withdrawn their listings – 3 weeks later this number went up 82% to 786 withdrawals. These people probably had the same info and knowledge than myself: With everything that happens in the world right now, the market had to collapse. Let’s pull the listing because I won’t get what I’m asking for. That’s common sense, but as you can see: It’s wrong. Although Cape Coral looks like it only had a few less listings, once you look at the following map you will agree that this seriously looks like a sellers market:

More RED than GREEN

This is an areal overview from today. Percentage wise there are way more red ( sold ) homes than green ( active ) homes. This picture shows single family homes active and sold within the last 120 days. So what does this mean for you?

As a buyer:

As a reader of my blog you know I suggested you should wait with your investment. Well: It looks like I was wrong. My conclusions haven’t been reflected by the market. The economy obviously has it’s own mind and once again the simple facts of Demand and Supply came to fruition. Less supply drives prices up. You should jump in. Sometimes it makes sense to neglect your feelings and senses and do the opposite. Lot’s of people do. In my blast blog I gave a few reasons why the market might not even collapse this time. Go back and read it. This time there is simply too much at stake. With this crisis there is no Government who can come and bail out single industries – at least not a collapsing Real Estate market. This could be the end of the Dollar. And believe me: Neither the current President nor the ( hopefully ) next President want’s this to happen. I start to believe the crash we were waiting for is not going to happen. A small correction maybe ( most probably ) but I was wrong before. I suggest you get in the game again – NOW!

As a seller:

Facts are facts. If your last name isn’t Trump you should believe what you see. Trust the experts. Trust the numbers. Look at the numbers and act accordingly. If you have a property you want to sell, then now is the time. You might be positively surprised what will happen once you list it. For all of you who can’t believe what you see I have good news: Do your own research. For this, I provide an easy tool right here on my website. Go to the Home Buyer link and go to Option 1:

• At the “Property Type” button click Residential
• Decide and click the cities ( areas ) you want to see results from ( i.e All Bonita Estero Areas )
• Click search
• On the next page you can see the results on the top
• Option 1 won’t let you check for properties that have been sold lately. If you want to get these info as well, go fill out your info for Option 2

Resume:

I’m long enough in business to honestly tell you if I made a mistake. Well…. I didn’t really make a mistake, but I came to the wrong conclusions based on what was in front of me and I told you about it. The market had other ideas and it’s time to adjust. If you are a buyer my advise is to get in asap. If you are a seller, you are considered a lucky one. Pick a Realtor, get it listed and lean back. Your sale is right behind the corner. Good luck to all of you.

I’ve posted enough reasons why the market is supposed to ( or even HAS to ) adjust, but it’s not happening. The opposite is happening: The market is going up and not just a little. Here are a few interesting numbers:

As a reader of my blogs you know I’m checking the supply and demand of homes every 4 weeks. Go check the previous inventory 4 weeks ago in my last blog. Within the last 30 days we have sold this many MORE single-family homes in these areas:

• Cape Coral: + 30.83% MORE = 539 homes
• Fort Myers: + 42.32% MORE = 380 homes
• Naples: + 37.99% MORE =523 homes
• Bonita / Estero: + 26.26% MORE = 125 homes

That’s for single-family homes SOLD within the last 30 days. Here are the numbers for Apartments SOLD within the last 30 days compared to last month:

• Cape Coral: + 31.43% MORE = 46 sales
• Fort Myers: 37.90% MORE = 171 sales
• Naples: 44.91% MORE = 313 sales
• Bonita / Estero: + 7.41% MORE = 87 sales

Does this look like a crashing market to you? If we are honest: Not at all. That’s why I started to investigate the reasons for such abnormal behavior. What do other people know where I have no clue about. I started asking me the following questions:

• Was I looking at it from the wrong perspective?
• Will it still make sense to wait until I invest in real estate again?
• How will banks and lenders handle the forbearance once they run out?
• How bad will the impact from tenants not paying their rent be for the Real Estate market?

Am I looking at it with the wrong perspective?

For me it was as clear as never before: with this many people losing their jobs and so many people not paying their mortgages and their rent, the market has to collapse. This is simply common sense.

Shall I keep waiting or buy now before the market goes upo even more?

The facts mentioned before clearly state that waiting for the crash is the best decision, but the numbers of real estate sold within the last 30 and even the last 60 days speak a totally different language. Not only more homes were sold, but also the DOW and Nasdaq are going up like crazy. What is going on? Is everyone completely blind? Am I the only one capable of reading the facts? For my investigation, I started to look into the mortgage forbearance rules because for me this seems to be the biggest problem next to the high unemployment numbers.

Forbearance and unemployment:

This week the lowest number of forbearance was reported: “ONLY” 7.7% of all mortgage owners have not been able to pay their mortgage. SERIOUSLY: That’s supposed to be a good number? These 7.7% equal 4.1 million households who care not paying their mortgage right now. 4.1 Million!!! With the unemployment rate still on the rise and Corona not going away, all the experts agree: These numbers could rise even more. Making things worse: The weekly unemployment check of $600 ran out end of last month and the Government hasn’t reached a deal on how to help these families to survive. Even with the unemployment checks coming in, they usually only cover about 50% of the people’s regular income. Mortgage rates often are close to 50% of people’s income. No wonder they can’t pay. I needed to find out more about how banks and lenders will handle these repayments from their mortgagees. Here comes a quick overview:

If you’ve been affected, you are entitled to forbearance for 12 months

Lenders will start with a shorter plan and reassess at the end of the period to see if the financial situation has changed. However, if mortgagees are still unable to make full payment, they are entitled to up to 12 months of forbearance if they request it. This looks like a game-changer for me. I was under the impression forbearance is a one-time approval and the payments have to be paid back over a period negotiated between lender and mortgagee after. But here is how it will be handled:

Your payments are suspended in forbearance – but mortgagees must pay the money back in the future

During forbearance mortgage payments are suspended until the end of the forbearance period, whether it’s one month or 12. If mortgagees can make partial payments during forbearance, it will reduce the amount outstanding at the end of the forbearance period.

Mortgagees are never required to pay back their forbearance in a lump sum

Here are several options mortgagees have to repay the money they owe, based on what’s best for them. These include:

• Full repayment, known as reinstatement, where they pay back the missed payments.
• Repayment plans, allowing them to catch up gradually while they are paying their regular monthly payment.
• Resuming normal payment, when they can’t afford an additional amount but can resume making their normal monthly payment, lenders can leverage alternative ways for them to pay back the suspended payments in a manner that is affordable.
• Modification of the loan, when they have a sustained reduction in income resulting from the crisis, lenders can look at a modification (changes to the terms of your loan) that might suit their new circumstances; those changes will aim to reduce their original monthly payment amount.

Loan servicers are supposed to reach out to their customers about 30 days before the forbearance plan is scheduled to end to determine which assistance program is best for them at that time—a repayment plan, loan modification, or even an extension of the forbearance period if needed.

Summary:

When we look back at the housing crash 2007 / 2008 everything was chaotic. Lenders only acted according to their statutes. If payments came in late, the ( foreclosure ) process got started. No matter the circumstances. No negotiation. This behavior has cost them dearly, but they got bailed out by the State. Back then we have seen 1.6 million foreclosed homes. This number gives you an idea of why lenders hang on to every loan even if mortgagees aren’t paying. 4.1 million loans are in jeopardy. That’s 150% more loans than in 2008. This time lenders probably figured the Government can’t come to help. The money simply isn’t there. Covid has crashed the whole economy and not just the Real Estate market. They needed to act smarter. They don’t want to become owners of these homes in jeopardy. That’s not their business. Their business is lending money. And that’s what they do. Interest rates are at a historic low. I’ve seen 1.875% for a 15 year fixed loan. People are buying homes. Period. According to the payment plans mentioned above, I think it’s safe to say lenders will keep extending forbearance or modify loans if possible to avoid another crash. That’s why the market might NOT crash.

Outlook:

I didn’t assume current increased sales were made with high down payments. I assumed it’s the opposite. In meetings with friends and colleges in the last few weeks, my assumption was confirmed: Most of our buyers have asked for loans with mostly low ( Zero to 3% ) down payments. We have been there. That isn’t good if the market drops, but this time lenders probably will just keep their hands still and won’t force people into foreclosure. My take: I’m going to start looking for at least one more home right now. I know: It’s a little like Russian roulette. But if you think the market might still crash then opt to buy some options for falling markets. This way possible real estate downturns losses will be caught by these options and you have invested in assets either way.

Since my last blog only a few weeks ago, not much has changed. Prices are not dropping in a concerning way ( yet ). Here and there we see people lowering their asking process, but this has always happened. People under duress don’t have many choices to attract more buyers than lowering the asking price. This happens all the time and is no clear sign the market is going south. Price reductions are still only a few percents off the initial asking price. So people are asking: What can my money buy right now. Let’s take a look:

Less than $100.000:

This is a momentum for only today. Tomorrow’s numbers can be slightly off. But today there are 299 properties for less than $100.000 for sale in Lee County. This is everything in size, age, and building design and it looks like a lot when looking at it from an investor’s standpoint. Let’s break it down:

Single-family homes for less than $100K:

From the 299 properties mentioned above, only 7 are single-family homes in Lee County. A total of 13 are listed, but the other 6 are in Clewiston, La Belle, Moore Haven, and Punta Gorda. For my research, I will limit my data to Lee County only. That means 7 homes for sale below $100K. The cheapest is a 3/2 in North Fort Myers for $70.000 and it needs a lot of repairs. The 1st move-in ready home is a 2/1 with only 672 sqft for $79.000 also in North Fort Myers. This wood-frame home was built in 1944 and could be rented for around $700 / month. All homes for less than $100.000 are listed with fewer than 1.000 sqft and most are older wood-frame constructions. Since Termites are an issue in our area, buyers should be careful checking for pest trouble before investing. But yes: There are homes for less than $100K.

Apartments for less than $100K

134 of the 299 properties are apartments. 130 of the 134 are small 1 – 2 bedroom apartments and most of them are between 600 – 1.000 sqft. About half of them have mandatory Homeowner Associations which leads to additional expenses. For investors, this is important since some of them can’t be forwarded to the tenants. All of them show additional “Condo fees” while some even have Club – and other fees. These expenses lower the ROI. But yes: there are already plenty of apartments for less than $100.000.

My take on properties for less than $100K:

If you know what you are doing and if you are a good handyman yourself to address repairs and TLC jobs, this can be a start as an investment. If you are looking for a second home for the winter season it might work as well, but keep in mind these are either older homes with higher insurance premiums or smaller apartments with often pretty high monthly HOA fees. These fees occur if you use the property or not. I’m not an apartment guy. I hate HOA’s. In my experience jobs at HOA’s are usually filled by people having too much time on their hands. They are coming up with lots of ridiculous ideas that make owners suffer a lot. Been there – done that. No thanks. For sure not at such small apartments. But everyone is different and lots of people have no beef with HOA’s. It’s simply not for me.

Other properties for less than $100.000:

I was honestly amazed to only find 10 manufactured homes in this price range, and they were all freaking small. All between 376 – 960 sqft. But this will get you your own single-family feeling home with often lower HOA fees than at apartment complexes. Based on often higher insurance premiums this might kill your ROI and these properties also often have rental restrictions ( 55 + Communities ) that can make it harder to rent. They are often used as 2nd homes during the winter.

Properties between $101.000 – $200.000:

1.606 properties total pop up in our area in this price range.

• 270 are single-family homes
• 1018 are apartments
• 152 are manufactured homes
• 166 are Villa’s attached or detached and Townhomes

This is the breakdown from above – SFH:

• from the 270 SFH 51 are smaller 1-2 bedroom homes, 182 are 2+ and 3 bedroom homes, 33 are 3+ and 4 be homes and only 4 are bigger.
• 14 of these homes do have a pool. The cheapest is offered in Lehigh for $129.900, built in 1964 with 926 sqft. No HOA fees and it could be rented for about $1.000. The biggest is 3/3 in North Fort Myers with 1,955 sqft from 1954 in good condition which could be rented for about $1,800 and with no HOA fees.

Apartments:

• 1.018 of the 1.606 are apartments.
• 846 have 1 – 2 bedrooms
• 169 are between 2+ and 3 bedrooms
• only 4 have 3+ or 4 bedrooms
• there are no bigger apartments than 4 bedrooms
• The smallest is listed with 327 sqft for $159000 in Naples. It shows $160 monthly HOA fees.
• The biggest is listed with 2.406 sqft for $199.000 in fort Myers and shows NO HOA fees. Wow!! That sound like a rare bargain

All properties between $200 – $350.000:

Now they are coming. There is a total of 3,436 properties listed as of today.

• 1438 are single-family homes – 262 of them do have a pool
• 1449 are apartments – only 41 mention a pool in the community *
• 47 are manufactured homes – none of them mentioned a pool *
• 457 are Villa’s attached or detached and Townhome – 22 of them have a pool

All properties between $350 – $700.000:

Still going strong. The MLS lists 3.240 matches

• 2025 are single-family homes – 1273 of them mention a pool
• 1050 are apartments – only 47 of them mention a pool *
• still, 6 manufactured homes listed in this price range
• 159 are Villa’s attached or detached and Townhome – 48 of them with a pool

* Disclaimer: Apartments in this price range nearly all have access to a community pool. Often Realtors forgot to mention the pool in the listing description.

Let’s go crazy and check expensive homes:

• 1.536 properties are listed for more than $1 Million
• 1.067 of these are single-family homes – 1.014 list a pool
• 409 of these are apartments
• 51 are Townhomes or detached villas – 34 of them with pool

The most expensive:

• SFH: For $65 Million you get this 11.511 sqft home in Naples. I know: You want to see how something like this looks. And you can do this when you go on the “Homebuyer” tab on my site and copy this listing number in 219077095. It’s a freaking big mansion!!
• Apartment: The most expensive apartment is ( who had guessed ) also in Naples. For 16.9 Million you get a not so shabby World Class Oceanfront Beachfront Apartment with over 12.000 sqft. Go check it out with this listing # 220006493

Wow – but let’s get real again:

Suggestions for your own use:

Decent homes with pools start at around $250.000. Yeah, you can get some cheaper, but my emphasis was on DECENT. If you decide to rent this home to vacation guests, the minimum income we produced each year for each owner was enough to at least cover all expenses. Not bad for a start. We don’t know if this will still be the case with all the craziness going on around us, but let’s be honest: People will ALWAYS go on vacation and Florida will ALWAYS be a premium destination. We might have to face a slower time for a while, but I’m confident we will be back once a vaccine was found. Please feel free to read my other BLOG where I talk about this issue in detail

Go check yourself:

Take advantage of the free MLS access I grant all my readers. Click HERE to get life access. This link will give you the same access and information as any Realtor in our area has. Life!! No more BS , no longer false or outdated listings. The moment a listing is entered in our MLS which meets your criteria, you will receive this listing the same minute via email ( Option 2 only ) Start looking at Option 1 without even giving me any personal information. Your access is always free no matter what you are looking for.

Why go with me you might ask!

I’m in this industry since 1984. I’m not saying I’m the best or you won’t find anyone else with my experience. But in my 36 years in business, I’ve seen a lot. I’ve solved a lot of problems and I’ve helped a lot of people to buy or sell their properties. My experience as a builder in Germany and in the US gives you behind the scene knowledge not everyone has. I’m used to telling my buyers and sellers everything even if it sometimes means losing a sale. Happy customers come back and tell their friends. This is and was my motto my whole life. Why don’t you give me a call and find out if we are a good fit working together to make you become a homeowner in sunny Southwest Florida. I’m looking forward to hearing from you soon.

The Dow is surging, and that’s supposed to be awful news for the housing market which is completely disconnected from the real economy. In addition, the U.S. stock market appears to be diverging from the housing sector as well.

After the release of the ( obviously slightly manipulated ) better job report a few days ago, the Dow rose. Although slightly fallen since then, the Dow has soared about 40% since it had hit bottom.

But what’s good news for the U.S. economy is awful news for the housing market. Indeed, the risk-on rally has caused Treasury yields to spike. The employment report fueled the growing selloff in the bond market, pushing the Treasury yield above 0.9%, its highest since March. As mortgage rates follow the yield on the 10-year Treasury, they have risen this week, after sitting around record lows in the past two weeks. The average interest on a 30-year mortgage was 3.18% this week.

In addition, lenders have tightened their lending practices making it harder to be approved for a new loan with only a little or sometimes even no down payment at all. Interest rates climb, customers are supposed to bring higher down payments, unemployment is at all times high and the Corona Pandemic is sneaking back into our lives again with possible shutdowns just around the corner. This is a recipe for a guaranteed disaster for the housing market and it has to fall sharply. Well: Not yet.

Facts not suppositions

Readers of my blog know I’m regularly checking our local housing market. Supply, demand, and sales are easy to compare to previous months thanks to our MLS software. So let’s compare a few facts with previous months:

May 2020:

How to read this list:

• These are ALL Single-family homes in Lee County
• In total there were 6,667 homes for sale 30 days ago
• 6,040 have been sold within the last 4 months while only 1,241 have been sold for the last 30 days. The 30-day comparison already gives us the first clue. Multiply 1,241 by 4 and you end up with only 4,964 sales instead of 6,040. This states sales are declining.
• Supply should not last longer than 6 months with the current sales/month. Numbers in red are concerning – numbers in yellow are encouraging.

Now look at the same list 30 days later:

These are the changes you need to look at:

• There are over 1,000 homes less on the market for sale
• But within the 4-month comparison, 135 more homes sold
• And within the 30-day comparison, even 128 more homes sold
• In overall sales have increased to 16.76% compared to the last month
• Compared to 2 months ago when the Corona Pandemic was much worse, we are down only about 16%

That’s not a market in Turmoil -right?

Let’s take a look at apartments with the 30 day comparison side by side:

• Supply is nearly the same
• The 4-month sale is only down slightly, but the 30 comparison shows 113 sales fewer.
• Neglect the 200% uptick in Lehigh. There are only a few Appartments at all. But overall, the market is only still pointing down slightly.
• Compared to 2 months before, the overall sale is only down 36%.

With everything that’s going on, you should expect a much sharper downturn. These numbers are proof this isn’t the case – yet! So far, sales are still going strong.

What about prices – are they falling?

Remember: When Corona hit the States, lenders knew what was going to happen. People who are losing their jobs when businesses are forced to close often can’t pay their mortgage. Banks learned their lesson during the last crisis in 2008. This time they acted quickly and allowed homeowners to postpone mortgage payments for 3 months. 3 months later they extended it another few months. We are still in this extension. This explains why prices are not dropping as rapidly as you might expect.

So: Will prices drop eventually?

Let me answer this with a question: What do you think? Is there actually any chance they won’t? If yes, please explain this to me and my readers. If it walks like a duck, quacks like a duck, chances are good it’s a duck. In my opinion, prices have to come down once either the Government doesn’t extend these payment delays or if the job market doesn’t approve dramatically. I see none of these in the near future which has to lead to prices going down.

WHEN????

I have no idea, but soon. Investors, please be patient a little longer. I’m in touch with many of you already and I will let you know when I see clear signs to get in – when I will get in again. Until then: Watch the market and forward me your thoughts.

Look at my last newsletter from March 31 where I told you it’s going to happen and now it started. I’m in Real Estate since 1984. Before Corona I seriously thought I’ve seen it all, but nobody has seen what’s coming now. Nobody can tell how bad it’s going to be, but you can either be an optimist and use this situation to your advantage or you can be a pessimist losing money.

Is your glass half-full or half-empty?

In my last letter, I told investors to wait. I’m still telling you the same. The market is turning, but I think there is still plenty of room to go down. I don’t know if it gets as bad as back in 2008 where I made a fortune when homes sold for under $100.000 for which I since then receive between $950 – $1,350 rent per month. These homes are long paid off by the tenants and I sold a few for more than double the purchase price. In 2008 it was a local crisis initiated by greedy lenders. This time it is a worldwide crisis which should be a signal this one could even be worse.

How bad?

Nobody knows. Whoever is telling you they know they actually don’t. But thanks to our great MLS system, I can base my decisions on facts. I have learned to leave all the speculations to our President. For our local market, I can show you the facts and it will be completely up to you what you do wit this knowledge. Back in 2008 a lot of people made some decent money following my advice. This is what I do:

In this particular example, it shows right now there are 667 single-family homes in Bonita on the market for sale.

This picture shows us, 531 homes in Estero have been sold in the last 3 months. Divide this number by 3 and you get your overall sales of Singel Family homes per month. This ads up to 177 homes in overall sold per month. I can now reduce the sales period to any other number. That’s how I check how many homes have been sold within the last month. This will give us an idea of what’s going on in the market. If I only look at the last 30 days how many homes have been sold in Estero, this number is 124 or 15.17% less than overall. Demand is going down.

This is how the other areas are looking:

On average 25.61% fewer single-family homes have been sold within the last 30 days. Take a look at Appartments where it’s a little worse:

The average sales reduction for single-family homes and Apartments located on any kind of waterfront is 30%.

And how are sales prices doing?

The rule of supply and demand always works. Yes. But only in a market that isn’t artificially supported or manipulated as we see it right now. It is kind of weird why sales prices are not going down like crazy. In 2008 the banks made the situation worse when they didn’t work with their customers and forced everyone in default to sell their homes. This time it is different. With this global crisis, it’s not up to the banks alone anymore. This time they work with the Government and they worked out a deal where each homeowner can postpone their mortgage payments for up to 12 months. This is why prices are not dropping like rocks – yet!! Right now you see a few price reductions here and there, but nothing major. Will prices come down at all?

Let’s try to analyze this?

Try to put yourself in the following position: You are a homeowner with a mortgage and you have lost your job to Corona. You don’t have to pay your mortgage for the next 12 months. Right now you are in good company: A little over 14% of all Americans don’t have a job. Estimates suggest this number will go up to about 20%

• Will you save money to make up these 12 months?
• Are you going to drastically reduce your spending and change your life?
• Do you think the economy will be back the same within 12 months?
• Do you expect the value of your home to be the same in 12 months?
• Are you sure you will still have a job in 12 months?

If you positively answer at least 2 of these questions, chances are, the market won’t crash too much. But let’s honestly face it: It will!! That’s why I renew my position: If you got cash and if you are looking for a great investment, be a vulture and keep waiting. Chances will show. I will let you know when it’s time to go all in. Perhaps you will become one of my customers who bought the following homes between 2007 – 2009 and now get this:

• Lehigh: Purchase $56.000 – rent $950
• Lehigh: Purchase $78.000 – rent $1.100
• Fort Myers: Purchase $81.000 – rent $1.200 – sold for $179.000
• Cape Coral: Purchase $91.000 – rent $1.350
• Cape Coral: Purchase $99.000 – rent $1.400 – sold for $195.000
• Cape Coral: Purchase $109.000 – rent $1.900 ( Poolhome ) – on the market for $325.000

I could to on an on. All these homes have been paid off by the tenants. Even with all the necessary maintenance and repair, they are now free and clear or sold for a great profit. Where else can you get this kind of return on your investment where you can even write off trips to Florida as expenses? Call or email me any time for further references, help, and updates.

I didn’t ask IF the market is going to crash again. I also didn’t ask WHEN the market is going to crash the next time. We all know the answer to this. This time it’s easy. This time it’s obvious. The market will probably start going down by the end of April 2020 and crash max. 2 months later.

Why?

Well: Because this time we can’t avoid it. This time the signals are clear. There are several reasons:

• a lot of people can’t work = they have no income = they can’t pay rent or mortgage
• Owners who have financed their properties and who are not receiving rent payments for a long time might face trouble with their lenders. As long as owner pay their mortgages out of their pocket, they are fine, but they might also be out of work……
• I don’t think anyone believes the unemployment numbers we get from the media. If you assume they might be higher, you are probably right. This does not help the market

I agree: we all need to live somewhere. We need a roof over our head although we all know with this crisis this won’t be happening for everyone. A lot of people will lose their homes. It’s not their fault, but no matter what it’s going to happen. So what do I think how bad will it be?

Let’s see:

The stock market has crashed because a lot of people needed cash. They needed it quick to fulfill their short-term obligations. OK: that’s done. All sold – most often with big hits. The lucky ones have covered this month, but this crisis ain’t over yet. The stimulus package with $1,200 per adult plus $500 per child won’t cover most people’s expenses in April. Banks and lender MIGHT be a little lenient when payments are due, but in the end, they want their money. Comes the next payment, most people will be out of money. That’s why I say the market will go down a little by the end of April and continue to go south faster after that.

Let’s look at the numbers:

Readers of my blogs know, I’m doing a regular check how many properties are on the market for sale right now, how many have sold in the last 4 months and with this going create, how long will the supply last. The more properties are on the market and the less sell, the more prices will drop. So let’s take a look at the last 2 months. My last statistic shown on the left was performed on January 15th while the one on the right as performed March 21st. Remember: Back then we didn’t take this crisis really seriously yet.

This one looks like we don’t have a problem. Right: Not yet!! Of course, these numbers are correct and also expected. In a normal world, we have season at this time of the year. Our population nearly doubles. Lots of snowbirds are around. They got money and usually, they purchase properties. All completely normal. We even had less supply and slightly more sales than 2 months ago. Prices were going UP!

Same with apartments:

Less supply than 2 months ago ( 4916 vs 4758 ) but more sales ( 780 vs 679 ) Of course prices went up! I think the first and probably the biggest downturn will be seen in the commercial market. Right now everything is still ok, but:

The supply in Fort Myers went up. This happens sometimes even during normal times, so I won’t put too much thought into it. And Lehigh ( also shown in red ) isn’t a decent example for commercial real estate, because the supply is way too low to give us decent data.

OK: The world was still ok…..

Remember: This was a fact-check performed March 21st. Now we wait at least another month. ( I will do one in 2 weeks anyway.. ) If I’m right, then supply will go up and sales will go way down. I’m 100% sure sales will go down by then although the supply might also go down. Sellers who don’t need to sell no matter the price will take their properties off the market if this happens.

What does this mean for you if you are an investor?

This crisis is bad. They can be good for you though! The FED and all banks around the world are pumping money into the market as never seen before. FED and world banks worldwide interest rates are at ZERO and this is as low as it can get. It didn’t help the market this time. For the last crash in 2008, the banks were to blame. The had f…ed up. The FED had to intervene to support the banks before the problem spread to other markets. Mostly people invested in Real Estate were involved. The rest of the population had money and income was flowing. No other market was affected. You could buy toilet paper everywhere. No shortage.

This time the whole world is the problem and the banks will feel the impact a little delayed. Right now we are still all kind of ok. The little money most people have is sufficient to cover the necessities for food. All other stores are closed anyway. Supply is not affected yet, but the longer it takes to reopen the economy, this will happen. If we then open the economy and we have a shortage of supply in many areas, prices will go up drastically. A lot of demand hits only little supply. This law will apply and this means we will go towards inflation. How bad? I don’t know. Nobody knows, but this can be the one that erases most of your money.

Therefore:

Wait and keep checking the market. When you see prices go down start buying. Material value will beat the monetary value. Yes: You might see values even go further once you decided to buy, but they never go to ZERO as your monetary value might. It happened before. There is no reason it will not happen again. Don’t lose your money. Invest in material values. Invest in Real Estate. I still own a few properties which I bought for pennies on the current value. The rent I receive has paid them multiple times since then. Do the same next time. Most of my values have tripled since 2008. I don’t really care too much if they will suffer a little in this crisis. I will start buying again if the market feels right.

I will let you know….

Keep reading my blogs and I will let you know when I get back in the game. Then it’s up to you to either do the same or not. I’m making money helping you to invest and make money. This is a win-win situation.

I live in Florida since 2004. As a real estate agent, I am not allowed to provide legally binding advice when it will be the best time to invest in Real Estate. I’m in this industry my whole life. I’ve seen the market turn in both directions multiple times. I’ve invested my own money and I tell my friends and customers to do the same. I don’t know if I will be right all the time, but one thing I can guarantee 100%: The market will return. Either with you or without you. If you are interested in our services, please feel free to call or email me any time.