Rental market caution flag

Glut of vacation rental properties lowers investor return

The well laid plans of the ever expanding pack of investors -- buying property in SW Florida with the expectation to cover operating expenses with rental income -- while realizing appreciation has hit a snag -- an oversupply of rental properties and a shortage of prospective renters.

In this boom market, many former seasonal renters have taken the plunge and purchased their own home in the Florida sun. This rental property glut represents a fundamental shift from a market where traditionally it was quite difficult and expensive to score an in-season rental.

With the ongoing records being set for new building permits this is not a problem that is going away.

Renter’s Market [Naples Daily News]

Matlacha madness

Affordable housing disappearing quickly

Once a quaint fishing village Matlacha is undergoing a transformation much like the majority of SW Florida. Developers have discovered the beauty of the island communities of Pine Island and Matlacha which are located west of Cape Coral and north of Captiva Island.

The low income agricultural community on Pine Island is in danger of losing their homes as they are priced of the island. With some of the best Tarpon fishing in the world just beyond its shores, it is only a matter of time for the explosion of prices on Pine Island.

A non-profit organization called Island Housing Solutions has been founded to coordinate and implement affordable housing options for low and moderate income Pine Island residents.

Groups are preparing for a housing crunch [News-Press]

Baby boomers on the move

Upwardly mobile generation

A recent Coldwell Banker survey reveals that baby boomers are breaking the mold of their parents and are buying new more expensive homes. Most parents of boomers came of age during the depression and World War II remained in the same home throughout adult life.

According to the Coldwell Banker survey, more than half of the baby boomers who bought a luxury home plan to spend less than 5 years in this home. Eighty six percent of these baby boomers have purchased three or more homes in their lifetime.

Boomers are certainly benefiting from reaching their peak earning power during the stock market boom of the 1990's and the real estate boom of this decade.

Affluent Baby Boomers Are Not Ready to Stay in Their Current Homes Forever [RisMedia]

New university coming

Accord reached for permanent Ave Maria University campus in Collier County

A new town and university will soon emerge from the palmetto fields of East Collier County. This project located about 5 miles south of Immokalee is expected to add 11,000 dwellings and 24,000 residents over the next 10 years.

Ave Maria, a Catholic University is expected to eventually have a student body of 6000 students. Ave Maria is the first new Catholic University in the US in the last 50 years. Currently Ave Marie, has more than 300 students in a temporary campus in The Vineyards in Northeast Naples. Much of the funding for Ave Maria has been provide by Thomas S. Monaghan, the Michigan-based founder of the Domino's Pizza and owner of the Detroit Tigers baseball team.

The developer will donate to Collier County the necessary roadside land required to provide four lane access to the University.

Deal clears way for Ave Maria campus [News-Press]

Record prices in Lee County

Average home price up 43 percent from 2004

The average single family home price in Lee County was up a staggering 43 percent and hit $246,000 in March 2005 up from $179,900 in March 2004.

With the building permits in both Cape Coral and Lehigh breaking records in March, it doesn't appear that the high prices are scaring off new buyers. It appears to me that the whole region is awash in significant real estate gains and these gains are driving significant activity in all real estate sectors.

SWFLA home prices reach all-time high [News-Press]

Lehigh nit

Many property listings are not customer friendly

The market in Lehigh never ceases to amaze me. Currently property is escalating in price on an almost daily basis and investors are snapping up every well-priced parcel within hours of it hitting the market.

A common practice among some many Lehigh realtors is to ask the buyer to pay for the title insurance policy and sometimes other closing costs as well. I am told this custom in Lehigh dates back to the days when lots sold for almost nothing and the title insurance and closing costs significantly eroded the sellers take. I get particularly annoyed when the seller wants the buyer to pay all closing costs and also wants to dictate what firm will handle the closing. Unless the property is seriously under-priced, I avoid buying property listed with these types of arrangements.

If there is anything that I learned in my nearly 20 years in the telecommunications industry, it is that customers want bundled pricing and a service provider (or seller in the case of real estate) that is easy to do business with. Having a listing chocked full of nit charges is not a way to entice me to take a close look at or buy the property.

I do not understand why listing realtors just don’t simply raise the price of the property by the amount of the closing costs and eliminate these customer negatives in their listings. To me this just seems like a basic marketing 101 practice that would only help to sell property more expeditiously. With most vacant parcels in Lehigh selling for over $40,000, it is time to get with the program and end this silly practice. As Bob Dylan so eloquently stated, “the times they are a-changin,” it’s time to turn the page.

Affordability in question

Escalating costs are squeezing Lee County citizens

One of the major attractions of Lee County has traditionally been the affordable cost of living. Many are starting to question the affordability of Lee county with escalating costs especially in the area of housing.

The 23 percent increase in home costs from 2003 to 2004 in Lee County has been a boon for investors and speculators but is putting a major pinch on the overall population. While home prices are still low on a relative basis when compared with other parts of the country, a big challenge for Lee County is a shortage of high paying jobs.

While there are some glimmers of hope on the Lee County job front including the expanded presence of the Gartner Group, the expansion of Florida Gulf Coast University, Chicos continued growth and Findwhat.com there is a void in the growth of good jobs.

In my opinion, much of the wealth on display around Lee County was either made elsewhere and brought here or made here mainly in the fields of real estate and development. The economy needs to expand in order to support the ongoing price escalations.

Newcomers feel price squeeze [News-Press]

Florida third in growth

80 percent growth expected by 2030

New Census figures are predicting that Florida will grow by 80 percent over the next 25 years. Locally, Lee County is expected to reach 905,400 and Collier County 740,000
residents by 2030.

The key to managing for this type of explosive growth is for strong regional planning. The Fort Myers based Southwest Florida Regional Planning Council, whose membership is consists of officials from Charlotte, Collier, Glades, Lee, Hendry and Sarasota Counties, is charged with this task.

The Southwest Florida Regional Planning Council has identified six key areas of focus for its 2005 legislative position statement: affordable housing; economic development; emergency preparedness; natural resources; regional transportation and general government.

Regional Planners Work To Keep Up With Population Boom [WINK-TV]

A-rod a Tampa landlord

Baseball star Alex Rodriguez invests in Tampa apartment buildings

In addition to covering third base for the New York Yankees, Alex Rodriguez heads up an investor group that recently purchased two Tampa apartment complexes and a vacant lot for $20.8M. As baseball's highest paid player with an annual salary of $25M, obtaining financing shouldn't be a problem for A-rod and his investor group.

The complexes purchased by A-rod are the Lakeside Villas on N. MacDill Ave and the Pinetree Apartments on Idlewood Ave. The investor group also purchased a St. Petersburg complex in 2004.

A-Rod Is New Landlord For Some Area Renters [Tampa Tribune]

Cape Harbour accelerates

Second tower to be built ahead of schedule

The cranes that are so visible in Southwest Cape Coral are not going away anytime soon. The developer of Marina South at Cape Harbour had such great results in marketing the first tower that they are accelerating plans for a second high-rise.

Condos in the 15 story Marina South II are expected to sell for between $300,000 and $500,000 and have views of the Gulf of Mexico or the Marina. Plans also call for a 100 room hotel to be built on the site.

Great demand leads to Marina South II [News-Press]

Another Cape scam

Immigrants targeted by NY Woman

Here's a new one for you, paying $300 - $500 for a tour of vacant lots available in Cape Coral. When you find a lot to buy, you make a down payment and monthly payments but never get a deed to your lot. Rosalind Laguna-Boza, of Port Chester, New York is the mastermind behind this one and her victims were NY area immigrants.

Suspect Targeted Immigrants in Real Estate Scam [Ris Media]

Bankruptcy dodgeball

Homestead protection capped at $125K

Hundred year-old Florida homestead laws protect the family home from loss due to debts. These laws were instituted in the late 19th century to protect early dirt poor settlers of Florida from losing their homes.

Many wealthy individuals have taken advantage of these laws by electing to shelter capital in an expensive Florida home before declaring bankruptcy. Notables who have utilized this loophole include actor Burt Reynolds and former Major League Baseball Commissioner Bowie Kuhn.

Recent federal legislation will put limitations on this practice by capping the homestead exemption amount at $125K for homes purchased within 40 months of declaring bankruptcy.

This is a badly needed change that will help creditors recover debts on a more equitable basis.

Mansion owners won't be able to dodge creditors in Florida anymore [Sun-Sentinel]

RE attracting Internet execs

Many are finding new wave to ride

Hardly a week goes by where I don't cross paths with a former dotcom/telecom/Internet/ (and soon I expect)biotech execs that are now in the real estate market.

Dave Goldoff, profiled in CNN/Money, has jumped from the Internet entertainment space to real estate investing. Initially he participated in distressed auctions and has now moved to renovating homes in upstate NY near lakes and golf courses.

Tycoon in the making [CNN/Money]

Housing starts drop

Off 17.6 percent nationally

Housing starts in March experienced the largest decrease since 1991. Even with this decline, the first quarter of 2005 still had the highest number of housing starts in 20 years.

While weather has been attributed to some of the decline in housing starts, it is interesting to note that building permits for the same period were off by only four percent.

As reported two weeks ago, Lee County bucked the national trend as building permits were up sharply in March.

Housing starts slide 18% [CNN/Money]

Lehigh lot lowballers

Uninformed owners hooked by below market offers

Several local firms and individuals are reaching out to lot owners located afar with below market and often misleading purchase offers. With the recent price escalations in Lehigh, vacant lots that were selling for $6000 two years ago are now routinely commanding over $40,000.

Many of the original buyers of Gulf American plated lots in Lehigh and Cape Coral have owned their property for over 30 years and have not kept up with the recent valuation increases in SW Florida. It is unfortunate when a long-time property owner sells their property without seeking the advice of a good real estate professional.

Savvy buyers cash in big on cheap lots [News-Press]

Cape project shutdown

Foundation cracks and soil problems plague 370 acre subdivision

The City of Cape Coral has issued a stop order halting all construction activity at the Coral Lakes subdivision. Coral Lakes, located in Northeast Cape Coral along the Del Prado extension, covers 370 acres with nearly 1000 homes.

The problems at the development have included foundation cracks and soil containing large boulders. It appears that the developer, Transeastern Homes used lake dredging material to fill throughout the project site. This type of fill can cause a house to settle improperly and cause serious damage.

Pre-construction sales activity began at Coral Lakes nearly a year ago and the project is nearly sold out. It is reassuring that the City is taking aggressive steps to insure that future homeowners will have properly constructed new homes.

Cracks, poor soil stop homes project [News-Press]
City shuts down construction at Coral Lakes [NBC-2]

Naples tops 2nd home index

Florida most popular state for second homes

Naples, FL ranked first in the nation in a second home indexing compiled by the website EscapeHomes.com. This site tracks user searches for second homes on it's site. Seven of the top ten locations were for second homes were in coastal communities including the Florida communities of: Destin; Orlando; Tampa and Venice.

It is interesting to note the breakdown the types of properties searchers were looking for in Naples: 34% investors; 30 % retirements homes; 24% vacation property and 12% permanent relocation.

Florida the hottest spot for second homes; Naples tops March online real estate index [EscapeHomes.com]

Gulfstream dreamin'

"Live with your plane" neighborhoods gaining popularity

Located just off sleepy Buckingham Road northwest of Lehigh is the residential airpark neighborhood of Buckingham Airpark. This established neighborhood of about 50 homes is located adjacent to the Buckingham Airport.

The neighborhood is laid out in a manner to accommodate the movement of private planes on the streets in the development between the runway and individual homes. The neighborhood has deed restrictions and an active neighborhood association.

On a recent drive through the Airpark, I did notice a couple of for sale signs on vacant lots, although none appear to be currently active in the MLS system.

With the amount of investment cash flowing into Lee County, is it only a matter of time before The Donald builds a pad in the Buckingham Airpark? Call me if you see a Maybach 62 parked at the Hut.

For more private pilots, home is where their plane is parked [The Christian Science Monitor]

Lee adds 60 people a day

Census figures detail population boom

SW Florida real estate investors received some positive news today with the release of the latest census figures. During the period of July, 1 2003 and July 1, 2004 Lee County added an averaged of 60 new residents every day.

This is the type of demographic data that gives me some comfort with investing in this crazy real estate market. I get excited every time that an end-user buys one of my vacant parcels to build a new home. It is hard to imagine that this wave of migration to Lee County is going to end anytime real soon. In particular the market seems to have picked up more momentum after the horrible hurricanes that hit last year.

Lee, Florida continue population boom [News-Press]

Babcocks say no to state

Reject $455M offer for 91,000 acre Babcock ranch

In a move that may have serious ramifications for the future development of SW Florida, the Babcock family turned down the latest offer from the state for their 91,000 acre ranch.

The 91,000 acre ranch represents an area approximately the size of Cape Coral, Florida's second largest city. The ranch is home to many protected animals and plant life and provides a filter for groundwater that ultimately flows into the Caloosahatchee River.

The ranch which straddles both Lee and Charlotte Counties has been eyed by developers to create a town of about 20,000 new homes.

At this time there is a gap of about $25M between the price the state is willing to pay and what the Babcock family will accept. Additionally, there are some difficult deal structure issues associated with the tax burden on the Babcock family. Hopefully, these gaps can be bridged to protect this remaining piece of solitude in SW Florida for future generations.

Babcocks say no to state [News-Press]

Home sales softening?

Sales levels expected to remain above historic norms

The National Association of Realtors is predicting a slowdown in home sales and softening of price gains. The NAR is forecasting that home sales will be down 2.24% over record numbers in 2004. This result would still be the 2nd highest in history with 6.62 million home sales.

New home starts are expected to rise 1.4% to 1.98 million units, the highest level of new construction since 1978.

NAR chief economist David Lereah is predicting an increase in 30-year fixed mortgage rates to 6.8% in the fourth quarter of 2005.

While these downturn predictions from 2004 are of concern, the market is still close to historic levels. I continue to be optimistic, especially in the SW Florida market.

Home Sales to Soften With Firm Price Appreciation [Realtor Magazine Online]

Contract shenanigans

Sellers backing out of deals

A new trend is emerging in this red hot market -- sellers backing out of executed contracts because their property has sky rocketed in value between contract execution and the closing.

This issue has become widespread and in particular with pre-construction condos as the time interval between contract execution and closing is usually rather lengthy. Condo developers are now often not providing a final price at the time the deposit is made by the customer on the pre-construction unit.

I experienced a seller trying to back out of a contract for a waterfront lot in Cape Coral. This sale was delayed for several months due to a probate issue and during the period of the delay, the value of the lot increased significantly. After the probate issue was resolved, the seller refused to sign the closing documents. I hired a lawyer who filed a lis pendens with Lee County which is a notice on the public record of legal action on the property. We also served the seller and soon afterwards the seller agreed to sign the closing documents and close the transaction.

I would advise anyone that encounters a seller trying to back out of a contract to seek an attorney that specializes in real estate law.

Deals turn raw in real estate [News-Press]

Downturn prediction

Higher interest rates coming

BusinessWeek is predicting a real estate slowdown caused by a tighter monetary policy, higher interest rates and a slowing economy. The publication suggests that interest rates will reach 7% by 2006. As interest rates increase the amount of house that buyers can afford is reduced.

The amount of wealth created through home value appreciation is staggering. Between 2002 and 2004, homeowners who have refinanced have taken $400 billion out of their homes. Most of this cash was dumped back into the economy, creating significant economic growth. A 2002 Federal Reserve study found that the average homeowner pulled $26,700 from their home with each refinancing.

I find it interesting that the risk of investment speculation has been shifted from the building industry, which traditionally built on spec for end-users, to the end-user themselves who are investing directly in speculative real estate. I am still cautiously optimistic that investors can realize strong returns through real estate investments. As always, the key to having a positive investment experience buying correctly, having patience and setting realistic expectations.

After the housing boom [BusinessWeek Online]

Cape breaks permit record

858 single family house starts in March

Cape Coral continues to boom as new single family home starts reached an all-time high in March with 858 new permits. This breaks the previous record of 601 set in January and more than double the 400 number of March 2004.

With nearly 300 new permits in Lee County, First Homes is the area’s largest homebuilder. First Homes specializes in moderately priced homes in Cape Coral and Lehigh. I continue to be amazed every time I drive around these two areas at the sheer number of homes that First Homes has under construction. First Homes is also in the mortgage origination and title insurance business offering a one stop solution for their customers.

Lee, Cape permits reach record [News-Press]

Commercial crunch

Low vacancy rates for class A space

Throughout Lee County, finding suitable class A office space is a growing challenge for companies moving to or expanding in the area.

The CB Richard Ellis semi-annual inventory for Lee County shows a drop in vacancy rates from 18.8 percent in 2003 to 10.2 percent in January of 2005. These latest figures should spur on new construction as developers are generally interested in building spec office space when vacancy rates drop below 10 percent.

Downtown Ft. Myers is a particularly tight market recently made more challenging by the County's purchase of the SunTrust Bank Building, eliminating this space as commercial rental property.

Cape Coral, with its near zero commercial vacancy rate, presents an even bigger challenge for companies seeking space. With a population that recently exceeded 138,000, the Cape will have increasing needs for commercial space. The underlying problem is that only 8 percent of the cape is zoned for commercial and industrial use. This commercial zoning shortage dates back to the early development strategy of Gulf American Corporation.

Locations in Ft. Myers west of I-75 near RSW, including Metco Parkway and the newly opened Treeline Avenue are ripe for significant new commercial development.

Office Supplies [Gulfshore Business Online]

Deed scam update

Pol pushes for reform

The SW FL deed scam which Gulf Returns reported on about a month ago continues to escalate in scope. State Senator Dave Aronberg plans to pressure state officials to do more to tackle the problem.

The crux of the matter is that the Clerk of Courts and the Secretary of State do not have investigative power or authority to verify that individuals are who they claim to be.

It appears to me that we need legislation passed to provide these agencies with more authority and resources to combat this growing problem. Ultimately, the powerful title insurance industry will force reform when title claims reach critical mass.

Tighter deed laws sought [News-Press]