Housing Bubble??

Ellie Bunting • February 21, 2021

3 Reasons We’re Definitely Not in a Housing Bubble

Home values appreciated by about ten percent in 2020, and they’re forecast to appreciate by about five percent this year. This has some voicing concern that we may be in another housing bubble like the one we experienced a little over a decade ago. Here are three reasons why this market is totally different.

1. This time, housing supply is extremely limited

The price of any market item is determined by supply and demand. If supply is high and demand is low, prices normally decrease. If supply is low and demand is high, prices naturally increase.

In real estate, supply and demand are measured in “months’ supply of inventory,” which is based on the number of current homes for sale compared to the number of buyers in the market. The normal months’ supply of inventory for the market is about 6 months. Anything above that defines a buyers’ market, indicating prices will soften. Anything below that defines a sellers’ market in which prices normally appreciate.

Between 2006 and 2008, the months’ supply of inventory increased from just over 5 months to 11 months. The months’ supply was over 7 months in twenty-seven of those thirty-six months, yet home values continued to rise.

Months’ inventory has been under 5 months for the last 3 years, under 4 for thirteen of the last fourteen months, under 3 for the last six months, and currently stands at 1.9 months – a historic low.

Remember, if supply is low and demand is high, prices naturally increase.

2. This time, housing demand is real

During the housing boom in the mid-2000s, there was what Robert Schiller, a fellow at the Yale School of Management’s International Center for Finance, called “irrational exuberance.” The definition of the term is, “unfounded market optimism that lacks a real foundation of fundamental valuation, but instead rests on psychological factors.” Without considering historic market trends, people got caught up in the frenzy and bought houses based on an unrealistic belief that housing values would continue to escalate.

The mortgage industry fed into this craziness by making mortgage money available to just about anyone, as shown in the Mortgage Credit Availability Index (MCAI) published by the Mortgage Bankers Association. The higher the index, the easier it is to get a mortgage; the lower the index, the more difficult it is to obtain one. Prior to the housing boom, the index stood just below 400. In 2006, the index hit an all-time high of over 868. Again, just about anyone could get a mortgage. Today, the index stands at 122.5, which is well below even the pre-boom level.

In the current real estate market, demand is real, not fabricated. Millennials, the largest generation in the country, have come of age to marry and have children, which are two major drivers for homeownership. The health crisis is also challenging every household to redefine the meaning of “home” and to re-evaluate whether their current home meets that new definition. This desire to own, coupled with historically low mortgage rates, makes purchasing a home today a strong, sound financial decision. Therefore, today’s demand is very real.

Remember, if supply is low and demand is high, prices naturally increase.

3. This time, households have plenty of equity

Again, during the housing boom, it wasn’t just purchasers who got caught up in the frenzy. Existing homeowners started using their homes like ATM machines. There was a wave of cash-out refinances, which enabled homeowners to leverage the equity in their homes. From 2005 through 2007, Americans pulled out $824 billion dollars in equity. That left many homeowners with little or no equity in their homes at a critical time. As prices began to drop, some homeowners found themselves in a negative equity situation where the mortgage was higher than the value of their home. Many defaulted on their payments, which led to an avalanche of foreclosures.

Today, the banks and the American people have shown they learned a valuable lesson from the housing crisis a little over a decade ago. Cash-out refinance volume over the last three years was less than a third of what it was compared to the 3 years leading up to the crash.

This conservative approach has created levels of equity never seen before. According to Census Bureau data, over 38% of owner-occupied housing units are owned ‘free and clear’ (without any mortgage). Also, ATTOM Data Solutions just released their fourth quarter 2020 U.S. Home Equity Report, which revealed:

“17.8 million residential properties in the United States were considered equity-rich, meaning that the combined estimated amount of loans secured by those properties was 50 percent or less of their estimated market value…The count of equity-rich properties in the fourth quarter of 2020 represented 30.2 percent, or about one in three, of the 59 million mortgaged homes in the United States.”

If we combine the 38% of homes that are owned free and clear with the 18.7% of all homes that have at least 50% equity (30.2% of the remaining 62% with a mortgage), we realize that 56.7% of all homes in this country have a minimum of 50% equity. That’s significantly better than the equity situation in 2008.

Bottom Line

This time, housing supply is at a historic low. Demand is real and rightly motivated. Even if there were to be a drop in prices, homeowners have enough equity to be able to weather a dip in home values. This is nothing like 2008. In fact, it’s the exact opposite.

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The Gullah Heritage: From Sea Islands to Florida

By Ellie Bunting • December 27, 2024

In January, the speaker for Estero Island Historic Society’s public meeting will be Martha Bireda, director of the Blanchard House Museum of African American History and Culture of Charlotte County. Ms. Bireda is the great-granddaughter of Queen Evans Andrews, a pioneer who came to Punta Gorda in 1897 from Charleston, South Carolina. She will share stories of the Gullah culture and of her visits with the Gullah people who live on James and Johns Islands. Having just visited the Georgia and South Carolina Coasts, I thought this might be a good time to do a bit of research into the Gullah culture in anticipation of our January meeting.

1921 Tampa Bay Hurricane

By Ellie Bunting • October 8, 2024

Repairing the St. Pete pier after the storm. Florida Archives. As we prepare to run from another hurricane, it might be helpful to reflect upon the 1921 “Tampa Bay” hurricane which hit the Tarpon Springs/Tampa area on October 28, 1921 This was the first major storm to hit the Tampa area since the “Great Gale” of 1848. We can draw a few parallels between this hurricane and what we are now facing with Milton. In 1921, the weather forecasting was not what it is today; rather, the forecast was based on observation sites which reported breezy and cloudy conditions around a low pressure system that was organizing off the coast of Honduras on October 20 and 21. By October 22 and 23, the area of low pressure began to intensify. Winds reached tropical storm force at the observation sites. The sites reported thunderstorms and cloudiness across the Caribbean.

Labor Day Hurricane 1935

By Ellie Bunting • September 1, 2024

Searching for survivors on Upper Matecumbe Key after the storm. Photo Credit: Creative Commons In the late summer of 1935, the citizens of the Florida Keys were in the depths of the Great Depression. Key West, once a prosperous port city, had declared bankruptcy. Residents were struggling to live on an average monthly income of $7. The city needed a plan to survive so it was decided to rehab the old buildings and re-create Key West as a tourist destination. The government saw this as a way to help the jobless World War I veterans who had been affected by the economic downturn. The vets would be paid $30 a month plus free room and board to come to the Keys and build the bridges and roads that would be needed to support the Key West plan. The men were housed in flimsy shacks built on the shoreline. Residents of the Keys warned that this housing would never survive a hurricane, but their warnings were not heeded. The government plan in case of a storm was to send a special train from Miami to evacuate the vets if a storm approached. Like many plans, this one was not thought through very well. The railroad officials insisted that they would need several hours of lead time to get a train ready and on its way to the Keys. It was in late August 1935 that a tropical wave came off the coast of Africa heading across the Atlantic towards the Caribbean. At this time, predicting storms was not a science. With no satellite images or hurricane hunter planes, meteorologists were pretty much shooting in the dark with only a newly developed radar to help them predict when or where a storm would hit.

Who Was Jack DeLysle?

By Ellie Bunting • September 1, 2024

Who was Jack DeLysle? I had been reading about him in different articles as I was doing research on the early days on the island. I had come up empty except for one cryptic note I found that he “left the island under mysterious circumstances.” Yesterday, I was going through copies of the Sand Paper that were donated to the historic society and found an article by Jean Matthews that was about Jack DeLysle. This is what I learned about the mystery man who played a pivotal role in the early development of the island. Jack and his brother, John, first appeared in Southwest Florida after their ship ran aground at the moth of Gordon’s Pass. When Sheriff Frank Tippins arrived to investigate the incident, he found 320 boxes of “Soap” that turned out to be whiskey. The brothers had apparently picked up the moonshine in Alabama and sailed to Tampa, then Key West, and finally to Cuba. When they returned to Florida, they were caught in a storm and the ship was wrecked. “Captain” Jack DeLysle claimed he was in the British Army; however, he and John were arrested and turned over to the Feds. Both men were found innocent by a jury in Tampa and Jack returned to Fort Myers where he was into many different endeavors. Although he wrote poetry that he published in the local paper, DeLysle is best known for his efforts to raise money to build a bridge to Fort Myers Beach. He joined the Crescent Bridge Road Company where he met E.E. Damkohler. Damkohler was trying to raise money to build a road from Miner’s Corner to the Island. DeLysle saw potential in Crescent Beach ( old name for Fort Myers Beach)being developed into a tourist mecca like Miami Beach. He purchased property in Case Subdivision and built the Seminole Sands Casino. DeLysle’s casino had a game room with tables and slot machines, changing rooms, a dance pavilion, and a restaurant.

Al Capone and FMB?

By Ellie Bunting • July 3, 2024

Did Al Capone spend a week on Fort Myers Beach back in 1929 or 1930? According to Jean Matthew, Capone and some of his lawyers may have stayed at the home of Dr. Baker Whisnant in Seminole Park. The group consisted of two attorneys and their families, including their children, and of course, Mrs. and Mrs. Capone. Matthews states that the two lawyers who were with Capone rented a beach cottage at the same time they rented the home in Fort Myers. Rumors began spreading around town that Capone and his gang had been seen hanging round in downtown Fort Myers. The cook who worked at the Seminole Park house while the gang was staying there stated that every morning a strange man would appear and eat breakfast at the house, arriving from the beach. Was this mysterious stranger really the infamous Al Capone? The cook’s description of the man sounded like Capone who also had a deep scar on the left side of his face. The strange man never went out during the day. He would stay home and play with the children until evening when he would leave. Other people in town also recall this stranger who may have been the famous gangster. A young gas station attendant who was working at the Standard Oil station on McGregor waited on the stranger. When he was caught staring at the gangster, Capone is reported to have told him, “You know who I am, but kept it under your hat.” Mrs. Whisnant, the owner of the Seminole Park home, said that the group acted strange from the beginning. They didn’t register at a hotel. They immediately sought out the realtor who was in charge of the rental and were brought to the home immediately. They took only a brief time to look over the house before asking to move in in immediately. They didn’t want a phone. They asked about the mail but insisted that their business was all transacted by telegraph. When the group left, and the owner was cleaning up her house, she found many cases of empty liquor bottles. The residents of Seminole Park told her that the renters were not very friendly and stayed to themselves. After reading this in the Sandpaper, I decided to do a bit more research to get to the truth about Al Capone’s visit to Southwest Florida.

Times Square Through the Decades

By Ellie Bunting • June 14, 2024

The Tip Top was a popular hangout for teens back in the day.

Hurricane Season is Upon Us: Predictions

By Ellie Bunting • June 3, 2024

As we are all still recovering from Hurricane Ian, the news from NOAA that was released this week is a bit intimidating. Forecasters estimate 17- 25 named storms this season with 8-13 reaching hurricane strength. Of these, forecasters predict that 4-7 would be considered “major.” This is not great news, and it gets worse. Florida has a 96% chance of being impacted by one or more of these named storms. If we look at only hurricanes, the probability of a hurricane hitting the sunshine state drops to 75%. This drops even more to 44% when we look only at a ‘major’ hurricane hitting our state.

Preserving Our Environment: The Battle for Estero Bay

By Ellie Bunting • May 7, 2024

While doing research for Lost Icons, I came across a quote in the News-Press that I have cited several times in other articles and presentations. Written in the late 1970s, this quote seems to bring the past and the future together quite nicely: “Nobody really wants to stop progress, but there is an increasing awareness that the island is in danger of becoming a polluted paradise.” Over fifty years ago, the paper stated that Fort Myers Beach was at a crossroads. The 70s were a time of rapid, uncontrolled development with over 68 condos being developed in a single decade. This led residents to vote to incorporate the town so we could control our own destiny and stop the over-development of our island. The newly born town elected its first town council who worked very hard to create a comp plan that would guide our development and preserve our island lifestyle. This plan was completed in 1995 and had served us well until Hurricane Ian damaged every building on the island. Now that we are in the rebuilding mode, we are once again at a crossroads: Do we stick to the comp plan and turn down the developers who want to build higher and bigger? So far, the council has been carefully considering all arguments and is making logical decisions trying to keep as close to the comp plan as possible. The council and residents need to tread carefully to make sure, in our efforts to build back, we spend time anticipating the unintended consequences of building back bigger. One very good example of this is the recent attempt of two legislators to take back 225 acres that are part of the Estero Bay Aquatic Preserve. (More on this in another post). This was not the first time our beautiful back bay was threatened. Let’s go back to the 1960s when a group of concerned residents decided to take action to preserve the beauty of our back bay. Back to the Future

Home Buying Today

By Ellie Bunting • April 27, 2024

Is It Getting More Affordable to Buy a Home? Over the past year or so, a lot of people have been talking about how tough it is to buy a home . And while there’s no arguing affordability is still tight, there are signs it’s starting to get a bit better and may improve even more throughout the year. Elijah de la Campa, Senior Economist at Redfin, says : “ We’re slowly climbing our way out of an affordability hole, but we have a long way to go. Rates have come down from their peak and are expected to fall again by the end of the year, which should make homebuying a little more affordable and incentivize buyers to come off the sidelines.” Here’s a look at the latest data for the three biggest factors that affect home affordability: mortgage rates , home prices , and wages. 1. Mortgage Rates Mortgage rates have been volatile this year – bouncing around in the upper 6% to low 7% range. That’s still quite a bit higher than where they were a couple of years ago. But there is a sliver of good news. Despite the recent volatility, rates are still lower than they were last fall when they reached nearly 8% . On top of that, most experts still think they’ll come down some over the course of the year. A recent article from Bright MLS explains : “ Expect rates to come down in the second half of 2024 but remain above 6% this year. Even a modest drop in rates will bring both more buyers and more sellers into the market.” Any drop in rates can make a difference for you. When rates go down, you can afford the home you really want more easily because your monthly payment would be lower. 2. Home Prices The second big factor to think about is home prices . Most experts project they’ll keep going up this year, but at a more normal pace. That’s because there are more homes on the market this year, but still not enough for everyone who wants to buy one. The graph below shows the latest 2024 home price forecasts from seven different organizations :

Treasure and Dead Bodies

By Ellie Bunting • April 26, 2024

Did WC Zimmerman Discover a Lost Treasure on What is Now San Carlos Island? Although I really enjoy researching and writing about local history, I am also a sucker for local legends and lore, so when I was given an article taken from a 1897 issue of a newspaper called Fisherman and Farmer, I knew I had to do a deeper dive.