Florida’s big-time housing bust is a disaster for sellers, but it gives retirees and others a great buying opportunity.

Here in Fort Myers, Fla., people don’t ask whether we are headed for a recession. They know a recession is here. For those who live here, the questions narrow down to two:

How much worse will it get? How long will it last?

For residents, virtually everything hangs in the balance. And I mean everything.

A doctor friend once told me of an eerie feeling that came along with medical practice. Tending a dying patient, he would look out the hospital room window for a moment. Outside, life went on without a pause. The automobile traffic never stopped. People were still in a hurry.

I feel the same way as I drive down Route 41, the U.S. highway that connects Cape Coral, Fort Myers, Bonita Springs and Naples. The roads are still busy. The cars are still shiny. Massive new shopping centers greet the snowbirds, the early retirees setting up house and the usual vacationers escaping the cold of Minnesota, Michigan, Massachusetts and Maine.

At the sales and information office for the Colony Golf and Bay Club in Bonita Springs, I meet Robert Burdett. I ask the former photojournalist if he’ll bring me up to date on what has happened since I visited in 2004. He tells me all the condos at La Scala, a very upscale tower I had visited and admired then, were bought.

But everything seemed to stop last summer, he says. At the Florencia, the newest luxury tower, few purchases were completed when the project was finished last fall. Only a handful of units were sold in the last quarter.

So on Jan. 8, WCI Communities, the embattled developer, lowered prices dramatically. A spectacular penthouse unit that was priced at $1.7 million on Jan. 1 can now be had for $1.3 million, a 24% drop. Discounts on other units range up to 40% as WCI struggles to survive.

Now, buyers have appeared, and units are under contract.

That this can happen to WCI is striking. WCI is a primo developer, a company that understands how to create the experience that upscale buyers seek. The company takes its slogan, “Every element for the perfect life,” very seriously. If this can happen to WCI, it’s terrifying to imagine what can happen to the average developer — or to anyone who needs to sell his or her house.

According to figures from the Fort Myers Multiple Listing Service Board, it would take 44.5 months — nearly four years — to work off the current inventory of homes for sale. That doesn’t count the discouraged sellers who have taken their houses off the market but still want to sell.

Foreclosures accelerating

Foreclosures numbered 1,441 in December and 7,324 for the year — about 4% of the single-family homes in Lee County. And most of those foreclosures were after August. The situation is not getting better. Hank Fishkind, an Orlando, Fla., economist, estimates that it may take four years for the housing market to recover.The local newspaper regularly advertises auctions of homes built to sell for $250,000. The minimum bid: $50,000. Small condos are offered with opening bids of $25,000.

Over lunch, another real-estate agent says those $250,000 houses are now selling for $100,000 — if they sell at all. She explains that most of the properties that are selling are “short” sales, in which the debt and closing costs exceed the sale value of the house.

The agent herself fears becoming a victim. She is spirited, hardworking and resilient. But the blunt reality is that she is “upside down”: She owes more on her house than it would sell for. Worse, she depends on scarce real-estate sales for the income to pay her mortgage.

• Video: 2008’s real-estate outlook

Sadly, she is in the same position as the Texas “condo slaves” of the late 1980s. When new buyers take over distressed houses and condos on the Florida Gulf Coast, they will be able to do what buyers did in the Texas bust: rent the property for less than the real-estate agent pays on her mortgage. Her long-term financial health may be better if she declares personal bankruptcy than if she toughs it out.

Some of the bust effects are more subtle. The couple I am visiting, friends in their early 80s, take me to a dinner party at Eagles Nest, a large and luxurious continuing-care community with a golf course, tennis courts and marina at Shell Point. At 67, I am nearly 20 years younger than the other guests.

After years of long waiting lists, the resident guests tell me, Eagles Nest now has a small number of vacant units. People who want to move there can’t because they need to sell their house or condo first. As a consequence, some elderly people who need the support of a continuing-care community are now at risk, trapped in homes they can’t sell.

However universal the decline, this isn’t bad news for everyone. It means a half-empty glass for sellers. But it may also mean a half-full glass for buyers. For about $800,000, for instance, it is possible to buy a large and essentially new house with a pool in a gated community with deeded boat dockage and direct access to the Caloosahatchee River and the Gulf of Mexico. That’s about $275 a square foot. In another gated development, a three-bedroom home with a courtyard pool, boat dockage and lovely canal views is available for less than $400,000 — about $185 a square foot.

• Video: 2008’s real-estate outlook

According to Realtor.com, there are more than 12,000 listings in Fort Myers alone, with nearly 2,000 available at $125,000 to $175,000. Many cost less than $100 a square foot.

Will prices go yet lower?

No one knows. What’s clear, however, is that a seller’s disaster may be a buyer’s opportunity. A Florida retirement may now represent an opportunity to exchange a high-priced home elsewhere for a bargain-priced home in sunny Florida.

An opportunity checklist

Here is a precautionary list for bargain hunters, culled from conversations with my host, a former executive for a major international company and former commodore of an area yacht club. He has been retired in Florida for more than 20 years.

• A bargain is about more than price. If the property is an ugly dog, it doesn’t matter how low the price is, don’t buy it. Remember, many of these houses and condos were built by brainless builders funded by nitwit lenders.

• Avoid developments that are not yet complete. You don’t know how, when or if the project will be finished. Equally important, you don’t know what the long-term homeowners association costs will be because they may be subsidized by the developer at first.

• Read the homeowners association bylaws carefully. Make sure you understand the restrictions and how they would affect your property. Some would protect you. Others might make it difficult to rent the property or sell it in the future. Pay particular attention to the association reserves. If the financial reserves are small, you could be walking into a major future assessment.
• Remember, Florida is hurricane territory. If your development has canals, docks and other water features, there can be significant assessments for repairs. Don’t buy if you don’t have the money to cope with special assessments.

• Check the water sources for your community. A long-term drought has reduced the water level in many canals by as much as 3 feet. It also has led to strict rationing of irrigation. Some communities have deep wells for irrigation. Others have shallow individual wells that may run dry.

• If boating is your aim, check the depth of the canal or other access to open water. Similarly, if living on a golf course is your goal, don’t assume it will be there forever. Check the finances and membership of the club.

• Check the health-care services in the area, particularly if you have special needs or an unusual malady.

• If you wouldn’t be living there full time, make certain the homeowners association is responsible for all yardwork. That determines, in large measure, the appearance of your development and how you would experience it.

• Don’t buy a property planning on future rental income. With thousands of rental properties competing for the same renters, you’d likely be playing a game of rental musical chairs.

• Do buy a house or condo if you have a solid personal use for it, such as retirement, partial retirement or family vacation home.

• If you wouldn’t be living there full time, explore the ease and cost of air transportation and car rentals. Include a budget for these in your planning.

• Don’t fool yourself that this market will turn around in a hurry. Whatever the crush of boomer retirees, it will take years to work off the accumulated inventory.

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