SCOTT SIMON, host:
This is WEEKEND EDITION from NPR News. I'm Scott Simon.
There's a popular phrase in the Florida real estate industry - first in, first out - means that those who were hit by the economic downturn early on hope they'll lead the edge of a recovery.
On Florida's Gulf Coast, the area around Cape Coral is sometimes called Ground Zero of the nation's housing crisis. Last year, it led the nation in foreclosures.
NPR's Greg Allen spent time there recently, and reports there are some encouraging signs in one of the nation's hardest-hit housing markets.
GREG ALLEN: It's not hard in Cape Coral to find neighborhoods like this one. On this block, Northwest Second Avenue, at least half of the houses on the street are vacant. There are a few sale signs. High weeds grow into the palm trees at one house. Others have their windows and doors covered with storm shutters.
But for those who follow the real estate market here, there are beginning to be some signs of hope.
Mr. BRETT ELLIS (Real Estate Agent, RE/MAX): Sales are picking up and the inventory is going down.
ALLEN: Brett Ellis is a real estate agent with RE/MAX. The increase in sales, he says, has been especially notable in Cape Coral. In Lee County in January, the Florida Association of Realtors reported a 43 percent increase over last year's sales.
In his office, Ellis says, the increase has been over 70 percent, and half of those sales are taking place in Cape Coral. It's an upward trend that's been taking shape over the past year. After a devastating 2007, he says last year, prices began dropping and the market responded.
Mr. ELLIS: Well, buyers got their confidence up, their moxie up in '08. They recognized good value; they jumped on it. The banks responded, everyone responded, the market moved and the transactions started flowing again, even the short sales and, of course, the foreclosures.
ALLEN: A year ago, the median price for a home in Lee County was $225,000. Today, it's less than $100,000. Those steep price declines have encouraged first-time home buyers with good credit, and lots of investors. In recent months, the price drop has begun to flatten out. And in some desirable locations, Ellis says, prices may even soon begin to rise.
More than three-quarters of the homes sold in Lee County in the past year, Ellis says, were distressed sales - properties that were either in foreclosure or on the way. And more are coming on the market daily.
Mr. ELLIS: Okay. So this is pretty typical of an average foreclosure.
ALLEN: Ellis is here to prepare a price opinion on a property recently recovered by the bank. It's a three-bedroom, two-bath house that's clearly seen better days. Christmas lights still hang out front. Orange trees, heavy with unpicked fruit, are in the backyard. Ellis notes these and other details.
Mr. ELLIS: One of the things I look for is, you know, are the appliances here? What does the flooring look like? In this particular home, I detect a slight scent of dog in his property. And, you know, if you can smell it, it's hard to sell it.
ALLEN: Foreclosures have actually showed signs they may be declining here in Lee County. Even optimists like Brett Ellis hesitate to make too much of the recent downturn, however, in part because of the large numbers of adjustable-rate mortgages that are due to reset in 2010 and 2011.
But in the meantime, foreclosures are being finalized, and deeds conveyed in Lee County, at a record pace.
Unidentified Man #1: Twenty-two thousand.
Unidentified Woman: Have a bid of 22,000 from (unintelligible).
Unidentified Man #2: Twenty-five thousand.
Unidentified Woman: Have a bid of 25,000 from John and Morgan Trustee.
Unidentified Man #1: Twenty-nine thousand.
Unidentified Woman: Have a bid of 29,000 from (unintelligible)
Unidentified Man #2: Thirty-two thousand.
Unidentified Woman: Have a bid of 32,000 from...
ALLEN: The second floor of the Lee County Courthouse, it's a scene that's played out daily, Monday through Friday. On some days, more than 100 foreclosed properties are sold. But here's a positive sign for those following real estate in Lee County: Even with hundreds of foreclosed properties coming on the market each month, the inventory of houses that are for sale is shrinking.
At current rates, there's now just over a 12-month supply of houses for sale in Cape Coral. That's still higher than the three- to six-month inventory typical of a healthy housing market. But Jeff Tumbarello, who studies the market for the Southwest Florida Real Estate Investment Association, says it's becoming harder to find real bargains. He's been working with an investor who's looking for houses there.
Mr. JEFF TUMBARELLO (Analyst, Southwest Florida Real Estate Investment Association): That investor we've got in town that's looking to fill. He wants to put a half a million into this market. We're struggling to give him what he wanted to put in to Cape Coral at the right price. One property that we bid on for the guy, there was seven offers; another one was four.
ALLEN: Matt Zacharias had better luck. He recently paid $182,000 for a house that sold for more than $500,000 just 16 months ago.
Mr. MATT ZACHARIAS (General Contractor, Lancaster, Pennsylvania): Ah, well, basically three-bedroom, two-bath, two-car garage house, with the pool - is getting redone right now, deep saltwater access in the back, a boatlift.
ALLEN: Zacharias is a general contractor from Lancaster, Pennsylvania.
Mr. ZACHARIAS: The market down here, the prices are just too good to be true. So I had to come down and check it out for myself. So back in November, after coming back from a cruise, I drove over, went and looked at a couple of houses. Just couldn't believe it. And one thing led to another, and here we are. And now, I'm actually going to look at another property later, as another investment property.
ALLEN: Zacharias says some of his friends from Lancaster are also looking at properties in the area.
But now, a reality check: A resurging housing market doesn't mean the recession has relented. Lee County's unemployment rate is one of the highest in the state, at 10 percent. There are plenty of vacant storefronts along with the vacant houses. Declining assessments have left Cape Coral's city government with little choice but to lay off workers and to cut services.
Jim Burch, though, prefers to dwell on the positives. He's Cape Coral's mayor and says it helps to recall that just a few years ago, he and other elected officials worried about how, with rising costs, housing in the city was being priced beyond the means of teachers and policemen.
Mayor JIM BURCH (Cape Coral, Florida): It's kind of solved that problem. Affordable housing is back. That also attracts business. It also attracts residents to come into our area. So we should take advantage of that, and we will.
ALLEN: With prices apparently leveling off and a declining housing inventory -at least in some segments of the market -optimists like Mayor Burch think they may see a glimmer of light down a long, dark tunnel.
Burch isn't quite ready yet to say that Cape Coral has reached the bottom of the housing market, but he believes it's probably not far away.
Mayor BURCH: We do believe in the first in, first out theory. We think we were the first in, without a doubt. And we think we're, right now, we're getting ready to be the first one to come out of this.
ALLEN: Economist Hank Fishkind, like others who watch the housing market, notes it's not possible to know that you've hit the bottom except in hindsight, after prices have begun to rise. He agrees, though, that Cape Coral is probably close to the bottom. And eventually, Fishkind says, most of Cape Coral's oversupply of houses will be absorbed by the market.
Mr. HANK FISHKIND (Economist): I think there's no doubt about that, but it will be the houses that are in the best of the locations. There are some houses that are in such far-flung locations, in such scattered development patterns, that there may be very little demand for them at any price. Some houses will be abandoned.
ALLEN: Just 50 miles south of Cape Coral is a Florida cautionary tale. Golden Gate Estates was planned in the early 1960s as the world's largest subdivision, with some 400,000 homes. Eventually, it went bust. Today, a few thousand homes are scattered across the 172-square-mile area. The rest of it has been reclaimed as a nature preserve.
Greg Allen, NPR News, Miami.