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Are We In Another Real Estate Bubble? Not Yet.

Posted on Monday, November 24, 2014


Are we in another real estate bubble? We get this question a lot these days. Naples real estate prices are up 15%+ over the last twelve months following a year when prices went up 18%+. These price increases coupled with the big bust in the not so distant past there is good reason to think we are in some sort of bubble. But as they said in one of my favorite lines from the movie Gladiator – “not yet, not yet”.

Despite the many writings these past few weeks regarding investment bubbles of all sorts we would like to challenge the notion Naples real estate has reached some sort of bubble. Sure, investors, flippers and regular folks have bought into real estate here again and prices are up but … let’s take a look at the fundamentals this morning and see for ourselves.

First, we are not investment advisors so before making investment decisions we recommend consulting with your professional financial advisor.
Ok, with that out-of-the-way what fundamental force drives markets? Supply and demand. We all know this. What does supply and demand look like in Naples right now? Naples real estate demand continues to increase as supply continues to decrease driving prices up. This is normal folks, especially after one the toughest recessions we have seen in a while.
Let’s look at the numbers (Matrix MLS) and see if there is support for these current prices. Let’s look at supply first. There are 4,040 properties for sale this morning in the all Naples market up almost 100 properties from the prior month and up from summer lows. Ok that does feel “bubble like.”  More properties for sale may signal some softening but we need to look at demand as well.
What about demand? Are people really buying at these increased price levels? Yep. 2,822 properties were purchased in the last 120 days giving us an inventory of about 5.7 months – same as last month. These numbers are not bubble like. Buyers are keeping up with sellers despite the recent price increases.

1520 Curlew Elevation
So what? Well an inventory level of twelve months is considered “equilibrium” where prices should hold.  When we see inventories of less than twelve months prices should rise. Where are we now? 5.7+ months. Sure, these levels are higher than last spring but we are far below the “equilibrium level”. Prices should continue to rise – no bubble yet as long as buyer keep up.
Speaking of buyers we also think demand will continue to remain solid over the next year due to several factors. Demographics show 8,000 boomers retire every day and a few are coming here. Internationally we see strong interest continuing from western Europe. Our favorable tax treatment draws more business and people in to our State. An early and strong winter in the northern United States also drives people to buy down south.  A lot of positives.
So … good demand, low supply – no bubble yet.

What could make it all change?  Watch those volumes.  At some point higher prices will start to decrease demand – buyers just won’t buy at some future higher price level we just do not know when this will occur.  Today volumes are increasing, not leveling out or dropping so we are not there yet but let’s keep an eye on it.
Want to know another thing to watch? Watch the condo market. In many ways the condo market here is the “canary in the mine”. The condo market declined a full twelve months before the single family home market started to decline in the last bust. Will the condo market predict the next bust in the single family home market? Maybe, we need to keep an eye on it. We will keep you posted on condo specific volumes and supplies in our next newsletter but so far so good.
And a final thought. Anyone try to get a mortgage lately? Still tough – a good thing I think.  If your credit score is 650 or less and/or your income records is shaky or your home does not appraise out (appraisers are still shell-shocked and conservative right now) good luck obtaining financing.  It will be very, very tough. Despite low rates we do not have the easy money fuel which drove the last bubble and bust. Good so far on the credit side we think.


Ok you get it, supplies, volumes, early indicators and credit all say no bubble yet.

Want to know more about living in Naples, Florida? We have toured and owned property in Naples for thirty-eight years and know we can help you out. Please give us a call at 239.595.3921. Also consider reading our book “Understanding Naples Real Estate” to get you started on your real estate search or just give us a call about things to do here.

Hope to meet and talk with you soon,
Mark Goebel PA, Nan Goebel PA and David Goebel, PA
Co-Founders of the Naples Best Addresses team

Coldwell Banker
Mark Goebel, PA and Nan Goebel, PA
REALTOR Coldwell Banker 5th Avenue South

Mobile: 239.595.3921 239.595.3920
Facebook: NaplesBestAddresses
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No legal, investment, or tax advice is being given in this Blog.  Consult with legal, financial and tax professionals before acting on any real estate transaction.  Actual real estate price and sales results are subject to market forces and are not completely predictable. The writings of this Blog are intended for the sole use of our clients.
We are pleased to announce a portion of our real estate earnings go to support the The Naples Botanical Garden, Habitat for Humanity Collier County, The Race For The Cure Citrus Ride, The Seacrest Country Day School and The Naples Winter Wine Festival.
Some of the data relating to Naples homes for sale and Naples real estate for sale on the website comes in part from the Broker reciprocity program of M.L.S. of Naples, Inc. The properties displayed here may not be all the properties available through the MLS reciprocity Program. This information is deemed reliable but is not guaranteed. Buyers and sellers are responsible for verifying all information about their purchase prior to closing.
Mark Goebel, PA is a REALTOR with Coldwell Banker on 5th avenue in Naples, Florida with 35+ years of visiting and living in Naples. After 25 years at Accenture, Mark retired as a managing director and spends his time helping non profits and building a Naples real estate team with his wife Nan. Talk to Mark and Nan about life in Naples and why they chose this place to live full-time over all others and enjoy Naples real estate.
Contact us to learn more about Naples real estate trends, the florida rental market, Naples design ideas like coastal contemporary and transitional designs or just get a feel for the place like Naples Florida population trends.