Posted on Friday, February 26, 2016
(wonderful on-water new construction under $2,000,000)
Year over year average real estate prices are up 6.94%. Pretty darn good considering the worst start ever to the US equity market and a strong dollar pricing out some international buyers. Even so, prices are still going up.
You might stop reading at this point. After all where else do you see a 6%+ return these days? There are a few caution signals flashing we would like to share with you so stay with us and read on – but a price increase is a price increase.
Readers of the blog will know Naples sees more year round families, business professionals, boomer retirements, fantastic climate, great lifestyles and favorable tax treatments – all of which provide natural demand for Naples real estate. Natural demand – as opposed to speculation – is at the heart of this month’s numbers. Slow and steady price increases supported by population increases makes sense.
Over the last twelve months the average Naples area property selling price increased 6+% with single family homes out pacing condos slightly. Volumes are steadily slowing however. It could be buyers are growing tired of chasing rising prices but it is little too early to tell. Some of my local colleagues are forecasting a real “pop” next month forecasting increasing volumes and prices – we will see. Some caution at this point makes sense.
As we often share with our customers, as long as you have good volumes, supply levels should forecast the short-term price trends. This month we see a “double caution” however. Volumes are slowing with rising supply AND price increases are slowing. We stand at 8.65 months supply – a good level supportive of rising prices – BUT this is the ninth straight month of rising supplies and eyebrows are rising right along with them.
(Offers and showings continue for new on-water construction)
Readers of the blog will know prices and trends differ street by street or condo building by condo building. Each month we take a look at Naples real estate market trends in a very detailed neighborhood by neighborhood manner. Here we go.
Are we in for a continued boom? Probably. For a few more months then we will see. Why? Firstly, prices are highly likely to continue to rise in the next few months. We have some concerns about world events, equity markets and slowing volumes but today’s combination of eight month supply levels and “ok” purchase volumes should allow prices to climb modestly.
The inventory of existing homes is at 8.65 months up from 7.37 months last month and the ninth straight month of inventory build up – but far below the 12 month price equilibrium point so good for now. At 8.65 months we expect prices to rise. Another annual double-digit price increase is even possible. Our “supply based” forecasting method proved accurate over the last twenty-four months.
(well priced condos like this one move quickly)
Will the buyers put up with higher prices? Probably. “Original Price to Sold Price” spreads held at 3.7% – not far off last month’s 3.6% figure. Translation? Sellers get most of what they asked for leaving only 3% or so on the table.
This is a great time to sell as serious buyers remain in the market. If you are thinking about selling call us at 239.595.3921 – so far the sellers are still winning in this market with tight close to ask ratios and low inventories and only one to two months of season remains. “List now before summer” might prove to be a good idea.
Another market caution – property selling speed slowed somewhat to an average of 40 days from 36 days. I would not read too much into this figure as selling speed remains near recent levels but the slowing is something to watch. Motivated sellers should keep their properties in good condition and fairly priced.
(Naples provides some great lifestyles – return from the Gulf Of Mexico to your back yard and ride in style to town)
Another market sign to watch – condo prices. Remember during the last bust, condo prices dropped almost a full year BEFORE the single family home decline. Condo prices are still going up thank you but at slowing rates. This past month we saw condo prices rise a rather anemic 2.94% on a year over year basis. Better than the equity markets certainly but not the g0-go price increases in recent months.
One final statistic to watch for future predictions – foreclosure rates. Some of our foreclosure volume changes are due to the vagaries of our Florida system but the changes demand attention. Foreclosed condos are now 37 vs. 31 last month and foreclosed single family homes improved significantly to 44 over 33. These foreclosure levels could be seen as normal movement and we have no real trend yet but let’s keep an eye out here as well.
Are we in a bubble? Here is a question we get a lot – especially with equity market gyrations, a strong US dollar knocking out some international buyers and unpredictable Fed policy. Even with all the commotion we do not think we are in a real estate bubble here. Why? Increasing prices but at slower rates. coupled with growing inventories and slower selling speeds all make sense. This is not a bubble popping but a market climbing at lower rates. No cliff or sharp moves yet. The market is adjusting, aging maybe and climbing at a rational pace. Some of our early cautions are starting to flash but we should be good for now.
Will the party end one day? Of course. Perhaps suddenly. This is a boom and bust town. But “not yet.” Watch the numbers with us as cracks will appear unevenly in the figures as the next bust approaches.
(Naples is the happiest and healthiest place in the United States of America according to the Gallup poll. Beautiful scenes like this one do actually exist here. A typical “winter” day.)
Ok the big market is good but what about the numbers neighborhood by neighborhood ? All real estate is local – and this is especially true this month. Some neighborhoods are fighting higher inventories and we expect price pull backs while others are on a real price climb. We need to dive deeper into each neighborhood to understand real estate in this beautiful paradise we call Naples. Let’s go … Oh boy, more data!
Our first neighborhood stop is Olde Naples. Who doesn’t like the charm of this location? But … is real estate selling at these prices? Well real estate is selling in Olde Naples but we see no room for price appreciation from this point over the next few months. Inventories increased to 13.17 months from 11.66 months and crossed the equilibrium line – no likely support for strong further price increases from here.
Pelican Bay is in better shape with supplies holding at the 9+ month level – good for price increases but the longer term trend of supply build up is a little worrying. Pelican Bay experienced nine straight months of inventory build up before leveling off this month. Nothing to be alarmed about. Price appreciation potential is there but Pelican Bay is no longer the red-hot area it was last year.
(so thankful to walk to the farmer’s market in light clothing in the dead of winter!)
Inventories at Windstar on Naples Bay decreased dramatically to 18 months from 26 months – a good thing. Some of the fluctuation is the “law of small numbers” where one or two sales or listings make a big difference in the computations. Nonetheless supplies are too high here and we expect downward price pressure in Windstar over the next few weeks. Don’t forget to check out the golf greens and those fantastic club house renovations!
(Life at Windstar on Naples Bay can be pretty amazing)
The Crayton Road area is completing its six straight month of inventory build up to 8.53 months from 7.15 months. Expect more price appreciation in this beautiful area but buyers are beginning to reach equal footing with the sellers.
The Royal Harbor single family homes market continues to jump around. Supplies jumped to 28 months from 18 months before and 8.8 months before that. Buyers are finding it tougher to buy $3.5 MM homes … but some sub $2 MM values and some very nice choices remain. With the big price run up some of the buy-teardown-build crowd may be priced out for a time. On water, single family homes, convenience to 5th avenue, a spa within walking distance and an ever-increasing Naples “downtown” foot print there is a lot to like in this area.
(Royal Harbor folks like to keep their boats right in their own back yard)
Port Royal and Aqualane Shores inventories improved slightly to 17+ months from 19+ months but we are well above the equilibrium point. So what? Well theoretically, prices should start pulling back at these levels. When people ask are people really buying properties at these prices? The answer is yes – in fact 19 properties sold in the last 120 days here – up from 17 last month. Property is selling here. This is a fantastic community and season is likely to improve volumes – we just do not see much support for price increases right now.
Marco Island held steady at 13+ months – about the same level as last month. We remain at equilibrium (maybe slightly higher) and prices should move sideways or drop a little on the island for a while. Houses and condos may be less pricey on the island compared to Naples and boating, golf and tennis and that incredible beach offer a great lifestyle.
(Yesterday’s boat ride to Marco Island and lunch – get an on-water feel for the place)
What we continue to find interesting on Marco Island is the struggling luxury single family home market – defined as properties above $2,000,000. Many of these properties offer incredible bay views and buyers may be on firmer footing here than in Naples. Inventories jumped to 100+ months (a record for this blog and yes I double checked the math) and up from 41+ months last month. Buyers be ready. If you like the Island and you are looking for a great place prices should start dropping here.
In addition to our monthly neighborhood analysis we would like to provide a few more points of view to help our sellers and buyers.
(the new construction boys are busy but existing home sales are running along fine)
The big market dynamic of new construction continues. New construction may finally be eating into the re-sale market and explain some of the caution signals.
After the bust and the demise of many a builder it took a while for the new home builders to bounce back. By bounce back I mean once they were ready to return they still needed to draw up new floor plans to match new market preferences, obtain permits, clear land and build infrastructure, hire the sales teams and build homes. Well they did all that and boy are homes selling. So much so they are finally putting a real dent in the existing home market. It is estimated (and it is only an estimate as these figures are very hard to track) about 50% of all new home sales right now are new construction.
Now here is the interesting part. Even with the all of the new construction there is still support for price increases in the re-sale market. Not as much support perhaps, but support remains.
A few things sellers need to know. Aggressively priced properties in poor condition are not selling very well. One possible seller and I reviewed numbers today showing some properties on the market for more than 200 days! Sellers of homes like this are competing with beautiful new construction and your neighbor’s well priced homes. Don’t get too greedy if you need to sell your home or you may be on the market for a while even in these good times. Don’t give it away of course but price it well and keep it in good condition to get on the 40+ day “days-on-market” trend.
(buyers better be ready to buy when well priced properties like this one come on the market)
Buyers in this market better know their neighborhoods if they feel like negotiating. Why? Because buyers are competing in a short supply world with other buyers in some neighborhoods BUT the same buyers may find more amenable sellers in other neighborhoods. Know thy markets!
For the buyers cash is king (a pre-approved financing letter is helpful) but whatever you do get with a real estate team like ours and learn about the market. In addition use our online search tool recommendation and be ready to make a same day offer when you find your place. Speed wins here and the old adage “Time Kills All Deals” is in full force in many areas.
(The International Award Winning Naples Best Addresses Team at Coldwell Banker)
So … the hot market is now warm and prices go up in single digits not double digits but the sun still shines here, people are still buying and the upside market still has legs. And oh yes, wintering here is still incredible.
Why not pick up the phone and catch up with us and let us know how you are doing? Just give us a call at 239.595.3920 (Nan) or 239.595.3921 (Mark) or 239.285.2038 (David).
Please also consider reading our book “Understanding Naples Real Estate” to get you started on a real estate search https://www.naplesbestaddresses.com/offer/ or just give us a call about things to do here.
All the best,
Nan, Mark and David Goebel, PA’s
Co-Founders Naples Best Addresses
Mark Goebel, PA and Nan Goebel, PA
REALTOR Coldwell Banker 5th Avenue South
Mobile: 239.595.3921 239.595.3920
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 Count and The Naples Winter Wine Festival.
Some of the data related to Naples homes for sale and Naples real estate for sale on the NaplesBestAddresses.com 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 40 years of visiting and living in Naples.