Posted on Thursday, April 28, 2016
(wonderful on-water views from this listing!)
The last couple of months saw average price decreases in Naples however the market is still up from last year by 6.7%. Will this price pull back in recent months start a trend or will the market find its footing as we enter the summer months? Let’s take a look at the latest results and try to figure this out together.
Year over year average real estate prices are up 6.7%. Pretty darn good considering the worst start ever to the US equity market, a strong dollar pricing out some international buyers, and some concerns over anti-immigrant anti-visitor political trends. Even so, prices are still up year over year.
You might stop reading at this point. After all where else do you see a 6.7%+ return and an opportunity to live in a year round outdoor paradise these days? Caution signals are still with us however and we need to dive deeper into this.
The big picture looks good for Florida and for Naples. 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 again at the heart of this month’s numbers. Even with currency challenges slamming 20%+ of the buyer market people are still buying homes in Naples – in fact 2,790 homes were purchased in the last three months which is up 5.8% from last month’s figures. Nice natural demand at work.
Let’s get behind this 6.7% year over year price increase a bit. Over the last twelve months the average Naples area property selling price increased 6.7% with single family homes out pacing condos slightly. Volumes improved reversing declines over the last several months and popped 5.8%. Maybe folks just have to buy something before heading out-of-town for summer.
As we often share with our customers, as long as you have good volumes, supply levels should forecast the short-term price trends. Volumes increased and new offerings stabilized causing a another monthly decrease in inventories AND a market more supportive of increasing prices.
(Offers and showings continue for new on-water construction)
Recent market improvements come at a cost however. In order to increase demand and eat into supply the market had to reduce prices. The average price of Naples properties dropped again this month – four months in a row of falling prices. Keep in mind prices are UP FROM LAST YEAR but we see prices fall month to month recently. At some point the market will figure out where it wants to be. Will prices continue to fall causing more demand and inventory tightening until prices stabilize again? Probably.
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 again!
Will these recent monthly price drops stop at some point? Of course. Why? At an inventory level of eight month there is plenty of support for prices. We have some concerns about world events, currency exchange rates and equity markets but today’s combination of eight month supply levels and rising purchase volumes should allow prices to stabilize.
The inventory of existing homes is at 7.94 months is lower and therefore better than last month’s 8.52 months and reverses a growing supply trend. Less than twelve month inventory + growing volumes = more price support.
(stone crab season will end soon so be sure to order them up after you buy your new place here!)
Will the buyers put up with higher prices? Maybe not … “Asking price to sold price” spreads held at 3.7% but we have seen four months of month to month price reductions. So … what is going on? How can spreads remain tight but prices fall month to month?
We looked into this further and found the answer in price reductions. It is true “ask to sold” ratios look good but what about ORIGINAL ask to sold prices? Ah Ha! When we look at what the seller started with originally and after some price reductions eventually negotiated a selling price with a buyer we see a whopping 10.77% difference between where the seller started and where the seller finished! So now we have it. Sellers are cutting prices in a big way to get buyers to buy. The last little bit may be 4% less than asking but the seller had to cut a lot to get there. In fact over the last three days we have seen more price reductions than sales.
So don’t get us wrong. This is a great time to sell as serious buyers remain in the market. Over 2,800 properties sold in the last four months in Naples. 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 lower inventories and only one month of season remains. “List now before summer” might prove to be a good idea.
A positive note …. property selling speed increased to 41 days from 44 days. I would not read too much into this figure as selling speed remains near recent levels and the recent acceleration may be due to price decreases.
(Naples provides some great lifestyles – return from the Gulf Of Mexico to your back yard and ride in style to town)
Another market caution this month – condo prices. Remember during the last bust, condo prices dropped almost a full year BEFORE the single family home bust. Condo prices have starting to fall these last few months … first $273,000 in January, then we saw $262,00 in February, then $260,000 in March and now $257,000 in April. Interesting. The heart of season and falling condo prices. Not great news.
It looks like the condo market is finally backing up a bit. Is it our “canary” for bad things to come? Probably not? Condo inventories did improve over the last few months and are more supportive of prices. So … it looks like a normal adjustment to us. Falling prices to increase sales to decrease to supply and eventually prices firm up again.
We saw real improvements in another leading indicator statistic– foreclosure rates. Some of our foreclosure volume changes are due to the vagaries of our Florida system but the changes showed promise nonetheless. Foreclosed condos are now 18 vs. 33 last month and foreclosed single family homes reduced slightly to 32 from 33. Clearly the market is clearing foreclosed properties out faster than the banks can (or want to) push them into the market. 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 world events, equity market gyrations, a strong US dollar knocking out some international buyers and unpredictable Fed policy. If we are in a bubble some of the air just got let out!.
Even with all the commotion we do not think we are in a real estate bubble here. Why? Modest prices decreases with tightening inventories all make sense. This seems to be a rational market – no cliffs or sharp moves yet. The market is adjusting, aging maybe and changing at a rational pace. Some of our early cautions are starting to prove true and we may see more adjusting ahead.
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 data is interesting but what about the numbers neighborhood by neighborhood ? Our readers know all real estate is local – and the saying holds again this month. Some neighborhoods are fighting higher inventories and others showed real improvement this month. 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 Olde Naples? Live in town, walk to great restaurants and the beach and just feel part of the small town. But … is real estate selling at these prices? Well real estate is selling in Olde Naples but we see no room for real price appreciation from this point over the next few months. Inventories are a little better this month at 11.06 monist vs. 12.54 months last month – but no likely support for strong further price increases from here.
Pelican Bay is in better shape with supplies decreasing further to 6.9 months from the 9+ month level – good for price increases from here. Pelican Bay experienced nine straight months of inventory build up before leveling off two months ago. It seems the adjustments are in for this micro market for now. Price appreciation potential is there again.
(so thankful to fish the Gulf in the middle of winter)
Inventories at Windstar on Naples Bay decreased dramatically again this month to 7.67 months from 12 months the month before and 18 months the month before that – a good thing. Supplies are back to equilibrium here and expect firming prices in Windstar over the next few weeks. Oh and by the way did you hear the men’s 4.0+ tennis team went undefeated and won the championships this year? (even if you did I just had to say it again!)
(Life at Windstar on Naples Bay can be pretty amazing)
The Crayton Road area inventory may have “crested” at 10+ months last month as we are now down to 9.57 months. But one month does not a trend make. We are glad to see the improvement and hope the trend continues. Expect more price appreciation in this beautiful area where buyers are on more of an equal footing with sellers.
The Royal Harbor single family home inventory continues to increase. Inventories jumped to 40 months this month from 31 month last month. With the big price run up in the last couple of years 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.
(In the summer expect the manatee to stroll right up your Royal Harbor canal)
The big news for Royal Harbor this month is the announced plans for the US 41 and Davis Boulevard development. Get ready to hear more on this but if the plans come forth look for Royal Harbor and the whole east triangle to gain in popularity.
Port Royal and Aqualane Shores inventories tightened to 14.46 months from 17+ months and we are closer to the price equilibrium point. So what? Well theoretically, prices should start pulling back at these levels. A quick look at history here shows prices are now flat over the last 12 months so this is making some sense. When people ask are people really buying properties at these prices? The answer is yes – we just do not see much support for price increases right now.
Marco Island inventories firmed again this month to 11.84 months from 12+ months and we now expect more support for stable prices here. We remain near equilibrium and prices should move sideways. Houses and condos may be less pricey on the island compared to Naples and do not forget that incredible boating, golf and tennis and that incredible beach offer a great lifestyle.
(Marco Island life can be a lot of fun including kite boarding on rollers on the beach!)
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 fell to 59 months from an eye-popping 100+ months last month. 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 is 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. A seller and I reviewed numbers recently 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 41 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)
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.