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The Bubble Detective: Purchase Volumes Accelerating In Naples

Posted on Friday, February 06, 2015

HFH - Goebel & Mola at House #2

(Big time development in full force in Naples, Florida)

Are we in another real estate bubble? We do not think so. We get this “bubble” question a lot these days. Just last week at dinner a friend asked me if we thought this big run up in recent prices caused some sort of real estate bubble.  He had his reasons – Naples 2014 real estate prices were up 15%+  following an 18% increase in 2013.  Recent real estate price increases coupled with memories of the big 2006-2007 bust may give folks reason to think we are in some sort of bubble.

We do not think so. At least for now.

Despite the many writings these past few months 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.

Gerosin Image Pool

(a beautiful view of the back country from one of our new listings)

Please understand, 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 is the fundamental force driving real estate 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 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 (source: Matrix MLS) and see if there is support for these current prices.

Gerosin Image Kitchen

(the updated kitchen in the same property)

Let’s look at supply first. There are 4,477 properties for sale this morning in the all Naples market – MORE than last month. Ok that is a little concerning as increases in supply could be considered bubble like.

Some of the supply increases in pre-existing homes could be attributed to new construction. It is estimated 50% of all Naples home purchases right now are in new construction projects. This competition for new buyers may be weighing on the pre-existing market.

What about demand? Well demand is actually accelerating. 2,838 properties were purchased in the last 120 days – more than the last trailing four month period we reported.  So demand as measured by actual closed sales is increasing. If we are in a bubble we should start to see volume falling.  Not yet.

1520 Curlew Elevation
(our new on-water Key West home available at month-end)

When you added it all up you find the months-inventory in our market stands at 6.31 months – slightly up from the beginning of the year at 5.68 months.  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.  The six months+ inventory we have today should be very supportive of price increases.  Not a bubble. If the inventory figure were say 18 months I would say we are looking at bubble-like conditions but we are actually at the opposite end of the picture.

Could it all change?  Sure let’s look at some of the other economic forces at work here. We  think demand will continue to remain solid over the next year due to several factors. Demographics show 10,000 boomers retire every day (source: money.USA) and more than a few are coming here to Naples. Internationally we see strong interest continuing from western Europe. Our favorable tax treatment draws more business and people into our state from other states. 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 so we are ok for now.

cochrane lanai

(Condo living with private beach shuttle on Naples Bay)

Want to know another key indicator to keep an eye on? Watch the condo market. In many ways the condo market here is the “canary in the mine”. Prices in the condo market declined a full twelve months before the single family home market started to decline in the last bust.  What do condo prices look like this morning?  Based on an analysis of 39,684 listings, prices are still going up, not down. January condo prices finished at an average of $275,000 AND prices remain well under the last peak.  If we look at condo supply it stands at 5.77 months – tighter than the overall market and supportive of further price increases.  There is significant support for more market growth and price trends are good here.

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.

455 Palm Cir East Pool

(absolutely beautiful Old Naples living (now under contract))

Ok you get it, supplies, volumes, early indicators and credit all say no bubble yet – but national and international events and unforeseen events could change it up. So far so good. Let’s keep on an eye on these numbers each month together.

Also remember the new edition of our eBook “Understanding Naples Real Estate” is now available making predictions for the 2015 Naples real estate market as well as offering up advice to sellers and buyers. To get your free copy go to .

If you would like to know more about living in Naples, Florida please talk with our team. We have toured and owned property in Naples for thirty-eight years and know we can help you out. Give us a call at 239.595.3921.

We 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.
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