naples real estate

PAST, PRESENT, AND FUTURE

The following history and comments refer exclusively to Naples, coastal Collier County, Bonita Bay, and southern Lee County. Fort Myers and areas to the north are not included as they are different markets.

PRIOR MARKET SYNOPSIS

Naples grew from a quiet and charming community of about 6,000 residents in the 1950s to a metropolitan area with over 300,000 residents today.

As it grew, the value of residential properties increased at an appreciation rate of 6 to 10 percent per year – some years more, some years less.

In 2003 speculators arrived, often paying full price or more for listed properties. Many of these speculators favored projects scheduled to be built by developers and sold at pre-construction prices. It produced a buying frenzy with appreciation rates that increased dramatically, generally in the 20 to 50 per cent per year range. It was an unrealistic market that could not be sustained.

Those who invested early and sold (flipped) their properties by late 2005, did very well. Those who bought pre-construction in 2004 or in 2005 were faced with closing on their completed unit(s) in 2006. They were then competing with others who were simultaneously trying to sell their properties. Suddenly, there was an excess of inventory on the market.

Because of excess inventory, prices declined, in many cases substantially. The decline was not uniform. In the lower priced segment of the market, prices dropped 50 per cent or more. In the higher priced segment, prices declined far less, and have been holding fairly steady over the last year.

OPINIONS OF ECONOMISTS WHO KNOW THE NAPLES REAL ESTATE MARKET

In late 2007, Dr. Lawrence Yun, a nationally known and highly respected real estate analyst opined about the Naples market: “existing home sales should be relatively stable over the next few months, holding in the modest range, with some pent-up demand growing from buyers who’ve been on the sidelines.” He predicted “by early 2008, the decline in the local real estate market will reverse, however, not to the peak levels that had the market aflutter in recent years”.

Then, in April, 2008, Dr. Harry Fishkind, another prominent real estate economist, said in a speech before the Naples Area Board of Realtors that he believes we are at the bottom of the cycle, and the Naples market is stabilizing.

CURRENT MARKET CONDITIONS

As evidenced by the surge in buyer interest, and increased sales in the Naples area so far this year, these eminent real estate economists’ predictions have proven to be true.

Unlike the generalized reports by many national pundits, the studies by Dr. Yun and Dr. Fishkind recognized that Naples is primarily a second home/retirement/resort community that behaves differently than real estate markets in other communities. It takes further intimate local knowledge of the Naples market to identify micro markets such as neighborhood locations, building types, and price ranges that may be moving in directions opposite other segments of the market. This dichotomy is particularly evident in the Naples area.

For example, the lower priced segment of the market is where most of the speculative buying in 2004 and 2005 occurred, resulting in much of the excess inventory when the bubble broke. Home prices in this sector appear to have reached their low point, although prices are still very negotiable where sellers are facing foreclosure, or are otherwise in pain.

The higher priced segment of the market has been far less affected by these factors. Those with wealth, seeking a second home in a warm winter climate, are not allowing temporary market conditions to deter them. Home prices and sales in this segment of the market are holding fairly steady.

Knowing what is happening in specific segments can best be obtained by consulting a knowledgeable local realtor. Call me at 239-404-0433 if you would like to discuss these matters in detail. You will incur no obligations.

MARKET IN THE NEAR AND LONG TERM

Those of us who have studied the Naples market agree that there will still be an imbalance of sellers/buyers into year 2009; however, prices are likely to edge upward as more buyers take advantage of this buyer’s market.

Foreign buyers, traditionally those from Canada, Great Britain, Germany, and South America, are returning to the Naples market with the incentive of a favorable exchange rate.

Of the many reasons for an optimistic outlook on Naples’ future, the most significant is that affluent baby boomers now reaching the peak of their earnings, and perhaps recipients of in heritance, are buying their place in the sun, now, before prices become much higher by the time they are ready for full retirement.

Consequently, demand is expected to remain strong, but developable land is diminishing due to restrictions that limit the encroachment on panther habitat and other preserve areas in eastern Collier and Lee Counties. With increasing demand, increasing construction costs, and diminishing supply of available land, overall prices are destined to increase.