After a year filled with anticipation and angst over our next commander in chief we round out the month of turkeys and cranberries with a retrospective view of where the Naples real estate market has been and where it may be headed.
The sixteenth year of the new millennium started with unfavorable stock market activity for much of January and February which negatively impacted the buyer behavior in our seasonal town. Buyers typically descend on our shores seeking to purchase property in the first four months of the year. By the time the market returned to a steady rate seasonal buyers had left without buying and many adopted a “watch and wait” attitude. The balance sheet of these watchers recovered just as the presidential campaign circus kicked into high gear. Further distractions ensued in June as the result of a referendum vote in England to withdraw from the European Union (Brexit) sent global markets into a tailspin.
Summertime DE Sizzle
Our summer season in Naples is typically enjoyed by South American and European visitors who this year were equally distracted by news of the Zika virus that developed in the Miami area. Many international travelers utilize the Miami airport as their port of call and hospitality sources cited that prolonged media coverage of the virus effected summer occupancy levels throughout the state. In addition, Canadians have been the primary foreign purchaser of real estate in Naples for over a decade. Declining oil prices and jitters over Brexit related issues sent their currency tumbling midsummer to .76 cents a share and caused many Canadian owners to turn their attention to selling their Naples real estate assets.
While dizzying factors hampered the traditional sales cycle in Naples there is reason for optimism to prevail. The basis of these distractions are diminishing or are all together gone. Time has moved on, the president elect is formulating his plan, the Zika virus no longer has a stronghold over the Miami area and domestic and global markets have hit a stride since the presidential election.
The Downing Frye Realty brokerage firm is home to over 600 agents who work through all price points within the Naples market. Mike Hughes, the general manager of the firm recently noted that “our business as a whole is off by 15 -20%” as compared to previous years. As a company Downing Frye Realty had approximately 1200 listings on their books in January 2016. At the end of October the company had sold 2500 listings and he estimates that the firm will be heading into the selling season in January 2017 with 1200 listings. This equilibrium points to Hughes’s view of a “middle of the road” kind of year. Consumer confidence and a general “feel good” factor is of upmost importance as the lack of these two elements has shown up in the numbers.
The Northern Frontier
Randy Thibaut, owner and founder of Land Solutions is noted by industry heavyweights as the best source of land intelligence in Southwest Florida. He has worked in all aspects of the construction sector for over 20 years is focused on establishing new investor relations to bring capital resources into Southwest Florida. At a recent building association meeting Randy outlined his views and forecasts.
The spotlight on Lee County has been blinding over the past two years. Home to all of Bonita Springs and Fort Myers, this county has seen permits for new housing reach record numbers in 2014 and 2015 spurred on by the lowering of impact fees. These fees greatly determine the developers’ ability to build homes in line with cost projections. Thibaut commented that last year the top five builders in the three county area (Collier, Lee and Charlotte) were commercial contractors and the apartment market was on fire. Apartment rents have risen given that higher paying jobs have attracted a new type of renter as a result of professional firms entering Lee County. The response to alleviate the rising rental dilemma is to offer value priced single family homes. DR Horton, the area’s top builder pulled 1200 permits to begin construction on their economical Express Homes product line. Closer to Naples, the Ave Maria development has been the value proposition for many yet Thibaut is skeptical that this will continue over the next few years. “The Collier family lowered lot prices below cost to get the development going, so expect prices to rise so they can make up costs”. Today Naples has a few new apartment complexes and rental rates are in line with the local market, yet are by no means affordable when compared with options in Lee County. Thibault’s predictions is that areas thirty miles north of Naples will see the majority of the growth citing lot value prices of $ 3,000 where developers can build homes for $ 250,000 such as in Lehigh Acres. He also views North Cape Coral and Charlotte County as the next frontier for large scale development.
Steadfast Naples Real Estate
In essence the Naples narrative remains the same. Land is at an ultimate premium, impact fees are staggering as compared to our counties and the availability of homes is always (comparatively) in short supply. Developers who overcome land and production cost hurdles create offerings to a market that can afford to buy homes at an ultra-premium. Yet the majority of the core Naples real estate market is rooted in buying and selling existing properties or purchasing lots and rebuilding homes to meet a buyer’s specification. By definition the Naples market is insulated and the up and coming value driven buyer has few choices on the outskirts of town. Thibault predicts that in 2017 the bulk of permits will be pulled east of Immokalee Road and around Ave Maria but new homes even there will be at a premium given the sellers need to recoup land costs. In North Naples the first luxury condominium tower at Kalea Bay priced from $ 1.3 Million is 75 percent sold out and the developer has four additional towers to build. A sprinkling of available new build homes near downtown and in Old Naples is a result of private owners or developers tearing down lots to rebuild at an entry point of $3.5 Million, which is always an option for some.
While 2016 was not a record setting sales year it did allow for prices to stabilize. We enter the New Year with a sense that the Naples real estate market is functioning at a deliberate and calmer pace with a grander sense of awareness. We know where the new land opportunities are for builders, national political distractions have diminished and as always the weather is the perfect complement to the ease of living in Naples which is second to none. The presidential election crystalized the role that the media played throughout the campaign. The Naples market has the good fortune of consistently receiving accolades from prominent media outlets such as Kiplinger, Conde Nast and USA Today. The function of positive media attention is imperative to remaining at the top of the destination radar for umpteen baby boomers who have yet to retire and who are at the core of the Naples target market.
We at Naples Meridian look forward to keeping you posted on the nuances of this ever changing market, as living and playing in this blissful environment is a luxury and a privilege.
Till next time .. Fátima
Fatima S. Khokhar is the managing principal of Naples Meridian, a group that specializes in providing independent and confidential property consultancy and sales services to property developers, investment groups and individuals.
Naples Meridian is the exclusive marketing and sales agent for the Olde Naples Residence project, a mixed use development project located at 365& 375 5th Avenue South in Naples Florida.