New Years cheer set in early in Naples, Florida. The roundup of figures outline that 2014 was a year steeped with gains for sellers in the luxury market. Annual statistics collected by the Naples Area Board of Realtors confirm that patterns in our market shifted significantly in 2014;
- Single family homes in the $ 1-2million category increased by 21 percent while homes over $ 2 million increased 33 percent.
- The median closed price for the under $ 300,000 price segment increased 13 percent from $240,000 in 2013 to $ 270,000 in 2014
- Overall inventory decreased 6 percent yet inventory increased 13 percent for condominiums priced between $300,000 and $ 500,000.
The real estate market in Naples churned at capacity within all price categories. Buyers in the single family home market had a bit more variety to select from in 2014 as inventory in this segment increased 3 percent. In comparison buyers seeking a beach area condominium by late summer had to make due with few options as inventory dropped 28 percent in August 2014. As a result we have witnessed a readjustment in buyer behavior; they either purchase what is available or they hold off, at times indefinitely. With the onset of a fluid market buyers who select to hold off realize that the property that the “pass” on will likely be snapped up by another purchaser. Cindy Carroll with the real estate appraisal and consultancy firm Carrol and Carrol, Inc. stated “the market in general is trending towards a balance of supply and demand and value stabilization. Some market sectors may have reached their peak for this economic cycle in the fall of 2014 while other areas will demonstrate continued value growth in 2015”.
We speculate that the areas of continued growth are neighborhoods that have long been of high interest to buyers; condos and single family homes in Olde Naples, Royal Harbor, The Moorings, and Parkshore. It is no surprise to anyone that these neighborhoods have low levels of available inventory and properties that are in good condition are selling for a premium above an already aggressive price level. Properties in neighborhoods that provide a relaxed lifestyle with access to amenities or the beach are of paramount importance for the seasonal and retiree Naples buyer. A second and critical category has (re)emerged; the new build community. Currently there are approximately 30 new communities under development in the area. While a majority are well outside of the preferred Naples zip codes these communities are poised to attract the seasonal buyer in search of a resort environment while others are targeted towards young families. Properties within these new communities are priced well above the $300,000 price point which has long been the entry level market for the area.
New build communities do not typically report their total inventory and sales figures to the Naples Board of Realtors. Given that the statistics reflect a downturn in available inventory in spite of the new build community sales further reinforces the aggressive nature of the current real estate market in Naples.
While the buying spree is Naples is alive and well, the effects of the frenzy is already starting to materialize. The entry point buyer (under $ 300,000 price category) is feeling squeezed as they have limited options and their dollar buys them less; the median price increased from $240,000 to $270,000 in 2014. Seasonal buyers seeking to be in a prime beach side or downtown location in Naples have to contend with limited options and million dollar buyers are also feeling the pressure as their fellow buyers beat them to the punch earlier in the year as sales rose 33 percent in 2014. In our view the story is no longer just about the lack of inventory but rather about the absorption rate within this property market. Given the pace of sales in 2014 we can deduce that the overall pricing of properties throughout the Naples market was justified given the rate at which properties were sold. Despite the onset of new build options that entered the market in 2014 this influx of inventory did not curb the rate of sale within the majority of the market.
Sunshine for 2015
As we launch into the New Year in Naples the momentum toward a busy real estate buying season is evident. Pending sales (sales contracts that have yet to close) in all price categories remain high which will translate into an increase in closed sales for the first half of 2015. The end of January ushered in a Northeast storm for the record books that has many of our New England clients scrambling to adjust their Naples travel plans. In the spring of last year we reported that the consequence of last year’s punishing storms lead many clients to buy a seasonal property ahead of schedule. This year we envision a similar phenomenon, and while there may be fewer choices to select from the Naples lifestyle and sunshine is always abundant.
Will inventory levels increase enough in the prime Naples neighborhoods as we enter the busy season in Naples? Will entry level buyers continue to purchase at higher median levels or will sales in this category diminish? Are million dollar buyers likely to increase their robust budgets to enter the next price category in order to have exposure to a greater amount of inventory?
We at Naples Meridian stay in tune with the nuances that occur in the local market and utilize the facts and figures to present our perspective on the pace of the Naples real estate market as it unfolds.
We look forward to keeping you posted!