SW Florida Housing Market has Slowed – and That’s Good

NAPLES, Fla. – Feb. 24, 2016 – The housing market is showing signs of slowing and local experts say that's OK. 

Home resales are slowing – and so are land sales for new homes and developments.

"We're in the middle of a downshift in the marketplace. And it's a good thing," said Denny Grimes, president of Denny Grimes & Co. in Fort Myers.

Grimes was one of three expert speakers at Market Watch 2016, sponsored by the News-Press and held at the Harborside Event Center in downtown Fort Myers on Tuesday night. All agreed the housing market is changing in a big way, sharing their thoughts on the future of real estate with a sold-out crowd in the hundreds.

Generally speaking, home resales started falling from Sarasota to Naples in the last two to three months of 2015, Grimes said.
"It's kind of across the board," he said. "We saw sales down in Lee County 30 percent in January."

So what gives? While the roads are full, as they usually are in season, and buyers are out looking for houses, he said, the consumer confidence tank is "low on fuel."

Part of the low confidence, he said, is "our fault," with home prices rising too quickly.

"We have seen tremendous price increases in the last two or three years and we are pricing ourselves out of a lot of the market. You can ask for more, but buyers won't pay it," Grimes said.

There are a few exceptions. The luxury market in Naples is still going strong, with the volume of resales rising 18 percent in the more than $5 million price category and 11 percent in the $1 million to $5 million segment in 2015, over 2014.

"I think the luxury market and ultra luxury market is being driven by people saying, 'If not now, when?'" he said.

It's clear the "Louis Vuitton" market of Port Royal in Naples, he said, is different, with 37 existing homes selling there last year, generating more than $300 million in sales, for an average price of about $8 million. Homes don't really go "on sale" there, he said.

"You want to be in Port Royal? You pay the price and you come," Grimes said. "That is an anomaly. I can't find that type of behavior anywhere else. It may be the only place on the Gulf Coast of Florida like that, which speaks highly for that area."

Except for the ultra luxury market, he predicts home price growth will slow down this year, and could even retreat a little bit.

"We have to slow down. We are going too fast for our own good," Grimes said.

Randy Thibaut, president of Land Solutions Inc. in Fort Myers, agrees a slow down is needed, coming from a different angle.

Last year, new home permits soared in Lee, Collier and Charlotte counties. Builders pulled about 13,000 permits in the three counties, for a 44 percent increase over 2014. Lee saw the biggest increase and that was driven mostly by a boom in apartment construction.

Apartments are in higher demand because of the rising home prices. First-time buyers are still looking for homes priced at $200,000 to $250,000, which can be found in very few places in Southwest Florida, Thibaut said.

In Collier County, the median home price – the price at which half the homes sell for more, and half for less – rose to $430,000 in December. For that reason, it makes sense that Maple Ridge at Ave Maria, where there are still homes available for less than $300,000, was the top selling subdivision last year in all three counties, he said.

"The reason why is price and value," Thibaut said. "So it's one of the last places people can get a value."

Some of the buyers in Maple Ridge are coming from the east coast of Florida, and commuting back and forth to their same jobs over there because they can get more home for their money in Ave Maria and they often have a shorter drive than they would on Interstate 95. Thibaut described the trend as mind boggling.

"Wow," he said. "That is crazy."

Land prices for residential development now exceed where they were in 2005 at the "peak of the peak," which is giving builders reason to pause, Thibaut said.

"We are seeing builders, developers and equity firms starting to tap the brakes on land transactions because the prices in some cases, in a lot of cases, have gotten to the point where they can't meet buyers' price demand requirements and are pushing the limit to still make margins," he said.

The pause is good for many reasons, Thibaut said.

"We have a great shortage of labor and we are having a tough time meeting the demand for the sales and products that are being built and permitted," he said.

Some builders have already noticed a slowing demand for new homes, with several starting to offer incentives to entice buyers to purchase the inventory. One of the areas where that is happening is in the Immokalee Road corridor in North Naples, which has seen a surge in new construction over the past few years.

High-rise condominium construction is back, with five projects planned or under construction from Naples to Estero, and it will be something to watch this year, along with continued apartment construction, which one speaker described as "white hot," especially in Lee County.

"Apartments are really pulling the market," said Stan Stouder, a commercial real estate broker with CRE Consultants in Fort Myers.

He showed a picture of a tugboat pulling a big cargo ship to bring home his point. In Southwest Florida, he said, 2,557 apartment units will be built this year, twice the number as last year, Stouder said.

Apartments aren't just attracting students, but millennials with too much student debt and not enough money for a down payment, would-be buyers with bad credit, and even boomers who can no longer afford the hefty home prices.

"Boomers are coming in great waves," Stouder said. "But they are less affluent. So their pension plans might have been wiped out, their 401ks might have gone down. Their houses may be selling now, but selling for less than they hoped they could get. They still want to come to Florida. Maybe they can't afford a second home, but they can afford to rent an apartment."

Naples Daily News