Sellers Flooding Naples Real Estate Market

The meteoric rise of the Southwest Florida real estate market simply couldn’t continue.

That has been the conventional wisdom for months, but the proof is finally starting to appear, according to the Naples Daily News. Data shows that in some south Lee County and Collier County areas, single-family homes have doubled or nearly doubled in value from 2003 to 2005. That is unsustainable growth, and many think prices are bound to fall as a result.

• In Bonita Springs, the median price in the 34135 ZIP code almost doubled in the two-year span from $170,000 to $330,000, according to data from First American Real Estate Solutions.
• Downtown Naples real estate rose from $807,500 in 2003 to $1.67 million in 2005.
• Marco Island real estate more than doubled in that time frame, with median prices soaring from $440,000 to $950,000.
• Even in Golden Gate Estates, a traditionally affordable location, median home prices rose from $176,550 to $305,095 in the 34120 ZIP.

Now the first signs of cooling are starting to emerge in Collier and Lee Counties. The market is flush with sellers, many seeking to cash out on these incredible appreciation gains that have been among the highest in the country. According to Joe Ballarino, a past president of the Naples Area Board of Realtors who posts area market statistics on his blog, it’s a buyer’s market — only sellers are in denial (or just don’t realize it yet).

This time last year, Realtors watched eager buyers snatch up homes within days or hours of listing. Now, over 8,000 homes are lingering on the market, and “just reduced” signs are starting to pop up as well.

“Buyers may be taking a wait-and-see attitude,” said Carol Dicupero, an agent with Coldwell Banker Fifth Avenue in Naples, who adds that despite the recent trends, she does not see a bubble-bursting scenario taking place. “The non-serious sellers will soon relent, and say ‘I don’t need to sell. I’m just going to take it off the market. What we’re doing right now is we’re washing out the investors.”

FIZZLING FLIPPING
Speculators went on a buying frenzy last year, sometimes rapidly flipping properties for quick profits. Jeff Tumbarello, a Lee County investor who is a founding member of the Southwest Florida Real Estate Investment Association, refers to these people as “the day traders,” people who washed the windows and now want $50K more.

Economists estimated that investors, hunting for better returns than the stock market, comprised more than a third of Southwest Florida real estate buyers in recent years. Some investors have the patience to hold on to their property and recognize that timing is everything, but others are strapped for cash and looking to get out sooner.

Thus, the glut of inventory.

But all is not lost for the Naples area and its future as a real estate speculator’s haven. The best investors make their money on “the buy,” when they find undervalued properties, said Tumbarello, who is excited about the buying prospects.

“A year ago those deals weren’t there to be had,” Tumbarello said.

A BABY BOOMER BOOM?
The market isn’t monolithic.

Many real estate analysts and industry professionals say they still see strong demand from wealthy baby boomers. In four days, Treviso developer V.K. Development took orders for 108 homes, villas and condos — valued at $126 million — for Treviso Bay, an upscale golf course development planned for 1,200 condos on 1,000-plus acres in East Naples.

Prices started at $725,000 with most properties selling at around $1 million, said sales and marketing director Cheryl Deering. More than half of the new community’s buyers were under age 54 — showing that the demand among the baby boom generation may only be beginning — and only around 10 percent were investors.

“The key to this whole thing was the younger boomers,” Deering said. “The younger boomers everybody’s been talking about, they’re finally here.”

Although the overall inventory of properties for sale has swelled greatly since the fall, the $750,000-and-up market is still seeing buyers. Some agents, like Nancy Kreisler of Downing-Frye Realty, think the current high inventory levels may be a result of condo conversions that have flushed the market with hundreds of units in the past three months.

A number of massive new South Florida real estate undertakings are in the works… and not necessarily catering to the super high-end buyers.

• Bermuda Island apartments off Vanderbilt Beach Road are planning to go condo, with 360 units due to hit the market in a matter of months.
• Malibu Lakes, on Immokalee Road just east of I-75, put 356 units on the market as part of a condo conversion, with prices ranging from the low-$200,000s to the high $300,000s.
• Monterra on Bonita Beach Road in Bonita Springs, with prices ranging from the low-$200,000s to mid-$300,000s, covers 29.3 acres, and will offer 244 condos in 11 three-story buildings.
• Laguna Bay, a condo conversion of the Fountain View apartments off Airport-Pulling Road, put 456 units on the market which are not yet in the area’s multiple listing services, but are expected to be priced from the high $100,000s to the low $300,000s.

The hundreds of units washing onto the market mark a sharp contrast to the fall, as business and government leaders across the state have worried about an affordable housing crunch and noted that there were less than a handful of units on the market for under $200,000.

SQUEEZING THE SNOW BIRDS
Although more retired baby boomers are heading to Southwest Florida, some part-time residents aren’t thrilled with the appreciation on their houses thus far. Rising property taxes (which increase directly as a percetage of a home’s appraised value), coupled with escalating homeowners insurance rates caused by the hurricanes, have many part-time residents contemplating getting out of the market.

“We’re paying 50 percent more for the same coverage,” said Shari Schroeder, a part-time resident of IslandWalk, in the 34119 ZIP.

And without being eligible for the state’s homestead exemption, she saw the taxes on her North Naples home rise right along with her property value. Property owners who make Florida their primary residence qualify for the exemption, which caps their annual property tax increases to 3 percent or the rate of inflation, whichever is lower.

If part-time residents put their properties on the market, the available inventory could push Naples-area prices lower. Another factor? Florida home loans. If first-time buyers are hoping for help in terms of housing prices, too many hikes in Florida mortgage rates could negate that relief. It remains to be seen how the many factors at play here will shape the market in 2006.

Stay tuned.