Naples Housing Market Continues Free-Fall, Speculation Varies Regarding Recovery

Ross McIntosh, a Florida mortgage broker, sold his house for $735,000 when there were several others in his neighborhood listed for $790,000.

Some lowered their prices to $760,000 and, after months on the market, one recently sold for $675,000.

The problem is people have unrealistic expectations, said McIntosh.

“There is a lot of speculation about how far (down) the market is going to go and how long the (downturn) is going to last. I have no idea. But it makes sense that [the Naples housing market] was first on the way up so we would be first on the way down,” McIntosh said.

The slowdown in the Southwest Florida housing market is already greater than anyone expected, and could get a lot worse before it gets better.

Prices in the Naples metro area could fall up to 14 percent before the market stabilizes. Fort Myers was recently given a grade of “F” and rated it last in a study of 34 major markets in the country.

The grade, according to a recent survey, indicates a market where there are declining home values, negative order trends, high cancellations, high resale inventories, poor buyer quality and a place where incentives are common.

Moody’s Economy.com says there is a 46.1 percent chance that prices will decline in the next year, said Chris Lafakis, an associate in economics specalizing in the Naples market.

The recent study looked at various housing indicators, such as the level of affordable housing, supply, prices, valuation and employment.

“We found that Naples is one of the most overpriced markets in the nation,” said Chris Lafakis, a Florida real estate expert specializing in the Naples market. “The only other markets that rival the appreciation of Naples and are likely to have similar price declines are Stockton, Calif., and some markets in the Northeast.”

The market has positives aiding it and negatives working against it.

The positives are a construction employment — which at 12 percent of total employment is twice the national average — holding relatively steady. Job growth in the industry has barely declined, strong migration trends are fueling demand for housing, and Florida mortgage rates are low enough to generate refinancing activity.

One of the biggest negatives is staggering price appreciation. Read: People aren’t willing to pay the kind of prices sellers want. And Naples is one of the least affordable areas in the U.S., eliminating many, many buyers.

Lower Florida mortgage loan demand means inventories are building up, which makes the upcoming season a crucial time to determine the future direction of the housing market. Some people have a dimmer view of the market than others. McIntosh thinks that what most people consider the worst-case scenario isn’t really the worst-case scenario at all.

“There is plenty of room for the market to worsen and my real concern is that we are heading for a worst-case scenario that is worse than we think.”

“We have too darn many condos,” he said. “Southwest Florida appreciated at a rate equal to or greater than everyone else in the country so it is perfectly natural to assume that when it goes down, it will be the same. We have more to give back.”