In the Naples Housing Market: Record Inventory, Pervasive Overpricing
Homes for Sale Remain at Record Level
At the end of March, the Naples housing market had a slightly less than 12,000 homes listed for sale. This is three times higher than a balanced market.
However, during the month the number of homes listed for sale peaked at over 12,300 homes. The reduction down to 12,000 homes is the first noticeable decrease in the number of homes listed for sale, since late 2005.
The reduction is not due to increased Florida home mortgage loan activity - but rather by sellers taking homes off the market at a greater rate than those being added. Some sellers are finally beginning to realize that their asking price has no chance of selling, so why continue the listing. Whether the reduction in the number of available homes for sale is an emerging trend, or just a hiccup is to soon to determine.
Overpricing Remains Pervasive Throughout the Market
(Note: Since peak prices were reached in the fall of 2005, the majority of sellers have had asking Naples homes prices significantly above market values.)
The overwhelming number of homes listed for sale, continue to be priced significantly above current market values. Home values (for those that are selling) are generally at similar price levels as those purchased in early 2005, and in some cases have slipped into late 2004 pricing.
Of the 12,000 homes listed for sale, approximately 35% were purchased in 2005 or later, making the original purchase price for that group of homes higher than current market values. Most of these sellers continue to hang on to their dreams of selling with a gain at some point in time, and are sticking with an asking prices that are greater than the market value of their home. In other words, those homes are not really for sale.
These sellers have two choices:
- They can reduce their asking price significantly, thereby incurring a loss if it sells
- Or continue to incur the cost of holding the home (property taxes, association fees, mortgage payments, etc.), until such time prices rebound to their purchase price.
Either way they will incur the loss; it is just a matter of incurring the loss now, or over more slowly over time. The vast majority of these sellers have elected to the pay the monthly cost of holding the home, rather than reducing the price to fair market values and taking a loss. But in the meantime, they continue to keep their home listed above market value.
Examples of Overpricing
Examples of the overpricing phenomenon is easily shown by looking at similar size condos within the same community. A 20% difference between the lowest and highest priced condo within a community, can sometimes be justified based on such factors as view, upgrades, furnishings, location, etc. But in order to have a 30% or 50% price difference, then the higher priced Florida condo would need gold flowing from faucets.
Naples Real Estate Price Trends
The large number of homes for sale, along with low Florida home loan interest continues to put pressure on pricing. Low buying interest is not a reflection on the desirability of Naples as a second home or vacation destination. As the regional airport reported a recorded number of airline passenger traffic in the first three months of this year.Low buying interest resulted from the sky rocketing inflated home prices experienced in 2005. But now for most communities and property types, prices of the best priced homes, are 25% or more under those peak prices.
Much of the traditional real estate buying demand for Naples, is from second home buyers. Second home buyers do not need to buy today, next year or in two years. They want to buy when they are comfortable with pricing, and ready to start enjoying their purchase. Large groups of these buyers are sitting on the sidelines ready to buy today, if they had some assurance that prices have stabilized.
This is not to suggest that prices will return to peak levels anytime within the next few years. But rather that the bottom buying opportunity might be very short lived. Buyers on the sidelines waiting to time market prices perfectly, will most likely end up like the sellers wanting peak prices, long after the peak had been reached.
SOURCE: Naples Insider
