Market Watch returned with a new format and a new lineup of speakers.
This year’s event, pushed back because of the coronavirus pandemic, came amid a white-hot real estate market, the likes of which has never been seen before in Southwest Florida.
Held at the Hertz Arena on Thursday night, the hours-long affair drew a big crowd, eager to hear the latest trends in the local real estate market.
The speakers, some of Southwest Florida’s most experienced real estate brokers and agents, property appraisers, builders and economists, had plenty to talk about.
David Cobb, a regional director of Zonda Advisory since 2013, with more than 40 years of professional real estate experience, served as the keynote speaker at the event, sponsored by The News-Press and Naples Daily News.
Cobb has managed multiple home building divisions in Texas, Louisiana, Tennessee and Florida, working for large, public home building companies.
Here’s a snippet of what he had to say: New home sales are booming across the country. Through April, they were up 79% over last year.
Drilling down further, Cobb shared that his company’s index, which tracks the demand for new homes, ranks the Naples area as fourth in the country, based on a 150% increase in activity over last year. The index looks at two factors, pending and actual sales.
Meanwhile, a monthly survey by Zonda found that 21% of new home builders have stopped selling across the country because they can’t keep up with demand. That includes builders in Southwest Florida.
In case you missed it:‘Like gas to a fire’: Hot SWFL housing market brings top prices, frustrated home seekers
Homebuyers attracted to smaller communities
New home prices continue to rise, based on several factors, including higher labor and material costs.
“Appraisal problems are still a big issue,” Cobb said.
Buyers, from such areas as New York and New Jersey, are fleeing bigger cities, towns and regions, in favor of smaller ones, such as Southwest Florida, a trend that’s only mushroomed since the coronavirus pandemic hit last year.
Those out-of-state buyers are bringing “buckets of cash” with them and they have 30-40% more purchasing power here, Cobb said, due to the much higher housing prices in the places they’re coming from.
Among the cities seeing the most in-migration? Tampa and Sarasota, along with Cape Coral/Fort Myers, which is adding 50 new people a day on average, Cobb said.
“Typically, most of Florida’s population growth is from net migration,” he said. “Starting in fiscal 2025-26, net migration is forecast to represent all of Florida’s population growth.”
Why? Florida is one of the nation’s grayest states.
Cobb looks at 2021 as the year of shortages, from lumber and microchips to chicken wings.
“How come we have a shortage of chicken wings? Two words. Take out,” he quipped.
As for mortgage rates, Cobb sees them rising on the near horizon. Zonda forecasts they’ll be closer to 3.5% by the end of the year and closer to 4% by 2022, which could result in deflation.
“What drives mortgage rates? One word: Inflation,” he said.
This much is clear: Mortgage rates will be an important factor in housing’s future.
Baby boomers moving closer to millennial children, grandchildren
Other trends affecting the local real estate market? One called “baby chasers,” Cobb said. They are the baby boomers who are moving closer to their millennial children — and especially their grandchildren.
With that trend, there’s been a higher demand for multigenerational homes. Such homes allow grandparents to help raise their grandkids and to help pay for the mortgage, while giving them their own separate space and privacy, Cobb said.
“How sweet,” he remarked.
Looking at new home starts, or permits, Cobb said they’ve understandably surged in Southwest Florida, due to having such a crazy demand.
“We’re the little engine that could folks,” he told his listeners.
Putting some numbers to the trend, Cobb shared that the Naples-Fort Myers market saw 5,500 starts in the first quarter of this year. That was up 7% year over year — and represented 56% of the peak number in 2006, but 123% of the average.
If scattered lots are added into the mix, he said, “our market is as big as South Florida or Jacksonville.”
Nationally, Zonda forecasts there’ll be 1.5 million starts this year, up from 1.4 million last year. Cobb said to get to 1.7 million, it would require 400,000-plus workers, citing data from the National Association of Home Builders.
Addressing the tight inventory of homes on the market, he said it’s the lowest he’s ever seen over his many decades in Southwest Florida.
At the end of the first quarter, there were 195 vacant, completed homes in the Naples/Fort Myers market, less than a half of a month’s supply, Cobb said.
Finished vacant lots — or lots that are ready to build on — are also in short supply, he said, leaving builders in the position of scrambling for “the next new deal.”
In Lee County, for example, there’s only a 15.8-month supply of lots on the market, he said, the lowest number since 2006.
A 25-35-month supply of lots would be needed to reach equilibrium, where supply can meet demand.
Cobb doesn’t expect to see that kind of a supply anytime soon, as he doesn’t anticipate a rush of new listings or demand to die down that much soon.
However, he warned some yellow flags have started to surface, with Realtors reporting that they’ve started to see some price resistance, lighter traffic, and fears of buying at the top of the market, at least nationally.
Local experts share what they’ve seen happen in the SWFL real estate market
After Cobb’s fact-filled, numbers-packed presentation, a panel of local experts shared what they’ve seen and experienced in the real estate business over the past year.
Matt Simmons, an appraiser with Maxwell, Hendry & Simmons LLC in Fort Myers, noted that in May the median price for an existing single-family home rose to $365,000 in Lee County — up from $355,000 a month earlier.
Meanwhile, he said, the county saw fewer sales last month than in April, reflecting a continuously shrinking inventory of available homes.
The inventory is so low, that it seems like “there’s nothing on the market,” Simmons said.
Claudine Leger-Wetzel, vice president of sales and marketing for Naples-based Stock Development, said it’s more than just COVID-19 driving buyers to Southwest Florida.
From February of 2019 to February 2020, the company experienced the best 13 months it’s ever had, she said, in backing up her argument.
After the pandemic hit in mid-March of last year, the company lost $75 million in sales, Leger-Wetzel said, but it didn’t take long for interest in its homes to start picking up again.
Currently, Stock is just six sales shy of reaching its annual goal for 2021, she said. Most of those sales have been in Collier and Manatee counties.
Since January, the company has seen its building costs increase by 10%, Leger-Wetzel said.
Shortage of building materials affecting time to build new houses
Several panelists, including Leger-Wetzel, suggested that maybe it’s time for the federal government to take action to curb the rising cost of construction materials.
It’s now taking Stock 18 to 24 months to build a home, in large part due to the shortage of building materials, she said.
Justin Robbins, Southwest Florida Division President for D.R. Horton, one of the area’s largest homebuilders, said his biggest challenge these days is delivering homes on time for multiple reasons, including a shortage of construction supplies and longer permitting times at the local level.
“We just can’t get some supplies,” he said.
Attempting to build affordable housing “gets more challenging every day,” Robbins said.
He, in part, blamed higher land prices.
“Land sellers are overcharging,” he said, adding that he’d apologize later for such criticism if he had to buy land from anyone listening in the audience.
Corey McCloskey, president of the Naples Area Board of Realtors and a vice president of operations for John R. Wood Properties, said a recent check of the multiple listing service, or MLS, showed 180 homes available for less than $300,000 in Collier County.
“Is it something people want to buy? I don’t know,” she said.
Water quality could have ripple effects on real estate market
In this market, McCloskey said water quality is key. She cautioned that if another bout of red tide or blue-green algae hits Southwest Florida it’s likely to have ripple effects on the local real estate market, in a bad way.
McCloskey encouraged the crowd to do their part to protect the local waterways, including limiting their use of fertilizers.
Michael Timmerman, a broker associate with the Bonita Springs office of Premier Sotheby’s International Realty, talked about ways to create more inventory, including redevelopment and increasing density in some areas of the region.
He noted that increasing density is usually not a popular idea in Southwest Florida, often bringing opposition from neighbors, but it’s a way to “make our economy more efficient.”
“We’re in a unique position,” Timmerman said. “Because people want to be here.”
Michael Polly, president and managing broker at Royal Shell Real Estate in Fort Myers, said his company doesn’t just sell real estate, but it manages just under 2,000 seasonal rentals.
The company not only had to find ways to sell remotely, but to rent remotely, to avoid face-to-face interactions during the height of the pandemic.
While the pandemic led many of the regulars to cancel their rentals for the 2020-21 season amid so much uncertainty, Polly said, it opened up the opportunity to attract new ones, who struggled to find available ones before.
Those new visitors are more apt to explore the region during their stay, he said, and could one day relocate or buy a home here based on their experience.
All of the panelists seemed to agree that the pandemic had more positive than negative impacts on the local real estate market. That’s something they didn’t expect, especially early on when it chased buyers away — and discouraged owners from putting their homes up for sale.
The market has come a long way since then.
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