Every year there is a real estate story. In some years, there are multiple stories. In 2004, the real estate story was the start of a strong seller’s market. In 2005, the story was the plunging inventory as a result of the historic sales activity. This year( 2005 ), was the height of the real estate bubble. In 2006, we had a switch to a buyer’s market. In 2007, the story was the large amount of local inventory for sale. In 2010, we had the gulf oil spill and it’s impact on the local rental market ( even though we never saw any oil get near our shore ). So what is the real estate story this year? I would say it is the continued decline of our real estate inventory in the face of very strong sales activity.Last year was a good year for pending sales. This year is even better. Recently NABOR reported 10,214 pending sales for the year ended 07/31/12. This was 2% better than the previous year which had 10,030 pending sales in the Naples area.
The number of 2012 pending sales for Downing-Frye Realty have been very high this year. Let me explain. Our January pending sales of 325 transactional sides was our highest January since 2005 for pending sales. Same thing in February. In February, we had 398 pending sales which was our best February since 2005. We also had our best March since 2005 with 467 pending sales.How about April? In April 2012 we had our best April for pending sales since, you guessed it, 2005. In May, it was the same story, as was June. So what did July bring? We had our best July for pending sales since 2005 with 274 pending sales. That’s seven straight very strong months for pending sales. For the first seven months of 2011, Downing-Frye Realty had 2,228 pending sales. This was the first time since 2005 that we had topped 2,000 pending sales for the first seven months of the year. What about this year? For the first seven months of 2012, we had 2,612 pending sales which was a 17% increase in pending sales compared to the same period the year before.
With this amount of sales activity, what impact is it having on existing inventory levels? As you might guess, inventory continues to go down. Let’s take a look at NABOR’s inventory at the end of July for the last six years. NABOR’S inventory of properties for sale at the end of July for the last six years are as follows: 11,190 properties for sale ( July 2007 ), 10,640 properties for sale ( July 2008 ), 9,350 properties for sale ( July 2009 ), 8,731 properties for sale ( July 2010 ), 7,010 properties for sale ( July 2011 ) and 6,188 properties for sale ( July 2012 ). It should be pointed out that at the end of March 2007, NABOR had an inventory of 12,440 properties for sale. Now we are down to an inventory of 6,188 properties for sale. That is a 50% drop in inventory. It should also be pointed out that inventory has been dropping in all price levels.
Downing-Frye Realty, Inc. currently has 1,737 listings. This inventory has declined 17% since January of 2012. This still represents the largest block of listed inventory in this area. At the end of January, we had 2,095 listings. This year, we have participated in 2,298 closings. Despite all of these closings, we still have an inventory of 1,737 listings. So, the bottom line is that we are currently selling properties at a faster pace than we are picking new listings up.
Last year, Lawrence Yun, the National Association of Realtors chief economist, reported that one of the things that would drive sales in 2012 was the fear of buyers ” missing out “. He thought buyers that have been sitting on the fence and watching inventory levels continue to decline might start worrying that when they finally ” jumped off the fence ” the selections might become more limited. How much that was a factor in Southwest Florida is a subject of debate but certainly it was probably a factor. Another factor was extremely low interest rates. I never thought that we would see interest rates below 4% in my lifetime. In a recent meeting that I had with a Federal Reserve Bank of Atlanta official, he remarked that we could see interest rates stay low through 2014. So, the bottom line is that if you are a buyer looking for financing ( and can qualify ), the climate is ripe to pick up a very low interest rate loan.
One of the interesting real estate stories that is coming out of 2012 is the emergence of new construction. Since 2006, there hasn’t been a lot of large new construction projects coming out of the ground. This year, that has changed. Back in 2006,2007,2008 and 2009 new construction had a hard time competing against the large glut of reduced priced inventory that was in the area. That glut has largely disappeared.
Looking forward, don’t be surprised if you see the sales activity slow down a bit. Several factors could come into play. First, this is typically the slow time of year for us. Second, we have a significantly reduced inventory. Third, we have a pivotal election coming up. With topics like mortgage interest rate deduction and capital gains being discussed politically, some investors might take a wait and see approach until the election is decided. All three of these factors are largely outside of our control. I still expect a lot of sales between now and the end of the year. The Downing-Frye name has been around this area for over 50 years. If you throw out the two bubble years ( 2004 & 2005 ), we are on pace to have our best year ever for closings.
I have always felt this area is the crown jewel of Florida. I still feel that way. We truly live in paradise.
Reported by Mike Hughes, Vice President Downing Frye Realty
If you would like to talk to a realtor about buying or selling property in Naples Florida contact Melinda or Paul Sullivan, realtors with Downing Frye Realty.
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