A Cloudy Start to 2016 in Southwest Florida

July 12, 2016

Southwest Florida had a banner year in 2015 for new home sales, with Naples recording an 18.4% increase in volume YOY and Fort Myers notching a 10.1% increase. Builders in Florida’s retirement housing hot spots count on the early months of the year for their strongest sales numbers. Thus far, 2016 has not performed at the blockbuster level we saw in 2015. The following are our key observations for this market.

  1. Seasonal sales are below expectations. Reported monthly sales volumes in established Naples and Fort Myers communities were 10% to 50% below 2015 levels. New home supply has increased rapidly; permits grew an average of 45.2% YOY from 2012 to 2015 in Fort Myers and 33.9% in Naples. Although total new homes sales volume continues to grow, the increase in competition has builders fighting for market share.

  2. Incentives are back. Incentives range from a free pool, valued at $40,000, to an allowance toward design options up to $20,000—and buyers are shopping for the best deal. We have seen prices on inventory homes slashed up to 10% of the total home price.

  3. Price appreciation slows. The median new home price in Naples appreciated an average of 15.9% annually over the past four years (2012–2015), and the median resale price appreciated nearly as quickly, at an average of 13.5% annually during the same time period. The market is responding, and we have observed price cuts on resale listings that may have initially been priced too high. Affordably priced homes ($350,000 and below) continue to sell well, and builders are introducing multifamily product such as townhomes, coach homes, and low-rise condominiums to meet demand.

  4. Economic fundamentals are weakening but continue to outpace national averages. Job growth is slowing. Fort Myers, which reported a 6.5% annual job growth twelve months ago, has dropped to 4.9%. YOY growth in Naples is 2.2%, nearly half the 4.3% twelve months ago. However, this is higher than the national average, which was 1.7% YOY through May on a non-seasonally-adjusted basis.

The Sun Will Come Out…Tomorrow?

While fundamentals in the housing market in Southwest Florida are weakening, we remain optimistic for the future of this region. We expect that strong demographic forces will drive housing demand, albeit at moderated prices. According to the most recent numbers released by the US Census, Florida’s population grew 1.84% in 2015 compared to the US growth rate of 0.7%. Florida’s retiree population will continue to make up a large segment of that growth, and Southwest Florida will remain a retirement hot spot. In 2015, Florida had:

  • 6.3% of the total US population

  • 7.4% of the 55+ population

  • 8.3% of the 65+ population

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