I absolutely care about your well-being and that of your loved ones. I do hope this post finds one and all staying safe and healthy.
Not surprisingly, lots of questions are circling around. Namely, what’s going on in Naples real estate? This is a good time to share facts because there’s a lot of uncertainty, fear and theories circling around. So here’s what I know:
- Real estate sales are still taking place in Naples. Is it slower? Definitely. Has it changed? For sure. As one local real estate attorney said, during this time of year, his office is typically doing 250-300 closings per month. He reports that March was right in line with that. April, however, will be short, running around 200 closings. Beyond that, is anyone’s guess.
- Lenders are still lending money. One local mortgage lender reports that she is still getting loans done with buyers who have a 580 credit score. Other lenders are increasing their credit score requirements and adjusting other protocols, but loans are still able to close in 30 days.
- During the 2005 real estate boom, houses were being purchased sight unseen. We didn’t nearly have the tools available that we do today. So much in real estate can be done virtually. Everyone’s safety is the priority, but technology has made it so we can continue to conduct business.
- Now, more than ever, it is critical to have a real estate attorney handling your contract and/or transaction. There are new addenda and amendments that speak directly to Covid-19 and it is imperative that you understand how those may impact your purchase or sale.
- This pandemic is just for now; it is not forever.
Recession Does Not Equal Housing Crisis
What needs to be understood is that recession does not necessarily equal housing crisis. In 3 of the last 5 recessions, values of homes actually increased.
- 1950 – home values increased 6.1%
- 1981 – home values increased 3.5%
- 1991 – home values decreased 1.9%
- 2001 – home values increased 6.6%
- 2008 – home values decreased 19.7%
This is not a recurrence of 2008. A potential recession this year is not a repeat of the long-term housing market crash we remember all too well. Here’s why:
- In 2008/09, our area had 2.5 to 3 years of housing inventory available for sale. We were just coming off a huge market boom, and yet, almost overnight, everything shut down. Before Covid-19, our area had just over 6 months of inventory.
- The household debt in 2008 was 134%. Before Covid-19 it was 96%, a historic low.
- In 2008, the overall GDP decreased by 19.7%. Economists predict that we are going to actually increase 1 to 2% this year overall.
- In 2008, the stock market dropped 57%. Now, it is predicted that we will drop 20% before we start seeing growth.
Before Covid-19, local real estate was breaking records, year over year. January 2020 saw a nearly 22% increase in closed sales over January 2019 and a 33% increase in pending sales (residences that went under contract). February 2020 also saw a 29% increase in closed sales and nearly 43% increase in pending sales over February 2019.
Going into Covid-19, we were fortunate to have a stock market that was at almost 30,000. We were fortunate to have an unemployment rate at one of the lowest in our economy. We were fortunate to have interest rates as low as they were historically.
In 2008, it took several years for us to fully recover. While we don’t know the exact impact the virus will have on the housing market, we do know that housing is not the driver.
If we can get a handle on Covid-19, area brokers feel recovery could be 6 months, maybe less. Some believe it will be a seasonal shift because there will be a pent-up demand. Meaning, those buyers that would have been here buying property now (April, May and June) will shift to later in the year. Fall has the potential to be a busy buying season.
Advice to Sellers
As one area broker put it, “I’ve never heard a seller say, ‘I wish I never sold my property’.” Typically, it’s the opposite. They wish they had sold earlier before xyz event happened.
In any case, if you are considering selling, do it now. The goal here is to be ahead of the curve. You, the seller, want to be the one dictating the values in your neighborhood. Every neighborhood has a “ticking time bomb.” That ticking time bomb is the owner who sells for less because they are more motivated. As a result, they will reset the entire neighborhood with appraisals, etc.
As a seller, you want to be in front of that person, not following behind.
Advice to Buyers
If you are fortunate to have a job, why give rent to a landlord? Paying rent means you are paying 100% of the interest.
It remains to be seen what will happen to home prices in the coming months; they may not go down as much as buyers may think. But buyers may be in a better position with contract terms. Whereas before sellers were pushing for a quick close and high deposits, after this sellers may be more flexible in longer closing times and maybe smaller deposits.
Also, keep an eye on the mortgage market. It is in flux right now.
If you are considering moving to Naples or selling your Southwest Florida home, I’d love to chat with you.