Naples Real Estate Report
Year 2015

 

Naples Real Estate Market Summary

  • Home sales remain at a very good pace
  • Naples average home prices continue to rise – but remain far below peak year prices.
  • Builders have launched a dozen new communities.
  • New construction sales are strong.
  • Foreclosures and Short Sales are at the lowest levels since first being tracked.
  • Buyers have confidence that their equity is protected and are confident about future gains.

"Naples Area Leads State In Job Growth" - Naples Daily News, March 28, 2015

 

Home Sales

The number of home sold (not counting new construction) in the Naples area during 2015 was slightly below year 2014.This is not surprising as there are fewer homes available for sale and buyers now have many new construction options available to them.

Naples Home Sales
Years  2002 to 2015

Sales by Price Range

There has been a major shift in the number of home sold by price range. For example, in 2006 when home prices reached their peak, there were very few homes valued less than $200,000. Home sales under $200,000 accounted for less than 5% of total sales at that time. Then when home prices reached a new bottom during the 2009 to 2011 time period, homes valued less than $200,000 represented over 50% of home sales. Homes in this price range were selling for double the amount a couple of years earlier.

As housing prices began to recover starting in 2012, the number of homes sales priced under $200,000 once again began to fall.

Percent of Home Sold by Price Range
Years 2006 to 2015

Sales by Naples Regions

The sales mix by Naples geographic regions - North, South, East, West, Beach, Non-Beach, etc., has not changed in recent years. No area is currently trending towards greater sales or fewer sales - no "Hot" or "Cold" regions.

But the sales mix by region has changed from a decade ago. Naples housing growth is now primarily to the East and South of the core Naples area. East and South is where large tracks of available vacant land still remain. As housing grew in Naples' eastern and southern regions, these areas now account for a larger share of home sales. And as such, the western regions represent a lower percentage of overall sales.

Percent of Home Sales by Naples Regions
Year 2002 vs. 2015

Distressed Sales

Distressed sales (foreclosures and short sales) now make up a much smaller percentage of total sales. Distressed sales started to hit the Naples real estate market in 2008 when prices began to plunge. And then surged in year 2009 when owners stop making payments on their underwater home (they owed much more to the bank, than the home was worth). In 2009, distressed sales accounted for over 40% of sales.

Distressed sales have pretty much worked through the system and now account for less than 10% of real estate sales.

Distress Sales as a Percent of Total Sales
Years 2009 to 2015

Naples Home Prices

Since 2010 the Naples average home selling price has been on the rise. With an average price of $565,000 for 2015, an 11% increase over 2014.

Average Home Prices
Years 2002 to 2015

While the average Naples home selling price in 2015 was $565,000, 50% of buyers paid under $310,000.

Median Selling Price

Naples has some of the most affluent neighborhoods in the United States. As such the average selling price is much higher than what most homes sell for here. Looking at the median selling prices is a better indicator of Naples home price trends. The median selling price, is the price point where there are as many homes selling below the price as above.

The median home price in 2015 was $310,000 or 15% higher then 2014.

 

Average Home Prices vs Median Home Prices
Years 2009 to 2015

The median selling prices is just 55% of the average selling price. Why such a great difference between the two? The buyers that buy the most expensive homes in the area, inflate the average home sale price.

If we separate the buyers in four equal groups. The 25% buying the least expensive homes, the 25% buying the next expensive, the 25% buying the next, and the final 25% of buyers buying the most expensive.

Looking at the total value of the homes sold to the bottom 25% of buyers vs. the top 25% will help tell the story. Those home purchased by the 25% of buyers buying the most expensive homes in the area total $3.6 billion in 2015. Compared to just $400 million by the bottom group.

Total Value of Home Sales
Years 2009 to 2015
(Dollars in Billions)

Both groups bought the same number of homes, but there is a vast difference in total value. The top 25% of buyers, accounted for 64% of total home sales in 2015.

Sale Numbers vs Dollars by Buyer Quartiles
Year 2015

Home Price Recovery Trends

All Naples home sectors are in a rising price situation. Home values in some sectors did not fall as hard as others. The sectors the fell the hardest were the least expensive homes, and they are also the ones that have shown the highest subsequent gains..

The lowest price homes in the area are former apartment complexes, that were converted to condos. Here we compare prices of apartment conversion, with Winter Park, one of more affordable second home complexes, and Condos in Pelican March, and area with higher priced second homes.

Price Change From Bottom Pricing
Three Condo Communities

The lowest priced homes show the largest gains, but also had the largest perecnt decreases beforehand.

Using those equal number of groups, of 25% buyers discussed above. It can be shown how the average appreciation from the most affordable homes in the area, far exceeds the gains from the most expensive. But the actual dollar gains of the most expensive dwarfs the most affordable.

Price Change 2010 to 2015
Most Affordable vs. Most Expensive

The Recovery is Driven by End-User Buyers

The housing price increase in the early and mid 2000s was spurred on by the easy credit policy of the government and banks at that time. "No Doc Loans" (getting a loan based upon credit scores and a simple application) was the norm. This encouraged speculation on rising prices, and subsequently caused rising prices. It was an investor driven market, not a market driven by end-users (buyers that intended to use the property as their Naples home). Investors were buying homes pre-construction, that had no real demand by an end-user.

While Naples is once again in a rising price market, it is not being fueled by easy credit and speculators. It is fueled mostly by end-user buyers, or future-users buyers (buying now while prices are low for future use). This is not to suggest Naples is absent of the investor buyers. There are plenty of investors, just not at the level that existed in the 2002 to 2007 time frame.

See the difference it he percentage of mortgage back buyers in the early to mid 2000s vs. the recent years.

Percent of Buyers With Mortgage Financing
2002 to 2015

Cash buyers represent the majority of buyers in Naples since 2009.

Selling Prices vs. List Price

I often get asked, how much of a discount should a buyer expect off of list price. Currently the average is around 4%. This rate is similar to 2002 before the explosion in home prices, probably suggesting that Naples is in a balance market between sellers and buyers.

Average Discount Off of List Price

While the average discount is 4%, the actual range of discounts vary by price range, and by how well the home is priced. If the home is priced high, the discount will be higher. If the home is aggressively priced based on other closed comparable, the discount will be smaller.

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