Wednesday, December 27, 2023 / by Madison Tracy
The real estate market is always a fascinating entity to analyze, filled with its complex mechanisms and volatile nature. Particularly, the Naples real estate market has been experiencing some interesting dynamics recently. The foundation of the real estate market remains solid, but a perceptual change among buyers has been observed due to inflation. As Budge Huskey, CEO of Premier Sotheby’s International Realty, noted, “A lot of the underlying foundation that drives the real estate market is in place. The primary obstacle to overcome is a residual feeling by buyers that things feel more expensive than they once were due to inflation, and this hesitancy is being translated to real estate.”
According to the NABOR® November 2023 Market Report, the overall median closed price in Naples dropped to $580,000 from $600,000 in the same month last year. This report recorded 1,080 price decreases, the highest in six months. Moreover, November 2023 was one of four months this year that reported a decrease in median closed prices. Year-over-year price decreases have not been reported since 2019, which suggests that a price deceleration may be happening in parts of Naples.
The report also showed a decrease in pending sales (homes under contract) and closed sales in November 2023 as compared to November 2022. Mike Bone, Area Sales Manager with D.R. Horton, revealed that "Area builders have experienced a much slower fall sales market than what was budgeted for the fall months. Sales were lagging behind monthly budgets by approximately 25 percent, and cancellation rates on contracts have hovered around 20 percent due to the higher interest rates." Broker analysts reviewing the report speculate if the Federal Reserve’s promise to lower rates in 2024 may be causing some buyers to hold off on their decisions.
Inventory levels in the real estate market also experienced some changes. While monthly inventory levels for single-family homes and condominiums usually fluctuate similarly, the condominium home market in Naples saw a significant 74.5 percent increase in inventory, compared to a 17.4 percent increase in the single-family home market in November 2023. This notable rise in condominium inventory is likely due to barriers preventing sellers from listing their condos if they or the property suffered hurricane damage last year.
In 2021 and 2022, when inventory and interest rates were incredibly low, there was a greater urgency to buy a home. However, in 2023, interest rates, property insurance rates, and property taxes rose, making the cost of maintaining a home in Florida prohibitive for many homeowners. Jeff Jones, Broker at Keller Williams Naples, noted that "This might be especially true for second-home buyers who, because of new law, will no longer enjoy the same insurance rate as their primary residence. To remedy this obstacle, NABOR® teaches its Naples Real Estate November 2023 Market Update REALTOR® members to request the buyer check their homeowner’s and flood insurance rates prior to writing a contract."
Another challenge for buyers is a number of sellers who are still expecting to get pandemic level prices for their Florida homes. Molly Lane, Senior Vice President at William Raveis Real Estate, shared this observation. Budge Huskey responded that "We have two levels of inventory on the market today: those with sellers that are positioned to sell, and those with sellers who are testing the market based on prior years’ perceived values. The upcoming winter season will show us who is more likely to sell because we have the inventory now and it will be reflected in the ultimate value buyers are willing to pay.