As Inventory Tightens, Strong Buyer Interest Pushes Home Prices Higher Again in May
• Despite high demand for homes in Lee County, the number of properties for sale remains at historically low levels. Meanwhile, builders face multiple challenges as they seek to address the shortfall.
FOR IMMEDIATE RELEASE - June 10, 2021. The law of supply and demand was in full effect in the Lee County housing market in May, as low inventory continued to drive prices higher.
For single-family homes in Southwest Florida, the average sale price rose nearly 48% last month versus a year ago to $507,517. The median price jumped 39% compared to May 2020 to $365,000. As a result, the housing affordability index dropped nearly 27% compared to last year at this time.
On the supply side of single-family properties, the number of houses for sale dropped more than 77% in May vs. a year ago. That translates into a meager 0.7 months’ supply of inventory. A year ago, Lee County had a 4.9-month supply, which is more typical in this area for late spring. The average single-family home sold in just 27 days last month — 60% less than in 2020.
Meanwhile, sales trends for condominiums and townhouses, which includes duplexes, roughly mirrored the single-family marketplace. However, housing inventory was especially tight in this segment, resulting in a drop of 91.7% — a two-week supply. That compares with a six-month supply of condos and townhouses a year ago.
The average price for condo and townhouse units sold in May was $330,890, with the median coming in at $246,000. Condos and townhouses lasted just 36 days on the market last month compared to 74 days in May 2020.
As pandemic restrictions ease, more buyers are coming into the market, but are finding that there is a diminished supply of homes available. With such a limited supply of existing homes for sale, the market is looking to home builders to provide a much-needed boost of inventory to help meet buyer demand. However, increasing material and labor costs, along with supply chain challenges, have contributed to significantly higher construction costs, with builders passing these costs on to homebuyers. Analysts expect the current historically low levels of homes for sale to continue for some time.
SOURCE: Royal Palm Coast Realtor Association
Home Prices Climb in May
Notice: Attempts to compare the performance of the Naples area housing market using month-over-month statistics is not recommended at this time. Mandatory COVID-19 restrictions during the Spring of 2020 disrupted the market resulting in inequitable statistical comparisons.
Naples, Fla. (June 25, 2021) – Homes in the Naples area were being sold at 99.1 percent of the list price in May. A tight inventory and buyer demand continued to push prices upward in May, which resulted in an overall median closed price increase of 29.4 percent to $433,500 from $335,000 in May 2020, according to the May 2021 Market Report released by the Naples Area Board of REALTORS® (NABOR®), which tracks home listings and sales within Collier County (excluding Marco Island). Broker analysts reviewing the report predict continued price increases in 2021, but noted monthly showing and sales activity is beginning to show signs of deceleration from the remarkable market experienced during the first quarter of 2021.
Interestingly, the May Market Report showed the same number of list price increases for the month of May (247) as decreases (247), which, according to Mike Hughes, Vice President and General Manager for DowningFrye Realty, Inc., is a reflection of behaviors from two types of sellers: “the ones who, despite comparable pricing recommendations from a REALTOR®, seem to pick a high listing price and eventually have to decrease the home’s price to attract buyers; and those who listen to a REALTOR® and price the home right, but because of rising prices due to strong buyer demand in our market right now, end up selling the home at a higher price.”
“Some sellers have been asking about price wars,” said Molly Lane, Senior Vice President at William Raveis Real Estate. “This may not always be the best strategy as some buyers are weary of losing out and the seller may not get the desired result. It’s always best to consult with a REALTOR® as to the best strategy when pricing a home.”
Spencer Haynes, Vice President of Business Development and Broker with John R. Wood Properties, agreed with Lane and added, “A REALTOR® will help a seller price a home dead on the money or just a little below market to drive in offers. Buyers are getting keen on the tactic by some sellers to price way above value, and those sellers may not get the action they expect.”
Cash sales in May accounted for 58.4 percent of the closed sales transactions. The cash buyers continued to create challenges for competing buyers who required financing. It took an average of 90 days for a home to go from list to contract in May 2020, but in May 2021, the average days on the market was reduced to 43 days, a 52.2 percent decrease.
But the trend of paying cash for a home does not preclude those buyers who want to finance from purchasing a home. Buyers who are prequalified for a mortgage often fare well during negotiations and enjoy a faster closing process than those who are not prequalified. Also, as pointed out by Phil Wood, President & CEO of John R. Wood Properties, “Many capable cash buyers are leaving their money in the stock market because they can achieve a higher return there as compared to the low mortgage rates, of approximately 3.2%.”
The May Market Report showed that overall closed sales increased 164.4 percent to 1,618 from 612 in May 2020 (a month when all the world was in COVID-19 lockdown). For perspective, closed sales increased 36 percent in May 2021 compared to May 2019 (a non-pandemic lockdown month). Nevertheless, closed sales activity in May 2021 outperformed any other May in the history of NABOR®’ s market statistics reports.
Overall inventory fell 79.1 percent in May to 1,290 homes from 6,177 homes in May 2020, but monthly new listings activity continues. May welcomed 1,274 new listings, a 7.6 percent increase from 1,184 in May 2020. New listings that come on the market each month help to temper the drop in overall inventory and provide more opportunities to eager buyers.
“We’re in for a period of low sustained inventory,” said Budge Huskey, CEO, Premier Sotheby’s International Realty. “But even when demand begins to level off – perhaps in the second half of the year as is historically the case – our area will not see any real decline in prices because new fundamental values for our market are being set today and they are not likely to trend down again.”
Cash sales were not the only contributing factor to the drop in days on the market. Another factor was the 45 percent increase in showings for May (42,380 up from 29,319 in May 2020), which ultimately resulted in a 46.5 percent increase in pending sales for May to 1,710 pending sales from 1,167 pending sales in May 2020.
Historically, the Naples housing market’s activity in the first half of the year is not sustained during the second half of the year. However, since tourism to Florida is expected to increase this summer and buyers from foreign countries may also begin to arrive in the coming months, a return to more normalized buying behavior in the second half of the year was discussed although remains uncertain.