Declining Inventory, Rising Prices Bode Well for Southwest Florida

By: Michael Burke – Bonita Springs, Estero, Naples, Luxury Real Estate Expert

Published in The News-Press August 14, 2010

Seven or eight months ago, I wrote that I anticipated strong sales in the first half of 2010. This prediction was based in part on the first time homebuyer tax credit, which ended for good on June 30, 2010. I knew the incentive would encourage more people to buy in the first half of the year, which it did.

My point is, although the tax credit is now over, the statistics for the second quarter of 2010 – and even for July – show that there have been lasting benefits for the housing market. The most important benefit is how dramatically inventory has decreased, and what it means for the coming months.

At the end of June 2010, inventory in the Naples, Bonita, and Estero market areas had fallen 14 percent since the same time in 2009. Even more interesting, the largest decreases were not in the lowest price range, $250,000 and less, which is where most of the activity has been until recently. The $250,000 to $500,000 price range saw a dramatic decline in inventory – from 3,429 at the end of the second quarter in 2009, to 2,727 in 2010 – but the most astonishing drop was in the $2 million and up price range. In that category, inventory fell 25 percent between 2009 and 2010.

The drop isn’t just because of the increase in sales in the first half of the year, although that certainly did help. It is also partly to do with a significant drop in new listings. With 5,534 new listings in the second quarter of 2010, our new listings are at the lowest they’ve been since 2005, and almost 20 percent lower than they were in the second quarter of 2006, when the real estate crisis was at its worst.

Sales also increased dramatically during the second quarter of 2010. There were 3,099 closed sales between April and June, a whopping increase of 20 percent over first quarter. That’s also 18 percent more than second quarter of last year, when there was only 2,620 closed sales. July’s sales did drop – 676 closed sales for the month, down 19 percent from July of last year – but we expected that would happen after the first time homebuyer tax credit ended. Because the tax credit expired at the end of June, it encouraged homebuyers to buy earlier in the year than they might have originally been planning, causing the sales figures to rebound a bit in July.

Despite the drop in closed sales in July, year-to-date sales for 2010 are still 25 percent higher than they were last year. Furthermore, the other trends we have seen in the second quarter continue through July, indicating that the impact of the tax credit will last beyond its actual deadline. For instance, the increase in prices that we saw the first half of the year continued through July: The average sales price last month remained the same as in June, and increased nearly 10 percent over July 2009. Also, both new listings and current inventory for July 2010 are down 11 percent from this time last year.

The statistics for second quarter brought good news, but it wasn’t entirely unexpected – we knew, after all, that the tax credit would have an impact on the number of sales the first half of the year. What is especially encouraging is seeing the trends in inventory and price continue into July, and realizing what this means for the coming months. With the inventory at its current levels, we have less than a one-year supply. As a result, the market is stabilizing, especially in the lowest price category: homes selling for $250,000 or less. Some areas are even seeing a shortage of available homes, which is leading to a modest increase in prices. After the high we experienced in the first and second quarters, we will likely see a noticeable slowdown in the next couple of months, but I think we are also seeing the long-term impact of the tax credit coming to fruition.

As a real estate agent specializing in Lee and Collier Counties, I have seen market trends come and go, and I have a good feel for what is coming next. If you would like to talk to me in greater detail about what we expect to see in the third and fourth quarters, please feel free to give me a call. My door is always open!