For decades, the real estate market in Southwest Florida has been driven by out-of-area interests, whether it’s vacationers looking for a second home, or retirees looking for a place to spend their golden years.
That’s starting to change.
Shifts in the economy in the area away from tourism dependence, and a growing crop of young professionals in the area, are flexing their muscles and making a mark on the real estate market.
“I’m selling a home every week to families in their mid-20s who just love the area. The demographics have changed; it’s not just snowbirds or retirees, it’s a full spectrum,” said Jonathan Burg, of FL House Hunters. “Healthcare workers, assisted living, there’s a whole bounty of economic boom in our area and that’s a key factor that drives the real estate market.”
Younger buyers are moving into the market following job growth in professional sectors, thanks to companies like Hertz and Gartner moving into the area, and they’re also getting more for their money thanks to historically low interest rates.
The Federal Reserve raised key rates at the end of last year, but mortgage rates remain well below historical averages.
“They’re still getting interest rates of 4.5 percent, that’s ridiculously cheap money,” Burg said. “Once interest rates get to seven or eight percent that really blocks up the system because all of a sudden on a month-to-month basis it’s a lot more expensive for people.”
Of course, the older buyers haven’t gone anywhere either. As a result home prices have been on the rise for much of the last few years. In December, the Naples Area Board of Realtors reported that the median closed price of a home in Collier County over the last year was $318,000.
Ever since the bubble burst on real estate in the mid-2000s, there’s been a lingering wariness on that such a bust could happen again.
But the growth that’s happened since the recession has been different, Burg says.
“What messed things up in ’05 were flippers. They did that once and got lucky, and then turned around and bought five or six more. Multiply that buy a few hundred people and you had what were basically straw buyers,” Burg said. “What really messed us up for 10 years was the greed and the illusion that demand would never run out. I think people have realized that now.”
Which isn’t to say that everything is perfect, or will continue to be.
While Burg said he believes the area market is fundamentally strong, thanks mostly to a strong growth in the area, there is a potential pratfall ahead.
Home inventories have been on the rise, up 40 percent over the last year according to NABOR, and all the while new builders have kept going.
“If inventory starts going really high, there’s an overflow of builder product, and interest rates rise quickly, that could be the perfect storm that stalls us out,” Burg said. “Then there’s too many homes, they’re too expensive, and now interest rates rise so they cost too much month-to-month, that could screw up the real estate market right there. Hopefully that doesn’t happen.”
“But from the indicators I see, everything is good. As long as the general sense in the US is the economy is strong and people feel they have some money we’re good.”
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