The Last Five Years: Naples Housing
If you read my Naples market update articles every month, you will have learned how 2023 has been sort of a “levelling off” period for the housing market. Hovering around $600,000 all of 2023, the Median Price for the Overall Naples Housing Market only increased 3.6% in October ’23 over October ’22. As further indicated by the Naples Homes For Sale chart below, the available homes for sale in Naples has been steadily rising since March ’22. That is about the same time when interest rates started coming up from their all-time lows. At the same time, New Listings in Naples have not shown any abnormal spikes that would indicate undue motivation to sell, like fear of a crash. Just the common EKG readout over the last 5 years, though you can make out a slight decline in the amount of new listings over those years. Why is that?
Naples October 2023 Housing Prices
Naples October 2023 Homes for Sale
To tie in with the slowing of new listings in Naples housing is an article from Businesswire.com I came across recently that analyzed the percentage of people with mortgage rates under 6, 5, 4 & 3 percent. Look at these numbers.
- Below 6%: 91.8% of U.S. mortgaged homeowners have a rate below 6%, down from a record high of 92.9% in the second quarter of 2022.
- Below 5%: 82.4% have a rate below 5%. That’s down from a peak of 85.7% in the first quarter of 2022.
- Below 4%: 62% have a rate below 4%, also down from a record high (65.3%) hit in the first quarter of 2022.
- Below 3%: 23.5% an interest rate below 3%, near the highest share on record. The highest was 24.6% in the first quarter of 2022.
“Many would-be sellers are staying put rather than listing their home to avoid taking on a much higher mortgage rate when they purchase their next house. This “lock in” effect has pushed inventory down to record lows this spring. New listings of homes for sale and the total number of listings have both dropped to their lowest level on record for this time of year, which is fueling homebuyer competition in some markets and preventing home prices from falling further even amid tepid demand.”
Naples October 2023 Home Listings
Unequal But Connected Housing Demand
The negative effect of high interest rates is not exclusively reserved for people who need a loan to buy a home. Wealthy people are keen to pay attention to what is happening in those price points as well. If overall demand is weak, prices tend to fall. A person who has the ability to buy a home in Naples right now with 100% cash might wait a bit to see if prices come down after seeing the apparent “levelling off”. Everyone likes to save money. And as far as the luxury market in which comparable sales prices of the lower priced homes are not considered, an eye and a pencil is always aligned with value. Option 1; Buy a million dollar home for myself. Option 2; Buy two discounted half million dollar homes and rent them out since purchase loans are on life support right now. It’s currently a staring contest. But for homes located in particularly desirable areas, you can bet they will always command top dollar.
I read an article last week by a well known international media company, through research I imagine, that stated that one of three things need to happen to bring affordability back into the US real estate market.
- Wages need to increase 60%
- Interest Rates need to drop by 4%
- Home prices need to drop by 37%
Do you see your income increasing by 60% anytime soon? I really hope it does! Do you see interest rates dropping by 4% anytime soon? You can bet your favorite pair of shoes that if rates drop by half or if wages on a big scale increase by 60% that home prices with increase to ever higher levels, making affordability even worse. Think about it. Now let’s talk about if home prices drop by 37%. To put this in context, home prices dropped by about 30% from the peak in mid-2006 to the trough in mid-2009 during the Great Recession according to several sources on the web, including Investopedia. If we started to see a drop in home prices like that, again betting those shoes, we would surely see a slew of listings hitting the market as homeowners rush to pull out their equity before it evaporates. This could be the way that all of those people holding on to super low mortgage rates start to sell. Timing the market is near impossible, but maybe considering that sale to protect the equity blessing isn’t such a bad idea before prices start coming down. That is, if you believe that they will. Nothing lasts forever, not even historically low interest rates.
So, what do we do about all of this? Interest rates were held artificially low for about 13 years (2008-2021) as the US dealt with the ramifications of the greed and downright criminality that led to the crash of 2008. And while we all think we are way past that time and have recovered, we are still dealing with the crash and will be for some time in the form of affordability as it relates to wages, rates and home prices. Like ripples in a pond. Some groups of people think we can just borrow our way out of it, print more “Fun Coupons“. I don’t claim to be a financial expert, but I do understand the concept of value and kicking the can down the road, blowback & collateral damage. This why many us are focused on VALUE. By the way, how valuable is your REALTOR®?
Look, if any REALTOR® claims to have all of the answers to your questions, they are lying to you. As we move past this October ’23 housing update and creep up on the 2024 Naples vacation season, we are finishing a year of essentially level median prices, rising housing inventory, fairly static and even falling amounts of new listings (which supports higher prices), increasing days on market and falling pending sales. The market, as always, will work itself out as long as there is not an egregious outside force influencing it (ahem, Lobbyists, Banks, Uncle Sam).
Naples Housing May Need to Wait
My advice to sellers is to not grossly overprice your home right now and for buyers to talk to lenders with good portfolio options. If you don’t understand what portfolio options are, call me to discuss. Maybe even consider buying raw land and building or moving to a different area altogether. Sometimes (often) life simply changes and moving to another part of the state or country is necessary and will improve your life. Don’t be so stubborn that you miss a great calling on your life that requires a little effort and discomfort. I have had to move before against my grand plans to succeed where I was. Maybe waiting 12-15 months for a home to be built is better than buying an existing home. More hoops to jump through, but maybe you need the exercise.
Whatever. It’s life and sometimes we just need to change. Imagine if the Puritans and Christopher Columbus decided not to be bold and take to the sea in search of a brighter future. It could have been a completely different story here in America. New opportunities that could improve our health, relationships and investments should be at the core of our decision making. Comfort is rarely healthy nor does it bring longevity.
It’s time to talk about your next move.
Josh Amolsch | REALTOR®
Premiere Plus Realty, Co. | #SL3522310
1100 5th Ave S #101B, Naples, FL 34102
239.302.8475 | [email protected] | josha
Josh Amolsch | Naples Luxury Real Estate
