By Robert L. Nardi
With less than one month of inventory available, the Naples area housing market experienced a 14.5 percent decrease in overall pending sales in June to 1,256 pending sales from 1,469 pending sales in June 2020. Low inventory levels in June also contributed to a 7 percent decrease in showings for the month. It appears that the wild housing market frenzy that began about a year ago – peaking in March – is now decelerating. A new level of activity reflects improved market equity for sellers and sustained buyer interest from people seeking permanent residency.
According to the report, overall inventory decreased 78.8 percent to 1,271 homes in June from 6,003 homes in June 2020. As expected, going into summer, new listings fell 12 percent in June to 1,147 new listings from 1,303 new listings in June 2020. However, in the first six months of 2021, new listings have increased 9.9 percent to 8,744 new listings compared to 7,957 new listings reported during the same period in 2020. The number of new listings during the first six months of 2021 was higher than the number of new listings reported in the first six months of any year in the last five years. Closed sales in Naples increased 85.1 percent in the first half of 2021 to 9,414 closed sales from 5,086 closed sales in the first half of 2020 (during the height of COVID-19).
When the buying frenzy began a year ago in June, Naples had a 7.3-month supply of homes. As a result of the impressive year-long sales activity, our area now has a .9-month (less than 30 days) supply of homes. But the tight inventory isn't squelching demand quite yet. Closed sales in June increased 67.8 percent to 1,505 closed sales from 897 closed sales in June 2020. Due to the current inventory shortage, the overall percentage of the current list price received was 99.4 percent in June.
The NABOR® June 2021 Market Report compares single-family home and condominium sales (via the Southwest Florida MLS), price ranges, and geographic segmentation and includes an overall market summary. NABOR® sales statistics are presented in chart format ( CLICK HERE ) for those who would like to see all of the statistics.
What does this all mean?
In June, the inventory was so low that sales lessened, but demand was still there. If you are a Seller and have a newer pool home with at least three bedrooms, this is like having a "Golden Ticket." I put a single-family pool home up for sale recently (it was over 2000 sq. ft and had three bedrooms & a den with a list price of $549,900), and I had over 40 showings in a 10-hour period, which garnered 22 offers. I meticulously cataloged each offer, read the purchase terms, and then informed my Sellers accordingly. My Sellers directed me to ask for the highest & best by 6:00 pm on the 2nd day. By 6:30 pm, they chose an offer that fit with their move-out plans. It was a cash offer, closing in 3 weeks with a sales price of $608,000 (that was over $58,100 over the listing price!) It was pretty astounding. My Sellers chose the cash offer over two financing offers that were even higher because they took a job in Nebraska and had to leave town within two weeks. They could not risk the financing offers to fall through since they were already purchasing another home.
My best advice for any Buyers out there in this market is to limit the number of contingencies you have when making an offer. The fewer contingencies you have with a sales contract, the more likely the Sellers will accept it.
Cash vs. Financing
When presenting an offer, the best offer would be a cash offer. If there is a financing contingency, there are many factors that could affect the outcome of the loan. First, in an accelerating market is the appraisal. Based on the current market, appraisals are not keeping up pace with the purchase price. For example, a home's sales price could be at $450,000; however, the appraisal comes in at $425,000. Even though it is lower, other homes that could substantiate a $450,000 may not have closed yet. An appraiser generally looks at all closed sales of like properties within the past four months within a 2–3-mile radius of the purchased property. The loan will be denied if the property does not appraise. The only way it would not is if the Seller would lower the price to $425,000 (but that will never happen in an accelerating market) or the Buyer would have to add $25,000 more to their down payment to fill in the gap of the appraisal price to come up to the purchase price. Some Buyers would not have this amount of money, and therefore would be denied the loan. The other factors could be the Buyer's debt to income ratio, employment, savings, etc.
Those who have cash but would prefer to finance the property have an option when presenting an offer to select "Cash or Financing." However, since "Cash" is selected, it means there is no financing contingency. If the Buyers were not approved for their mortgage on closing day, they would have to pay cash. Hopefully, they would have the money on hand to pay for the purchase, but if they did not, they most likely would have to forfeit their escrow deposits to the Seller, which would be a loss of thousands of dollars.
Annual rental market on fire!
Many Sellers are "cashing in" and then renting due to this accelerating market. However, the annual rental market here in Southwest Florida is very tight. Why? Not only is there a demand from Sellers in Southwest Florida that wish to rent, but many people living outside of Florida want to sell their homes and move south. Lastly, many Tenants who are currently renting are requested to vacate after their lease is up because the Landlord wishes to sell the property. If you think about renting, please call my Rental Operations Manager, Corine Bordges, at 239-206-6457. She can provide you with our latest availability.
Please enjoy the rest of your summer! It sure has gone by fast!