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 SWFL Real Estate Market Update:

April 15, 2021 (Q1 Report)

Good Morning!

It’s no secret that our real estate market has been operating at record breaking levels across the board as the perfect storm of events endured over the past year have literally disrupted and accelerated the way we live, work, and value the overall freedom of life for that matter.  The trends of today’s market are well beyond normal statistical data and while some feel that a market correction lies ahead, many others consider this to be a “recalibration of values” for what has arguably been an undervalued market for quite some time and perhaps a “new normal” for real estate here in Southwest Florida.  As always, the main purpose of today’s report is to provide accurate up-to-date big picture market data, but furthermore, its about understanding the root foundation of it all to best project where the market may be heading in the months to come.

How Did Q1 of 2021 Perform?

Closed Sales – Transactions:  Per the MLS for Q1 of 2021 we had 12,300 total closed sales or 4,100 per month: Up 26.4% when compared to our 2020 monthly average of 3,244 sales or 9,732 per quarter.  Let’s not forget 2020 was a record breaking year, by significant margins too!Q1 2021 (12,300 Closed Sales) vs Q1 2020 (8,709 Closed Sales):  Up 41.2%
***Jan 2021 (3,274 Closed Sales) vs Jan 2020 (2,331 Closed Sales): Up 40.5%
***Feb 2021 (3,701 Closed Sales) vs Feb 2020 (2,698 Closed Sales):  Up 37.2%
***Mar 2021 (5,325 Closed Sales!) vs Mar 2020 (3,674 Closed Sales): Up 44.9%***Q3 2020 (10,612 Closed Sales) & Q4 2020 (11,820 Closed Sales)Closed Sales – Volume:  Per the MLS for Q1 of 2021 we had $14.99 Billion or just under $5 Billion per month:  Up 56.1% from our 2020 monthly average $3.2 Billion or $9.6 Billion per quarter.Q1 2021 ($14.99 Billion) vs Q1 2020 ($8.26 Billion):  Up 81.5% in total closed volume
***Jan 2021 ($3.91 Billion) vs Jan 2020 ($2.22 Billion): Up 76.1 %
***Feb 2021 ($4.41 Billion) vs Feb 2020 ($2.41 Billion):  Up 83%
***Mar 2021 ($6.67 Billion!) vs Mar 2020 ($3.62 Billion): Up 84.3%***Q3 2020 ($10.2 Billion) & Q4 2020 ($12.9 Billion)

Pending Sales:  For the month of March we saw 4,976 pending sales, Up 4.4% from Feb (4,751) and down 1% from January (5,027) but still up 53.4% from our 2020 monthly average closings (3,244).  Pending sales are still very high, yet, limited due to the inventory shortage.

Luxury Market:  $1+ Million for 2021 Q1:  (1,256 Closed Sales) vs 2020 Q1 (642 Closed Sales): Up 95.6%
***921 of 1,256 or about 73.3% cash***2021 Q1 Monthly Avg. (314 Closed Sales) vs 2020 12-Monthly Avg. (248 Closed Sales): Up 26.6%$2+ Million for 2021 Q1:  (489 Closed Sales) vs 2020 Q1 (254 Closed Sales): Up 92.5%
***402 of 489 or about 82.2% cash***2021 Q1 Monthly Avg. (163 Closed Sales) vs 2020 12-Month Avg. (94 Closed Sales): Up 73.4%Cash Sales (48.3%) in Total by City:  Up 21.4%

Naples (55.5%);  Bonita Springs (56%);  Estero (55.7%);  Fort Myers (46.1%);  Cape Coral (33.7%)

Lot & Land (95.4% Cash):

2020 Q1 Lots/Land: (5,070 Closed Sales) vs 2020 Qtr Avg. (2,737 Closed Sales): Up 85.2%

***With low inventory it’s no surprise to see a surge in lot sales.


What’s Driving This Crazy Market?

Record Low Inventory:  As of April 14th, we’re showing only 3,442 total listings or .85 months of inventory in all of Southwest Florida which is down almost 70% of where we should be for a balanced market.  This is mostly a result of strong buyer demand, high competition from deep-pocketed institutional investors, builders inability to provide new inventory, and a dash of seller reluctancy as replacement properties are not as easy to find thus limiting new resale inventory.

Enormous Demand & Desirability:  Whether it’s golfing, boating, fishing, kayaking, or the many other activities to enjoy the beautiful outdoors of SWFL, we are home to those seeking an enhanced quality of everyday life.  This past year has only accelerated that trend as Florida, to many, has been deemed the closest resemblance to “normal” during very uncertain times.  As a result, the desirability for people to be here is higher than ever before, consistently strong, and not going away anytime soon.  It’s estimated that 850 people will move to Florida per day over the next 5 years.

The COVID Effect:  Due to the global pandemic and massive shutdowns people have been unable to travel overseas or take cruises which left many not only valuing homeownership more in general, but also looking for that “getaway” here in the states with Florida capturing a lot of that traffic.  As a result, single family homes have been in extremely high demand for vacation rentals as buyers and institutional investors (who account for 20% of all sales right now across most markets) see the yield return potential given that other investment vehicles like US Treasuries have tanked and commercial real estate quickly became unappealing thanks to massive shutdowns.

Tax Benefits:  Let’s forget the many tax benefits of living here in Florida such as having no state income tax (1 of 7 states) which means Social Security retirement benefits, pension income, and income from an IRA or a 401(k) are all untaxed.  There’s also no estate or inheritance tax saving families a considerable amount of money after loved ones pass.  Bottom line, your retirement accounts will go a lot further and it makes financial sense to live in Florida.

Interest Rates:  On 15 separate occasions in 2020 we’ve broken all time low’s while bottoming out at 2.67%.  Even though rates have bumped up a bit, they still remain historically low and one of the many accelerants of the current market.  With inflationary pressure mounting, some fear the drop in mortgage bonds which could have an adverse effect on interest rates causing them to rise.

Homestead Tax Exemption: Primary residents enjoy the benefit of a reduced taxable value on top of protections in place capping any tax assessment increases at 3% per year vs 10% for non-homestead owners.  Furthermore, per the “Save Our Homes” provision any accrued savings over time up to $500,000 can be picked up and moved into a new homestead property which is considered “Portability”.  We’re certainly seeing a shift in use as more people are making Florida their home-base and flock north during the summer months (“sunbirds”).


Areas to Keep Our Eyes On:

Commercial Market:  With the rise of remote working and concern for health and well-being of employees, expect more of a “hybrid-type” model for many companies going forward.  Shared flex spaces are expected to be an area of growth while we might see some polarization between high-quality & adaptable buildings vs those outdated and less flexible.  It’s still too early to tell but it’s no secret that online shopping has forced downward pressure on brick and mortar retail space and hotels have suffered as well.

***Per NAR for 2020 the SWFL was ranked as the #1 commercial market in the US, more specifically Cape Coral and Fort Myers:  This shows that investors are comfortable making moves here in FL and a big boost for the local economy thus helping provide more jobs.

New Construction:  Since the bubble burst 12 years ago homebuilders have remained cautiously optimistic and as a result built only half as many homes over the past decade leaving us short on new inventory.  We have officially hit a bottleneck point where our market cannot keep up with the current rate of demand thus maintaining an upward pressure on pricing.  New construction is our direct source to new supply and their trends are always a good future indication.

Supply/Distribution Chain & Pricing: Given the nature of this past year with mass economic shutdowns & rising material costs across the board, it’s not helping the upward pressure on pricing across the board.  Appliances, lumber, roofing & plumbing materials, have all taken longer to get and significantly more expensive than what it was pre-pandemic.  We are seeing the added cost to new construction homes (24k on average) and remodels as a result. It’s estimated that the price of steel mill products has jumped 22% in the last 3 months alone.

RSW Airport:  Currently ranks #1 out of 50 airports in the US and has recovered 60% of it’s pre-pandemic traffic, more than any other airport.  Construction continues on a new $80 million airport traffic control tower and the plans to build the $280 million 200,000 square foot terminal expansion will be bid this month per Ben Siegel the executive director for the Lee County Port Authority.  This would certainly indicate future optimism and expected growth here in SWFL.


Is There A Correction Coming? 

Although it’s hard to say with absolute certainty especially given the nature of this past year, but the short answer is no.  We are in whats regarded one of the strongest and most sought after real estate markets in the country with very unique hyper-local insulating factors that quite frankly are difficult to relate elsewhere.  Believe it or not, there is some serious foundational sustainability to our market and too much demand and projected growth ahead for us to expect an imminent downturn.  This market is not built on a house of cards like it was during the “Great Recession” and here are a few factors to consider:

Unemployment:  As of February it’s estimated that the SWFL unemployment rate is down to 3.9% (roughly 6% nationally) which is pretty incredible considering where we were just a year ago. Construction jobs have boomed in March posting one of the largest monthly gains ever and our local market is certainly reaping the benefit as a result.  With the SWFL commercial market being ranked #1 nationally per NAR, that means institutional money is pouring in as a result of their bullish outlook and what comes with that is jobs.

Mortgage Forbearance:  The overall forbearance rate has fallen below 5.5% for the first time in a year.  It’s estimated that 90% of those currently in forbearance have at least 15% equity in their homes so even if people needed to sell, statistically speaking it should not be a distressed sale.  The sellers can walk away with some amount of money.  Also, most lending institutions are working with their borrowers to help them stay in their homes as mortgage companies could face penalties if they don’t take steps to prevent a deluge of foreclosures.  Let’s not forget the cash vs financing ratio in our market (48.3% in all of SWFL).

Continued Growth:  It is estimated that 850 people will be moving to Florida per day for the next 5 years as many seek the weather, lifestyle, and many tax benefits offered here.  Per the Florida economic development directors, Lee County will receive $2 billion in funds while adding 6,500 jobs in the next 2 years and Collier County projects about $1.5 billion with an estimated 4,000 to 5,000 jobs.  Barring any crazy unforeseen circumstance, SWFL is poised to see long term sustainable infrastructure and job growth.

Foreclosure Moratorium:  It’s expected that the foreclosure moratorium will be extended until December 31, 2021, but time will tell.  At the beginning of the pandemic the foreclosure pipeline was already at record lows and since then homeowners have gained significant equity over the past year making it less likely they would be in distress.  People generally default on a loan when they can’t afford to do so or are upside down in value which very few people are facing these days. Just like our parents or grandparents were shaped by the “Great Depression”, the same could be said about us today and the “Great Recession”.

Equity:  Americans are sitting on a record breaking $7.3 Trillion in tappable equity up 18% since the end of 2019, yet, we’re not tapping into them like our own personal piggy banks like during the “Great Recession”.  In fact, in 2006 American’s cashed out $321 billion (89% of all refi’s) vs $153 billion in 2020 (33% of all refi’s), which represents only 47.7% of the total equity pulled back then.

Where Does the Market Go From Here?

Supply vs Demand:  Until we find more of an equilibrium between supply and buyer demand, we can expect these same trends to continue and drag on.  Builders are pushing new homes out as fast as they can but not fast enough to accommodate today’s demand thus creating a “bottleneck”.  Demand has been consistently strong in spite of our international buyers mostly sidelined this past year.

Appreciation:  Most expect the market to experience more moderate growth in value in 2021 as most project anywhere from 3% to 5%, with others a bit more aggressive showing up to 7% or 8%.  The nature of our current supply and demand will most certainly keep an upward pressure on pricing and buyers seem to have no problem paying what they currently are for homes, hence the “recalibration of values” which is also making appraisals tough.

Overall, we are at or very close to the peak of a very strong real estate market and barring any crazy unforeseen circumstance, this market is not going to dramatically shift or change anytime soon.  The challenges we face in today’s market cannot be corrected overnight and it will take time to find more of an equilibrium between demand, inventory, and price growth.  It’s a safe assumption to say that April and May will be relatively strong but unlikely to surpass March as it’s expected that we’ll see a softening of pending and closed sales for the remainder of 2021, yet remain a strong market.  I leave you with this…. SWFL truly is a unique sought after market with a lot of affluent clientele and cash pouring in thus creating insulation from other macro-economic factors felt in most markets across the US.  It’s pretty clear that this market will continue on, for now at least, and there’s no true symptom for us to feel otherwise as the simple economic laws of supply and demand continue to lead the way.

Please keep up the great work everyone and let’s keep helping clients make well-informed real estate decisions!




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Adam Ruud – Managing Broker


Naples – Bonita Springs – Estero – Fort Myers – Cape CoralOffice: 239-301-4301

“Whether you think you can, or you think you can’t – you’re right,”

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