MARKET REVIEW
Naples, Bonita and Estero, Florida real estate board statistics
June 30, 2008
LISTINGS TAKEN / CLOSED SALES COMPARISON
Closings as a percentage of new listings taken peaked in April 2005, when closings reached 83% of new listings. Another way of saying this is that for ever 1.2 listings taken, a sale occurred. This was the period during which inventories decreased, demand was greatest, and prices soared. In May 2005 a consistent decline in this ratio began, ultimately reaching its lowest point in January 2007, when closings were only 10% of new listings taken or one sale for every 10 new listings. These lower percentages continued throughout 2007 and into the first two months of 2008. In April 2008, this percentage reached 30%, its highest in 28 months, and has continued near this level or higher during May and June. This represents one sale for ever 3 listings, a significant improvement. Closings are the best indicator that inventories may be decreasing, assuming the number of new listings continues to stabilize and return to more historic norms. This is validated by the fact that inventory currently stands at approximately a four year supply overall, contrasted to a five year supply at this time a year ago. While we still have some areas that will take several years, and/or significant price reductions to normalize, we are also seeing a growing number returning to a very balanced supply/demand status. The following neighborhoods are examples of areas with a one year, or less, product supply: Aqualane Shores, Bonita Bay, The Brooks, and Pelican Bay single family homes and Bay Colony Shores condominiums. Others are close and rapidly approaching a balanced market.
LISTINGS TAKEN / PENDED SALES COMPARISON
Pended sales as a percentage of listings taken reached 104% in February 2005; an all-time high. They remained close to this level until July 2005 when a decline began which reached its lowest point (17%) in October 2007. This represents about one sale for every 6 new listings taken. Since then, these percentages have been trending upward, reaching their highest in April 2008 when there was one pended sale for every two new listings. While the past two months have pulled back slightly from this high, the year-to-date ratio is approximately one sale for every 3 new listings (31%), representing improvement over the same period prior year, as well as significant improvement from the record low in October.
While not all pended sales close, they are the leading indicator of market shifts. By the time a closing is recorded, usually a two to three month lag period, actual market changes are well underway.
UNITS / VOLUME COMPARISON
The number of closed units year-to-date June 30, 2008 is up 6% over the same period 2007. Year over prior year comparison in June 2007 was still showing a 13% decline over 2006. While dollar volume of closed sales continues to lag the same period 2007, sales under $250,000 are actually up in both units and volume. This is the only price segment to show an increase in volume. The good news here is that much of the excess inventory is in this price range, and absorption in this category will significantly impact overall supply in the market. The 20% year to date decrease in sales over $2 million is the main reason for volume decreases.
AVERAGE SALES PRICE / MEDIAN PRICE COMPARISON
Average sales price year to date June 2008 is down 19% compared to this period 2007. Median sales price is down 16%. The lower average sales price, attributable to the large number of closed sales below $500,000, still represents a 19% increase over the same period 2004. It is always a good idea to check average prices by neighborhood. Although there have been decreases in all segments, some specific areas may or may not mirror overall market performance.
CONCLUSIONS
Two of the key indicators of market change are the Listings Taken / Closed Sales Comparison and the Listings Taken / Pended Sales Comparison. Both of these have significantly improved over the year to date June 2007 period, indicating that the market recovery is underway, although still somewhat sluggish. The remaining two indicators which we monitor, the Units / Volume Comparison and Average Sales Price / Median Sales Price Comparison are mixed. The fact that units are up while volume is down definitely substantiates that more buyers have returned to the market and are actually making buying decisions and closing on properties. The point at which volume shifts positively will be determined by the by the pace at which the over $2 million properties begin to move in greater numbers. While it is still too early to call the timing, both May and June 2008 have shown pended sales increases over prior year in this category. That leaves one remaining category – Average Sales Price / Median Sales Price Comparison. It is likely that we will continue to see declining averages over the coming months as lower priced inventory continues to be absorbed. However, due to stabilizing conditions in the markets mentioned earlier in this report, as well as others approaching stabilization, some areas may actually begin to see price increases again within the short term. At the very least, one should not expect to see dramatic declines from current levels in these areas.
Expect to see increased inventories in certain segments as more foreclosed properties come on the market. These could show a shorter listing period that others due to the fact that banks do not want to be in the business of owning residential real estate, so will be motivated to get them sold quickly.
A final word on the four year supply of properties currently on the market. Remember the four year estimate assumes that absorption rates will remain at the same level as they have in the past year; probably the slowest in the history of the area. If the pace of sales increases, as it has already done in some areas, the absorption will be much faster. The problem is no one can accurately know this until it is too late. Best advice is still that if you are in the market to buy for personal use or long term investment, this is a great time to buy. If you are looking for the “quick flip”, this is probably not the time!
