Q1 2021 SWFL Real Estate Market Report

Q1 2021 SWFL Real Estate Market Report

2021 Real Estate Market Naples, Bonita Springs, Estero, Fort Myers

Our real estate market has been moving at break-neck speeds as confluence of events over the past year (notably COVID) has literally disrupted and accelerated the way we live & work.  So what happened in quarter 1 as far as the Southwest Florida real estate market – including Fort Myers, Cape Coral, Estero, Bonita Springs, & Naples? Unfortunately because things have been so crazy, today’s market is beyond normal statistical data. We are truly in uncharted territory. And although Florida is special in many ways, our unique paradise is NOT unique in terms of home valuation increases and a lack of inventory, as we’re seeing similar trends – even in areas affected by COVID and by the riots – for example Minnesota & Minneapolis. However, 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.  

Quarter 1 2021 – Southwest Florida’s Real Estate Market

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) vs Q1 2020 (8,709):  Up 41.2% in total closed transactions. 

***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%

What’s important to note here, is that early 2020 was a solid, stable market (with no COVID in sight). Despite this, volumes are up TREMENDOUSLY!

***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 per month 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)

Phew – not only are volumes of transactions up – but so were values, leading to an 80%+ INCREASE IN SALES AMOUNTS. Based on our end of year report last year, we were calling for 20% gains in average transaction value, ie, if your home was worth $100,000, it will now be worth $120,000 – and we’re well on our way to confirming that (possibly shattering it).

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%

We’re seeing luxury homes breaking out as the largest moving category. This makes sense as it seems wealthier individuals and families are flocking to Florida for it’s healthy tax environment, and fleeing oppressive local and state governments. Currently New York is seeing the largest activity as far as interest in moving, and eventual transactions down to Florida.

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. 

Cash transactions are up greatly, and we expect this to continue to rise as appraisals are greatly trailing real market value.

What’s Driving This Crazy Real Estate Market?

Low Inventory:  As of last month, we showed only 3500 total listings or LESS THAN ONE MONTH OF INVENTORY. This was for all of Southwest Florida and is down almost 70% of where we should be for a balanced market. There are simply not enough homes to meet demand. And with the previous average on market time of 90-120 days, we’re blowing through inventory quicker than ever. This is mostly a result of strong buyer demand, high competition from deep-pocketed institutional investors, builders inability to provide new inventory, and seller hesitancy as replacement properties are not as easy to find thus limiting new resale inventory.  

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.  

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/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 as a result.  New construction is our direct source to new supply of homes and their ongoing trends are always a good indication of what lies ahead.  

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 on remodels as a result. It’s estimated that the price of steel mill products have 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 expected growth and future optimism here in SWFL.  

Homeowners Insurance:  This is one of the few true “pain-points” of our current market with premiums on the rise, scaled back coverage, and a substantial increase in claim payouts here post hurricane Irma which has now led to rate increases across the board.  Any new purchases going forward will certainly feel the impact of these effects and the rising insurance costs themselves could potentially act as a minor “pressure relief valve” on the current state of things, especially to those obtaining a mortgage.  

Is a Correction Coming?

We don’t believe so – at least not in the near future (1 year out). Although hard to say with certainty, there are just too many confounding factors that leads us to believe prices and transactions will continue to skyrocket. Perhaps from a statistical perspective it will look bad (low inventory means low overall volumes and transaction amounts) on a home-by-home basis, prices will continue to skyrocket due to low interest rates, low inventory, and our desirable location. Additionally we have the land and resources to continue to grow for many years to come.

We are in what’s regarded one of the strongest and most sought after real estate markets in the country.  There’s just too much demand and projected future growth ahead for us to expect an imminent downturn and furthermore, this market is not built on a house of cards like it was during the “Great Recession”. 

Foreclosure Moratorium:  One thing to keep in mind regarding a correction and our opinion that it will not happen is foreclosures. 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 Real Estate Market Go From Here?

Up… up… and away

Supply vs Demand:  Until we find more of a balance 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” and seller reluctance isn’t helping either.  Demand has been consistently strong in spite of our international buyers mostly sidelined this past year which is certainly an opportunity sector going forward.  It’s not as easy as building more homes with material and labor costs continue to rise, not to mention the tariff’s in place on Canadian lumber.  At the current rate of production it would take a few years to meet excess demand. 

Appreciation/Affordability:  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.  Affordability is becoming an issue as more and more people are willing to still pay for homes at today’s price but just know, prices can’t rise forever but some experts don’t foresee a leveling off until late 2022 into 2023.  

We disagree with these estimates for our area, and with increasing commodities costs expect prices to grow at a minimum of 10%, with potentials to grow more than 20%.

Many experts anticipate that we’ll see a softening of pending and closed sales for the remainder of 2021 given the nature of low inventory, but yet, we’ll remain in a strong market perhaps just coming back down to earth a bit.  NAR recently projected that for all of 2021 that we will see 6.5 million sales which would be a 15.2% increase from 2020.  For now, it seems as if the simple economic laws of supply and demand will continue to lead the way.  We’re seeing large pooled investing companies make large investments in housing in areas like Miami and Tampa. If those same inflows come into Southwest Florida (which is actually much more primed to benefit from that kind of investing) we may see prices soar even higher than the above estimates. Not to mention the current hyper inflation we’re seeing with commodities like wood, steel, etc.



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