Home Inventory Shrinks

Michael Timmerman has been making prescient calls on the residential real estate market in Southwest Florida for 17 years.

As senior associate in the Naples office of economic consulting firm Fishkind & Associates, Timmerman accurately forecast the real estate downturn in late 2006. For example, he warned shopping-center developers early that speculative new homes built during the boom didn't necessarily translate to new residents. Now they're asking his firm to develop economic models to measure population growth and retail demand.

At an Urban Land Institute of Southwest Florida presentation recently, Timmerman said the housing market could be on track to deliver 5% to 6% annual price increases if current demand continues.

Timmerman says he's encouraged by the fact that inventory has been slashed in half to about nine months. “That's why our prices have been stabilizing,” he says.

Already, some area builders have been able to increase prices in desirable communities where demand is strong and supply is limited. “We're going to see some new communities come on,” Timmerman says.

Timmerman isn't worried about another significant wave of foreclosures, the bane of homebuilders who have had to compete with these lower-priced homes. “Most of the foreclosures have been flushed out of the system,” he says. “Foreclosures have been substantially reduced in all the markets.” Besides, most of the foreclosures have been limited to speculative areas such as Cape Coral, Lehigh Acres and Golden Gate.

Still, Timmerman fielded more questions about foreclosures than any other subject in his ULI presentation Sept. 8, reflecting concern about the buildup of foreclosures stemming from bank administrative delays and government lawsuits.

Timmerman says he doesn't think another wave of foreclosures is imminent because most of the speculative investors have left the market. However, he cautions, employment needs to improve so that area workers don't file for foreclosure.

Fortunately, Southwest Florida continues to be a draw, especially for baby boomers nearing or in retirement. After stagnating for a few years, population growth is resuming. Timmerman says many retirees have started buying condos recently as a foothold while the market improves. “We're very fortunate that we have a lot of people who want to come here in the winter time,” Timmerman says.

So far, better established communities have been attracting the most new-home sales. “They're capturing more of the market,” Timmerman says.

Through Sept. 1, residential communities in Southwest Florida have been averaging 2.5 home sales per month, Timmerman says. While some communities have fared much better than that, that number still pales in comparison to the 2.5 home sales per day in 2005.

The next winter's home-selling season will be a good gauge to measure whether new residential developments are warranted. “How long is it going to take for newer projects before we need new communities?” Timmerman asks. “We won't know until the end of the season.”