In some markets in the region, the power has shifted to the buyer — hello, more inventory. But from Naples to Tampa, real estate agents ooze optimism.
Business Observer Staff
| 6:00 a.m. February 1, 2019
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While some real estate professionals and brokers along the Gulf Coast welcome a market they say is returning to normalcy in 2019, there is nothing routine about the sale at 2500 Gordon Drive in Naples.
The buyer of that house, a land trust, paid $48.8 million in June for the six-bedroom, nine-bathroom mansion, in Naples’ tony Port Royal neighborhood, according to property records. Even more abnormal: The owners tore down the 24-year-old house in November, choosing to rebuild another mansion on the site, which includes 5 acres of Gulf of Mexico waterfront.
“There were plenty of people who wondered, ‘Why would you need to tear that down, it’s a beautiful home?’” says Premier Sotheby’s International President Budge Huskey, a longtime area real estate executive. Now based in Naples, he’s also run residential real estate brokerages in Sarasota and New Jersey. “But they [the buyers] thought the only way they could get the house they wanted was to build it there. So they basically paid $48.8 million for a vacant lot.”
While the Gordon Drive teardown is an unusual — but not a singular — occurrence, it does illustrate one side of the residential real estate market, say several real estate executives. That side is that for many market pockets, luxury sales remain on the rise — both in volume and sale price. That’s despite a potpourri of obstacles, from inventory increases to stock market volatility to interest rate uncertainty.
“(Last year) was a story of the luxury sector, with the percentage increase in sales of homes above $2 million in Naples and Sarasota far exceeding the pace of the market overall,” says Huskey “The performance of that price category was heavily influenced by new construction and, particularly, closings of newly completed condominium projects.”
A deeper look at three markets in the region — Tampa-St. Petersburg-Clearwater; Sarasota-Bradenton; and Fort Myers-Naples — reveals several other core themes. One, the Gordon Drive project notwithstanding, is the market, after a lengthy run-up is, in some cases, flattening out. And to some, that’s OK.
“People would sometimes rather look at an accident than regular traffic, but we are moving from an abnormally strong market to a more normalized market. That’s been a pronounced shift,” says Michael Saunders & Co. President Drayton Saunders, speaking specifically on the Sarasota-Bradenton-Lakewood Ranch areas. “The market has had a lot of pent-up demand. That has leveled off.”
In the Sarasota-Bradenton region, at least going into 2019, the market took a noticeable dip. Closed sales in the two-county area fell by 14.4% in December 2018 over 2017, according to Realtor Association of Sarasota-Manatee data.
'We expect this year to be better than 2018 for residential home buyers and sellers.' Bryan Guentner, RE/MAX Platinum Realty of Florida, Sarasota/Osprey
Prices, for most part, also were in drop mode. The median price of a single-family home in Manatee County fell 2.7% from the highest median price in 2017, to $309,000, the association reports. The median price of a single-family home in Sarasota, meanwhile, rose 3.6%. Condo prices were down in both counties: In Sarasota it fell 12%, to $220,000, and in Manatee the median condo sales prices fell 2.6%, to $190,000.
More drops: Single-family home sales in in Manatee County decreased by 1.6% year-over-year, while condo sales fell 17.2%. And Sarasota single-family home sales fell 17.5%, while condos dropped 26.6%, the data shows.
The flip side, inventory, impacting pricing, rose 4.6% in Manatee County and16.9% in Sarasota County. A drop in sales combined with a gain in inventory is normally a recipe for a sour market. But several industry executives caution against overreacting to the most recent data.
“We have started the year with more inventory than last year,” says Saunders, citing places like east Manatee County going through a new homes mini-boom. “But it’s not out of whack with demand.”
Saunders also says the return to normalcy, in many cases, provides lower prices and a “better narrative for the buyer this year over last year.” Amy Worth, president of the Realtor Association of Sarasota-Manatee, in a statement, adds that a “rise in inventory is great for buyers who were previously unable to weigh their options.”
Huskey, who helps oversee Premier Sotheby’s International offices in Florida and North Carolina, says inventory can often be misleading, in there “are really two different inventories in every market.” On one side, he says, are homes in “quality condition and priced appropriately.” On the other side are homes where sellers are living like it’s 2015 and 2016 — when price appreciation was jumping. Like Saunders, Huskey looks at this nugget as a return to normalcy.
“There is a minor revaluation of assets occurring at this time in both the equity markets and in real estate following years of greater than normal growth,” Huskey says. “Accordingly, perhaps the greatest challenge is working with sellers to position properties properly and to adjust expectations on price.”
Like many others in real estate, Huskey, Saunders and Worth are confident in 2019. Worth cites mortgage rates that are down, drawing more people into the market, including first-time buyers. Huskey and Saunders cite the long-term draw of Florida as a great place to live with no personal income taxes — factors that can overcome a government shutdown or stock market upheaval.
And Bryan Guentner, owner of RE/MAX Platinum Realty of Florida in Osprey, in south Sarasota County, says “the halo of continued area population growth,” in the region will provide an ongoing boost for the market against obstacles.
“Sarasota Gulf Coast real estate market conditions are unique, and barring unforeseen economic circumstances, we should see nice real estate sales growth," says Guentner. "We expect this year to be better than 2018 for residential home buyers and sellers.”
Through 2018 and into 2019, there has been little sign of a slowdown in residential development growth in Southwest Florida.
From southern Charlotte to eastern Collier counties, entire new towns and new mega-communities address both the growing need for value-priced homes and the continuing appetite for estate properties. Thousands of residences have been approved and are awaiting construction.
Sales are up, as are prices, in Lee and Collier. Lee County saw a 7.9% gain in single-family closed sales in 2018 over 2017 at 13,388, while Collier closed sales increased by 11% at 9,771. Median sales prices in Lee County rose over the prior year by 3.1% at $251,000 and increased by 3% in Lee County at $339,000. Condo sales also gained, up 12% to 5,003 in Collier and 7% to 6,644 in Lee County, according to MLS data.
"We are still a very appealing destination nationally," says Ryan Benson, principal of A. Vernon Allen Builder and president of the Collier Building Industry Association. "I believe that's the natural characteristics we have here (that) will continue to maintain overall demand."
That popularity is reflected in continued strength in new construction. In Collier County, the town of Ave Maria, for example, surpassed 200 home sales for 2018 in November, exceeding the 2,000 rooftop mark overall. Entitled for more than 9,000 homes plus 1.8 million square feet of commercial space, Barron Collier Co. continues to bring the 4,000-acre town to life on the edge of the Everglades, 19 miles east of Interstate 75.
Straddling northern Lee and southern Charlotte counties, the 18,000-acre town of Babcock Ranch surpassed 250 home sales in December, on its way to a planned 19,500 units. And in between those communities, 2018 brought announcements of the development of WildBlue, a 3,000-acre, 1,000-home community; and CenterPlace, with 1,950 residential units both near Florida Gulf Coast University.
And that’s only to name a few.
'The good news for Southwest Florida for 2019 and 2020 is clearly we’re not going to have a bust in the single-family housing market. We are not in an overbuilt situation.' Randy Thibault, Land Solutions
The number of permits pulled in 2018, says Randy Thibaut, president and CEO of residential land brokerage and services firm Land Solutions, suggest a strong 2019 for home construction.
“We were surprised and happy to see that we saw permits increase in 2018 for single-family and multifamily,” says Thibaut. “We had expected to see some flattening in 2018, which didn’t quite show up, but we expect in 2019 that there will be a little softening in the total permits.”
Thibaut expects 2019 will bring a conflict between the latter stages of a housing boom versus the growing need for value-priced housing. But the outlook remains bright for developers that have either established their models or shifted them toward homes in the $250,000 range.
"Inventory for single-family homes under $500,000 increased the most in 2018, which is good news for buyers who don't necessarily require a home within walking distance of the beach," says Kathy Zorn, broker-owner of Better Homes and Gardens Real Estate Pristine in Naples. "In fact, the highest increase in inventory for 2018 was 34%, and it appeared in the under $300,000 single-family homes category."
Thibaut also sees growth in Cape Coral and Lehigh Acres. Builders there have joined Ave Maria and Babcock Ranch in drawing workforce families being forced out of Naples, Estero and Bonita Springs by higher prices. “The big master-planned communities are long-term plays, and the good news for Southwest Florida for 2019 and 2020 is clearly we’re not going to have a bust in the single-family housing market,” says Thibaut. “We are not in an overbuilt situation.”
Construction of luxury high-rise condominiums will also remain strong this year, Thibaut predicts.
“If you build it, they will come,” says Thibaut. “The luxury condo high-rise will continue to thrive simply because there was a decade with no new product built and pent-up demand among an age group looking to move out of single-family and into a luxury condo that offers the view and all the amenities.”
Don and Sarah Howe, of Howe Property Group in St. Petersburg have seen zero slowdown in the market. With an average sale price of $1 million, they specialize in luxury condos, town homes and single-family homes in downtown St. Pete, Old Northeast, Tierra Verde and Pinellas County’s beach communities.
“We’re very bullish on the market, by any metric,” says Don Howe. “Inventory is up year over year, as much as 15%. It’s not to the level that it had been, but it’s still on the rise, and values continue to rise.”
Coastal Properties Group International, Howe Property Group’s brokerage group, backs up that statement. The firm totaled $917 million in volume in 2018 on 1,939 transactions.
Howe says downtown St. Pete’s emergence as a walkable cultural oasis has been a big driver of condo sales. He mentions a couple from Chicago who were “exclusively” looking for a waterfront condo on the beach, yet changed their criteria when Howe showed them around the Sunshine City. “Now they’ve completely switched gears,” he says.
And with the new pier opening up later in 2019, Howe predicts downtown St. Pete will remain an easy sell. “They’re coming to St. Pete because of the hip factor,” citing sales to buyers from San Francisco, Singapore and London. “People from far and wide who otherwise would have shopped around in Sarasota or Naples.”
Socioeconomic trends also buoy sales, says Howe. “We’re a warm-weather, low-tax state. There’s just a constant influx of people — white collar, blue collar, whatever.”
The broader Tampa Bay metro area, as well, is healthy when it comes to home sales, says Mark Metheny, president of the central Florida division for Miami-based Lennar, one of the largest builders in the country and region.
'We still appear to be behind the supply/demand curve. The Tampa Bay market is creating more jobs and households than it is building new homes and apartment. Mark Metheny, Lennar
Like other builders, Lennar has been active in south Hillsborough County. Metheny says the area has a diverse range of shoppers looking for everything from high-end waterfront homes and active-adult communities to first-purchase residences. The company is busy in the Paso market, too.
“We still appear to be behind the supply-demand curve. The Tampa Bay market is creating more jobs and households than it is building new homes and apartments,” he says. “Tampa Bay is growing and new homes are being occupied by full-time residents, so there is no ‘peak’ like we saw in 2006.”
Howe echoes that view, saying sales to flippers have been minimal. “Lending procedures have gotten very stringent, and appraisals are coming in tight,” he explains. “You’ve got to work really hard to demonstrate value; you’ve got to show comps; you can’t just throw a number out there and get away with it.”
(Mark Gordon, Brian Hartz and Andrew Warfield contributed to this story.)