The Upside to the Housing Downturn
Price Declines of the Last Five Years Deliver Value to Home BuyerNaples, FL (July 7, 2011) – When Mark Wilson made the decision to buy the last 50 residential homes sites in Mediterra in December 2009, he was betting that the luxury home market in Southwest Florida had already hit the bottom. His instincts proved correct. Since his purchase about 800 homes priced at $1 million and above have been sold in the Naples market according to statistic from the Sunshine Multiple Listing Service. That’s a 45% increase over the previous 16 month period.
“We studied local market trends very carefully before pulling the trigger,” Wilson said of his purchase. “I also relied on my 20 years of experience managing London Bay through previous housing cycles, although this one is certainly different, he admitted. “In hindsight the purchase has proven to be very timely because we bought it at a low point in the market and on very favorable terms.
Now, as the market continues its gradual ascent from the bottom, luxury home buyers are finding they can benefit from his business acumen. At the height of the housing boom, some home sites in gated luxury communities such as Mediterra were priced at upwards of $1 million. The market downturn has significantly reduced that number. And Wilson’s timely purchase gives London Bay even more flexibility to price its home sites at Mediterra very competitively. Today, home sites at Mediterra start in the $200s with larger premium estate home sites still available for an average price of about $400,000. “The term buyers market may seem a bit overused today, but when you look at where prices were, and where they are today, there are definitely bargains in the market,” Wilson said.
Luxury homes sales in Naples slowed to a crawl during 2009. But during the first five months of 2011, 56 homes and home sites have been contracted or closed at Mediterra alone, valued at $74.3 million. “We have seen many people who have been considering a home purchase for several years now signing on the dotted line. They believe that home prices are going to start accelerating and they are locking in their best deals right now,” Wilson said.
During the last 30 days, London Bay has closed on lot purchases at Cortile in Mediterra, in Mirada at the Estuary at Grey Oaks, and in Matera at Lakewood Ranch in Sarasota. According to Wilson he’s in discussions with several other possible home buyers and he noted that he’s sold three model homes during this period as well. “The inventory of luxury homes in the Naples market is continuing to diminish,” Wilson said. Statistics show that 86 more homes price at $1 million and above sold during the most recent 12 month period as compared to the same period a year earlier. And, the average price showed a very modest increase during that period, confirming that price declines in the luxury sector have abated.
Calling upon his 20 years of experience in the Naples real estate market, Wilson now believes that the area is poised for another period of home appreciation. “When inventory declines, it has the effect of raising values and that’s what we are beginning to experience,” he said. An additional factor that could support Wilson’s belief is that there are currently no new luxury communities coming out of the ground. “The established communities such as Mediterra and Grey Oaks don’t have a large supply of home sites remaining. “If someone is looking for a custom home in a country club community where the lifestyle is already in place, limited inventory will drive prices up,” he said. “It simple economics.”
Another factor that’s working to the benefit of new home buyers right now is the principle of supply and demand. With new construction hovering around all-time lows, the cost of building materials and labor has declined by about one-third during the last five years. As an example, London Bay is now building luxury homes for as low as $181 per sq. ft. in the Naples market compared to about $275 at the market’s peak. In Sarasota, the price is even lower. But Wilson is quick to caution that those costs are beginning to rise.
In December 2010, the Bureau of Labor Statistic’s Producer Price Index for building materials registered its largest increase of the year -- a 4.5% increase. Home building analyst Ivy Zelman is also seeing some sharp price increases in lumber and wallboard, with smaller increases in roofing, insulation and concrete. “For those people who have been waiting for the perfect time to buy, my advice is don’t wait much longer, or the opportunity will be gone,” Wilson said.
Media Contact: Nicola Weston 239-449-1514 or nickyweston@londonbay.com
