Southwest Florida real estate experts gave their outlook on the current climate and future forecast when it comes to property acquisitions in one of the fastest growing areas in the country.
“The Thrill of the Chase: Market Trends 2022” took place Thursday night at the Caloosa Sound Convention Center in Fort Myers, where attendees were given insight on what to expect following a record year in real estate.
Topics covered ran the gamut from single and multi-family home sales, to commercial, retail and industrial space.
Land, new home sales and development expert Randy Thibaut, founder of LSI Companies, stated that while usually the national real estate cycle fluctuates every seven years, the country is in currently on the 11th year of an uptick in new single-family homes sold.
“We thought we were going to see softening, but then something happened — it was COVID-19,” Randy said. “It was the spark that lit the fuse in our market. Our permits soared in spite of the pandemic.”
Randy used a subdivision house in Cape Coral that in 2020, sold for $267,000. In Quarter 4 of 2021, that house is now valued at $366,000 — a 37% increase.
“A house in the North Cape could be $500,000 this year,” he said.
The total number of residential permits between Lee, Collier and Charlotte Counties totaled 25,184 — a 37% increase from 2020. New residential single and multi-family homes just in Lee saw a 28% increase, while Collier and Charlotte saw a 48% and 50% increase respectively.
Randy compared those numbers to what he called a true “boom” in 2005 when they saw 44,000 permits. He said if there were to be a massive influx of residents looking for homes in Southwest Florida that would be comparable to 2005, the capability to service those people and build the additional homes would be essentially impossible due to the shortage of supplies and constraints.
Randy stated that many homeowners have seen their house valuations increase dramatically and are opting to sell and rent, leading to an increase in multi-family properties.
“We saw another surge in multi-family permits. Why? Because people saw their homes go up to astronomical numbers,” he said. “They’re selling out, choosing not to buy in, and renting an apartment. They’re riding it out until the market softens.
“Young families looking to buy a home and got priced out, they’re renting.”
When it comes to single-family homes, Lee saw a 59% increase in permits — and not just in premiere locations.
“I believed and what I was taught was, ‘location, location, location.’ These are ‘C’ and ‘B’ locations (with the highest increase). It’s not about location, it’s about availability of lots to build on.”
An eye-opening statistic was that 25% of new single-family home permits in Southwest Florida were pulled in Cape Coral — notably in the north Cape.
“I don’t see that stopping,” he said. “People are flocking there because of affordability.”
Another hot commodity on the market is “build for rent” homes. Randy said the 6,740 in 2021 is expected to double in 2022.
As for what homebuilders are doing to work through the supply chain issues, Randy said these entities are going to manufacturers and suppliers and looking to purchase wholesale amounts of product to be able to keep up with the demand from their customers.
Crash?
Randy stated that in order to have the market crash, there needs to be an oversupply — something Southwest Florida is not experiencing at the moment.
While he’s confident a crash is not forthcoming, he did state there could be “softening” coming ahead due to buyers hitting a wall on pricing, rising interest rates, supply chain issues and the possibility of a recession.
“It looks like it’s not going to stop anytime soon,” he said. “We’ve just got to keep these things in perspective — I hope they’re not happening.”
Growth & rising costs
Residential real estate expert Denny Grimes, president of Denny Grimes & Team at Keller Williams Realty, showed statistics from the Census Bureau stating Florida had the second highest population growth next to Texas in 2021.
In Florida, the median price of sold single-family homes in January of 2022 is $375,000, while Lee sits at $413,000.
“There’s no $200,000 market here anymore. That’s gone,” Grimes said. “When you look at the percentage change, Southwest Florida outperformed the state in every county other than Sarasota. There is no question this area is blessed and we’re doing better than the rest of the state.”
The number of existing homes sold increased by 16% in Lee County from 2020 to 2021.
In 2021, Lee, Charlotte, and Collier counties all set records for single-family home sales, with Lee coming in at 19,226.
The median price of existing homes sold in Lee County from 2020 to 2021 increased by 31%. The median price of a single-family home in Lee County in 2021 stood at $360,000–the first-year median prices were over $300,000. Grimes said in January of 2022, the median price for a home in Lee County was $411,000.
“Not only have we broken the $300,000 mark, we’ve broken the $400,000 mark,” Grimes said. “The market is still moving forward (and) the market is still going up. We watch this every month. And when the market starts to turn, that median will start to trail off.”
Buyer torture?
Grimes said, “It’s kind of torture to being a buyer in this market. Buyers are going through multiple offers, and the national stats show that the average time on the market for a home is 19 days — normally it’s around 80 to 90 days. Buyers have to have their track shoes on. I know an agent that had 155 offers on one of their properties.”
Grimes said what’s causing this is the lack of inventory. In Lee County, the number of single-family homes available decreased by 13% over the last year.
“When inventory drops, prices go up,” Grimes said.
In Feb. of 2009, when the bubble had just burst, there were 4,220 single-family homes in Lee County under $100,000. In June of 2021, there were three. Now, there are none.
In Lehigh Acres, the median sales median sales for homes and lots have skyrocketed more than 138%.
In Cape Coral off-water lots, sales have increased by double-digit percentiles and costs have ballooned 173%, as the median sales price is now $41,000 compared to $15,000 in January of 2021. When it comes to waterfront property in Cape Coral, Grimes said the median asking price eclipses $1 million and, on a canal, more than $2.5 million.
“Asking prices are still going up, there is no slowdown in the future,” Grimes said.
When it comes to luxury homes ($1 million to $5 million), Lee County is outpacing Collier County (percentage wise) with an increase of 109% from 2020 to 2021. Lee County say 1,169 homes sell in that range in 2021, up from 558 in 2020.
In regard to homes over $5 million, Lee saw a 208% increase from 2020 to 2021, with 37 sold in 2021 compared to 12 in 2020.
Grimes agreed that to have a bubble, excess inventory is needed — simply not the case in the current climate.
He shared statistics from over the last seven days, where 353 were sold, 560 sales were pending and 358 new listings went on the market.
“When is the market going to shift? It’s going to shift when the numbers reverse and more listings are coming in than going off,” Grimes said, adding that the 2021 market is very unlikely to be repeated and that Florida’s migration numbers may slow as states relax mandates. “Now when is that going to happen? I don’t know. But we watch the numbers every week.”
Commercial, Retail, & Industrial
Commercial real estate expert Justin Thibaut, CCIM, president and partner of LSI Companies, discussed what the market is seeing when it comes to commercial, retail and industrial space.
“The chase is on for the next development opportunity, to buy assets, for returns, and ultimately, a chase for certainty,” Justin said.
In 2020, the overall commercial sales volume totaled $1.16 billion and rose to $2.17 billion in 2021 — an 87% increase.
“What happened in 2021– the whales arrived,” Justin said. “These are big equity firms that have had their eyes on Southwest Florida for some time — cash buyers, a lot of money flowing into our market.”
Justin said what’s driving the market is retail (55%), followed by office (26%) and then industrial (19%).
“Industrial tenants are not necessarily industrial users,” he said. “Quasi-retail office industrial users are infiltrating industrial parks throughout our market. Industrial trends show that in Lee County, rent and occupancy have increased drastically.
“Rents across all three markets are up 10% year over year,” Justin said.
The return to a brick-and-mortar retail shop is making a comeback with pandemic restrictions falling by the wayside.
Average rents and occupancy increased in retail over the last year in all three counties, but constriction areas are limited. Justin said a lot of existing buildings are finding new tenants, or swapping places, with the limited amount of new space to build. For example, Sprouts Farmers Market is taking the place of Staples along Pine Island Road.
When it comes to office, there is some trepidation about growth due to the many companies which are continuing to offer work from home options.
“In the office world, it’s all about the chase for certainty,” Justin said. “It appears that we’re moving from a pandemic to an ‘endemic’ — and that’s great news. This could signal the great return to the office, but it’s not as certain as we think it is. Southwest Florida operates a bit differently than the rest of the country and we’re back to work. People are getting comfortable working from home.”
Justin said one biggest office users in Southwest Florida is shuttering one of their locations while others are slated for upcoming growth.
“One question is, do we need to start rethinking that plan?” Justin said.
Despite these concerns, rent, occupancy, and construction trends for office space is continuing to move upward.
For more information, visit www.markettrendsswfl.com.
–Connect with this reporter on Twitter: @haddad_cj
