I have had requests from a number of people to give my thought on the current market. With that in mind, I will share with you some of my thoughts in conjunction with the recent NABOR release of their second quarter 2017 numbers.
Let’s start with inventory…
In March of 2007, when our market was in tough shape, NABOR had an inventory of 12,440 properties for sale. As of June 30,2017, NABOR has 5,189 properties for sale. Obviously, we have come a long way from the tough days in 2007 and 2008. Of the 5,189 properties that are currently for sale, 2,927 are single family homes and the balance are condos. Our overall inventory has come up a bit since 2014. At the end of June 2014, we had 3,723 properties for sales. At the end of June 2015, we had 3,698 properties for sale. The increase in inventory is not alarming as, to be quite frank, we needed more inventory for sale. In 2014 and 2015, buyers were struggling with a lack of choices in the market.
One interesting inventory observation is that we saw the overall inventory reduced by over 1,000 properties from March 31,2017 to June 30, 2017. At the end of March 2017, we had 6,407 overall properties for sale. At the end of June, we had below 5,400 overall properties for sale. It is not unusual to see the inventory decline over the second quarter as many of the contracts that were written “ in season “ actually close in the second quarter. What is interesting is that the reduction in inventory over the second quarter of 2017 was much larger than we saw in the three previous year’s second quarters. In 2014, we saw an inventory reduction of 682 properties over the second quarter. This was followed by a reduction of 555 properties at the end of the 2015 second quarter and a reduction of 603 properties at the end of the 2016 second quarter.
At the end of June 2017, we have 7.86 months of inventory. At the end of April 2007, NABOR had 34.78 months of inventory. Once again, quite a change.
Now, let’s move to Pending Sales…
The second quarter of 2017 saw 2,770 overall pending sales in the Naples area. For the same quarter in 2008, we had 1,558 pending sales. Once again, we have come a long way. Our pending sales activity is not as good as it was in the second quarter of 2013,2014 and 2015. For these three years, we had over 3,100 pending sales each second quarter. Last year’s pending sales were held down by the stock market and the presidential election among other factors. This year, we have seen pending sales improve over what we saw last year.
The June 2017 pending sales were up 16% over the previous June. Hopefully this is an indication of a strong summer for sales.
One interesting trend that I have observed with pending sales was the amount of increase that we have seen when we compare the monthly pending sales to what we saw the previous year. Please see the below chart.
January 924 847 pending sales up 9%
February 1,092 993 pending sales up 10%
March 1,262 1,136 pending sales up 11%
June 837 720 pending sales up 16%
The second quarter pending sales were up 9% in 2017 when compared to the second quarter for 2016. For the six months ended June 30,2017, our pending sales are up 10% over the six months ended June 30,2016.
One minor point…. Most pending sales are closing. Every now and then you will see one get hung up over an appraisal issue or other financing requirement.
Looking at Closings for the second quarter, we see that NABOR had a 7% increase in closings. At the end of the second quarter of 2016, there were 2,704 closings where the second quarter of 2017 saw 2,880 closings. North Naples saw an 11% increase in closings ( comparing the second quarter of this year to the same period last year ). The Naples Beach area also saw an 11% increase in closings.
One of the big stories with respect to closings was the 43% increase in closings over $2 million dollars. For the second quarter of 2016, there were 113 closings above $2,000,000. For the second quarter of 2017, there were 162 closings above $2,000,000. This represented a 43% increase in this sector of the market.
One number that is perplexing me a bit is the Average Days on Market reported at the end of the second quarter Overall, the average days on market for a property was 97 days which represented a 28% increase compared to what was reported a year earlier. NABOR reported that properties in the $1,000,000 – $2,000,000 range had an average days on market of 140 days. The market above $2,000,000 fared a little worse with an average days on market of 145 days. I should point out that the properties below $300,000 showed an average days on market of just 75 days at the end of June 2017. Why the average days on market has climbed is still being analyzed. Unrealistic pricing certainly can be an issue. Maybe CFPB is also a factor as closings might be taking a bit longer to wrap up.
Our overall Median Closed Price has gone up 3% over the last year. The overall Median Closed Price is $325,000 as of June 30,2017. The Median Closed Price for properties above $300,000 is $511,000 as of June 30,2017.
In summary, it looks like this year will be better than last year with respect to sales. I would keep an eye on inventory. If inventory continues to decline, if you subscribe to the economic concept of supply and demand, this could certainly put upward pressure on pricing. I don’t think inventory will continue to go down at the same rate as we saw in the second quarter of this year. However, you never know. Properly priced homes are selling. There have been a lot of price decreases this year. I am certainly seeing a lot more price decreases than price increases.
Sometime in the next two weeks, Downing-Frye Realty, Inc. will have closed over one billion in sales volume for the year.