Is New Construction in Naples New Communities causing a glut in homes?

Posted by Joseph Epifanio on Monday, February 20th, 2017 at 10:43am

If Real Estate is your passion and is also what makes your daily bread, then when my Real Estate Advisors tell me that there is a large number of homes available on the MLS inventory and that sales are slowing down, it makes sense to look more closely at the figures right?

But figures can be elusive, manipulated and pretty much made to say what you want them to say.  So I decided to take another tack, yes it would appear that there is a large number of existing homes on the market for sale. So why are they not selling? I took a look at the latest figures from Collier County, particularly at new construction and new communities. As a town, Naples is growing, anyone driving around would be able to see the huge amount of new construction that is taking place.  After the last downturn in the economy, everything stopped, construction almost came to a standstill and half-built communities had empty homes with very little activity going on.

Now compare that with the number of new communities recorded by Collier County in 2015 (43 communities) and 2016 (46 communities), already 2017 has seen 8 new communities and it is only early February.  So lets be cautious and half that number to say 4 new communities for January 2017,  if the trend continues, then it looks like 2017 is set to have a minimum 48 new communities, and if you took the 8 already proposed then it could be as high as 96 new communities to be approved this year.  Remember, of course, figures can be manipulated, it may be that those 8 new communities are the last ones to be approved and the trend stops there, no more building and no more new homes, there are always extremes right? What we do know is that somewhere in the middle is the figure for the number of new communities that will be approved by Collier County this year.    

So where is all this leading? My Advisors tell me there is a large amount of property for sale in Naples Florida on the market that is having a hard time selling, some of them interpret that as a slowing of the market.  While that may be true to some extent for existing homes, the number of new homes being built definitely puts up a defense to that argument.

New construction and communities in Naples Fl.What we do know is that if you have to say $500,000 to spend on a home, when you compare an existing home to a new build, then there is a lot going for the new home.  Newer building techniques, lower running costs, very low maintenance, no roofs to replace and of course all the model homes look like a million dollars so they heavily influence the buyers' decision on which home to put their money into.

As a Realtor I know that the things that appeal to buyers are often superficial, in a model home, for instance, designers make the most of what they have, they put in the top of the line appliances, tile choices, and options. When buyers go to actually buy their new home, what they have in mind is the beautiful model home, what they actually buy is a downgraded version of the model, which in some cases will never become the perfect home they first envisaged.

On the other hand, yes there is a glut in the market of older homes which are being passed over for the shiny new version.  But, what I tell my agents is this, the location has always been and always will be the number one influencer for a buyer. With so many of the new communities in Naples being built out of the East side of town, the drive to the beach becomes a consideration, as does easy access to shopping and nightlife. 

So if you are a Realtor representing a home for sale, the most sound advice you can give your customers is to upgrade, either spend some money to make the home more modern, or drop the price to compete with the newer homes, the only way to do that is to price the home so that the buyer has funds left to be able to modernize the home themselves.  If the home is in a better location and has had the upgrades already made, then those sellers are going to be in a strong position to compete with the newer homes.   If the Realtor and the seller get the price right to sell the property in Naples in the first place, giving buyers the opportunity to do a little work and have the home they want in the area they want, then the older homes have a better chance of selling.So when I am told that there is a downturn and a large number of homes on the market, the truth is that homes are selling are the newer homes. With land in Naples being a vanishing commodity, eventually the new Naples communities will be being built too far out to be attractive, then the balance of new and old will be addressed.   But until then, getting the price right in the first place for both sellers and buyers is the only way to compete.

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