Why is the Real Estate & Construction Boom Structurally Different?
Many people are concerned about the lack of real estate inventory, the increasing cost of housing, and the escalating cost of construction. Coming off the recent memory of the Great Recession, they feel that this is a bubble ready to burst.
Here are three reasons why I feel this “boom” is structurally different:
First, the rampant speculation from people not qualified to be real estate investors is no longer in play. Back in 2004 & 2005, I was building in Golden Gate Estates. I learned that people with little to no Real Estate experience were flipping homes without doing anything to them. In the end, many of them got stuck when the financial markets crashed. The crash of ’08 was due to many people buying homes with little to no money down. Today, financial institutions are no longer allowing this to happen. A great example of this was highlighted in the movie, The Big Short.
Secondly, the luxury Naples and south Lee County markets are overwhelmingly cash markets. According to NABOR’s MLS statistics, 4,782 real estate transactions closed in the last 90 days; of those, 2,823 were cash. That equates to a whopping 59%! Naples’ Real Estate has an extremely close correlation to the performance of the Stock Market. I analyzed the sale of homes and condos over $500,000.00 using two factors; the Dow Jones Industrial Average (DJIA) and unemployment. The analysis showed a direct correlation between the sales and the DJIA. The unemployment rate had no effect. With the continued strong performance of the stock market, the outlook for Naples Real Estate is robust!
Finally, COVID-19 has had a positive impact on the Florida market as a whole. While we have been a destination location for many years, COVID showed many people who would typically leave to go back up north that our summers stayed and enjoyed the summer and its heat. Across all industries, there is now an overwhelming amount of work with a shortage of employees. With our high standard of living and wonderful weather, we will continue to attract people to relocate to Florida. I encourage you to read a short four-page article written by Halstatt Real Estate Partners here and visit their website to see the deep roots the company has in Collier County.
Because of the reasons outlined above and the continued growth of the economy, especially in Collier County, it is important to move forward now with your Real Estate purchase and construction projects because it will only cost more tomorrow.
Mario Valle is a Senior Relationship Manager with PBS Contractors and holds a Bachelor’s Degree in Economics and Social Science from Florida State University. He has also been in the Real Estate and construction industry for over 25 years.