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Naples, FL, has long been one of the most desirable locations for families and retirees alike, having shed its traditional image of a sleepy, retiree-town to attract a diverse and exclusive crowd of buyers and workers.

Naples truly has something for everyone: World-famous white sand beaches, unparalleled golf courses, a thriving job market, and plenty of family-friendly activities.

It’s no wonder more and more investors are looking at this undiscovered jewel in the Gulf of Mexico as the next big addition to their portfolio!

But what can you expect when investing in the area, or even just looking for your perfect home in Naples?

While recent million-dollar sales might have you believe that the local housing market is experiencing an unprecedented boom, Southwest Florida’s real estate explosion has been anything but sudden — and talk of a “Naples real estate bubble” might not be as accurate as it seems.

So, let us walk you through the true state of the Naples real estate market, from average market prices to the reason why so many believe that the sunny city is experiencing a real estate bubble. Spoiler alert: They are sorely mistaken!

The Naples housing market is one of the most unique in the whole country, so taking a closer look at the figures will help any prospective buyer or investor understand what truly makes it tick.

Escalating Real Estate Market Prices in Naples Housing Market  What Happened?

Homes in Naples have sold for over 99% of the listing price in the last few months, resulting in a median closed price of $433,500, one of the highest in the country.

In the second quarter of 2020, three FL metros, all located in Southwest Florida,  recorded a 30%-plus jump in prices.

Notably, these figures are in line with national trends.

Nearly all communities in the country have seen house prices soar, with a whopping 94% of metropolitan areas experiencing double-digit growth!

Moreover, in the second quarter of 2022, the National Association of Realtors recorded a dozen markets that had experienced a house price explosion compared to 2020 when uncertainty and financial hardships, following the Covid-19 pandemic, made buyers hesitant.

Unsurprisingly, Naples has made that list as well.

According to the latest figures, Collier County has recorded a whopping 42% price surge compared to the same time in 2020, ending up third on the list of the biggest-growing house prices in the country, right behind Pittsfield, MA, and Austin, TX.

In the span of one year, Naples has joined the elite ranks of decade-long high-demand markets like Boston, San Francisco, and Seattle, as median home prices have started increasing sharply.

Three to four months on, and prices have continued climbing higher.

Homes in Naples are selling within hours and with multiple bidders involved. They are moving at such a speed that in the earlier months of this explosion some buyers were getting discouraged from buying, or at least advised to have plenty of patience.

More than affordability, low inventory seems to be the biggest issue for investors looking to grow their portfolio in Naples and the rest of Collier County: The rise in demand has led to fewer high-value homes being available, and realtors have been playing catch-up ever since.

Taking all of this into account, it doesn’t come as a surprise that questions have been raised on whether this record price increase makes the Naples real estate market a much-feared bubble.

But if we look at the situation with a more critical eye, it becomes clear that there really isn’t much truth to these fears!

Naples, FL, Real Estate Market Analysis

Is the Naples, Florida, Real Estate Market Experiencing a ‘Bubble’?

Before we dive into what the Naples housing market is experiencing, let’s take a quick look at what a real estate market bubble really is, and what it would mean for a suddenly robust market like Collier County.

In simple terms, a housing bubble is a sustained market condition of over-valued prices, stemming from a period of rampant speculation.

Bubbles are temporary conditions that can happen in any market that has the potential to develop one. But that doesn’t mean that they are necessarily short-lived: Bubbles can last years, and the effects of a burst bubble can be just as enduring.

When a housing bubble bursts, home prices experience a sharp decline, driven by the gradual decrease in demand and increase in supply.

Of course, the real estate bubble at the beginning of this century is probably the most well-known. When it burst in 2008 it led to probably the most infamous case of decline in demand in recent history and triggered what is commonly referred to as the ‘subprime mortgage crisis’. This was followed by a huge drop in house prices.

The first telltale sign of a real estate bubble is a dramatic rise in demand in the face of a limited supply of homes, which is further exacerbated by aggressive speculation.

In Naples, a sharp rise in demand has led to rapidly increasing home prices and it’s easy to see how this might be interpreted as a classic real estate bubble: Home prices have skyrocketed in a relatively short amount of time and some local realtors have been experiencing a troublingly low inventory.

However, there’s much more to a housing bubble than just soaring demand and prices. If we take time to consider the different factors that have generated the increasing demand for properties in Naples, we can clearly see that the Southwest Florida real estate market is not experiencing a bubble — it’s experiencing a correction instead.

The Naples housing market has been undervalued for a long time.

According to the realtors that have operated in the Naples area for the longest time, the market is finally getting its well-deserved appreciation rather than experiencing a temporary boom. It is joining the ranks of highly desirable, low-supply locations like Los Angeles and Atlanta where it belongs.

In these other high-demand markets, the reality that Naples is facing today has been the default for decades, and investors are finally waking up to the incredible opportunity Naples offers like they did in California years ago.

At the same time, there has been no aggressive speculation, subprime lending, or deregulation involved in the process: The market correction that Naples is experiencing has been organic all the way through.

In fact, the wealth that’s been building Naples for the past few years has been anything but manufactured, as home equity has taken over as the driving factor behind market growth, rather than subprime loans and other speculative practices.

But why has demand skyrocketed to the degree it has in this particular time?

Naples, FL, Real Estate Market Trends

Driving Factors Generating More Demand in the Naples, FL, Real Estate Market

Nationwide demand increase aside, there are several reasons why the Naples real estate market might have experienced the stellar growth we’re seeing now.

First of all, there’s migration: wealthy communities are moving from big metropolitan centers like NYC to smaller, more relaxed cities in Southwest Florida, seeking a better quality of life after enduring the pitfalls of big-city living during a pandemic.

On top of that, more and more employers have embraced remote working in the last year, leading to more professionals choosing to work from less stressful, more attractive beach locations, of which Naples is a perfect example!

This demographic has brought plenty of cash to the region, benefitting from up to 40% more purchasing power than local Floridians.

In addition to this, there is also a major supply crisis sweeping the state.

Local realtors have shared that, at the end of the first quarter of 2022, there were 195 vacant completed homes in the Naples and Fort Myers market, only enough to meet half of the monthly demand for completed properties!

The reason why inventory might be so low at the moment could come down to a global shortage of materials, from glass to lumber, as well as to the remnants of last year’s trade slowdown.

The situation is likely to improve very soon, but things will most likely not go back to the way they were just as easily. With every new home built or lot vacated, there are just as many buyers looking to take advantage of these latest listings.

Conclusion 

So, what does the future hold for the Naples housing market?

With plenty of out-of-state cash coming in and purchasing power rising in line with the rise in house prices, all signs point to the feared Naples real estate bubble not existing. Rather a long-overdue market correction is actually driving the tremendous growth of the area.

While supply shortages are a cause of concern for realtors and buyers alike, this is a nationwide reality, likely to only cause temporary delays and not discourage potential buyers from investing in the exclusive Naples market.

It’s hard to know where it will stop, but there will definitely be no bubble burst: Naples is well on its way to becoming the next big real estate market. When it comes to demand and home prices, it may become just as exclusive and desirable (if not more so) than the Los Angeles area.

It was bound to happen but that doesn’t mean it’s not still a great time to find your dream home in one of the most beautiful spots and luxury communities in the whole country!

No matter the increase in demand and the number of real estate opportunities available, we can help you find your dream home in Port Royal and Old Naples, Florida, without any unnecessary headaches or delays.

So if you find homes for sale in Naples, Florida contact us! We will be by your side every step of the way to ensure you’re just as knowledgeable about the Naples real estate market as we are, so you can make all the right choices along the way!

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