Ignorance is Bliss, But Knowledge is Power: A Recap of Market Trends 2024

By: Colten Thomas, Esq.

Nearly 1,200 attendees were drawn to the Caloosa Sound Convention Center for this year’s Market Trends, which took place on March 12, 2024. Henderson Franklin was privileged to, once again, be a platinum sponsor for the event.

The theme, “Ignorance is Bliss Until it Isn’t,” set the tone for discussions  focusing on the current realities shaped by a unique market situation. Real estate experts Justin Thibaut, Denny Grimes, and Matt Simmons delivered engaging presentations on the state of the industry that captivated the audience. Their insights offered a glimpse into the future of Southwest Florida’s real estate landscape.

While each presenter focused on a different sector of the market, all three speakers compelled listeners to make informed decisions in 2024. Importantly, their discussions reviewed industry trends from 2019 onward—because knowledge of the past prepares us for the future. But this year, learning from our past may require forgetting some of it.

Chiefly, the speakers urged us not to expect a blissful continuation of COVID-era growth. As Denny Grimes illustrated with his keen Men in Black theme, Southwest Florida should actually disremember things like 3% interest rates and booming residential sales volume. True: we must discard the idealistic circumstances of the past three years to situate ourselves best for the realities of today.

Still, while the market may be correcting, it is no secret that Southwest Florida remains a playground for anyone interested in real estate. The key takeaways from each speaker prove just that.

Land and New Home Sales Development

Justin Thibaut, President and CEO of LSI Companies, opened his presentation by acknowledging some “hot takes” for this year’s real estate market. To start, he predicted that interest rates should go down in 2024; and that permit volume across all sectors will increase as a result.

However, those monitoring the market should not expect every commonsensical relationship to pan out. Namely, Thibaut advised that interest rate reductions might not raise new home prices quite as much as everyone believes.

Thibaut opined that the public’s “interest rates down, home prices up” notion is a misnomer because it ignores a few key metrics. For one, building material pricing and availability are leveling out in Southwest Florida—leading to a decrease in construction costs and a surplus in stock. Consequently, the cost of labor is expected to decrease as well.

So, with that in mind, expect new home prices to remain as hardy as they did from January 2020-December 2023, notwithstanding the unprecedented increase in interest rates. Thibaut credits the same home sales incentives; interest rate buy-downs; closing costs, covered by builders; and free home upgrades that propped up sales during the interest hike. When the interest rates go back down, he predicts that these incentives will disappear, but that new home prices should remain relatively resilient.

Residential Real Estate

Denny Grimes, President of Denny Grimes & Team at Keller Williams Realty, touched on many key statistics in his presentation on residential real estate. Importantly, he reflected on the following:  

2023 Existing Single Family Home Sales (versus 2022)

• Charlotte -3%
• Lee -6%
• Collier -10%

You need to go back to 2008 to see a year this slow—and 1995 before that. This apparent dip indicates that our market is correcting. So, while sellers may have to “give back” some of their house money from the past few years, brighter days are ahead, and a “rational” market is forthcoming.

2023 Median Sales Price (versus 2022)

• Charlotte -4%
• Lee -2%
• Collier +2%

From 2006-2011, the median sales prices corrected. Grimes hypothesizes that we may see a similar dip now, as our market returns to rationality.

2023 Inventory (versus 2022)

• Charlotte             +97%
• Lee                         +45%
• Collier                   +15%

As stated previously, inventory is on the rise. Active listings are the highest they have been in ten (10) years. This bodes well in some respects, but…

 2023 Market Time (versus 2022)

• Charlotte             +108%
• Lee                         +96%
• Collier                   +87%

…not others. Grimes indicates that this increase in market time is the byproduct of too much inventory, which could signal a shift into a buyers’ market.

In conjunction with the above, Grimes also looks past the year-to-year analyses for guidance. Importantly, he averts our eyes towards a 2023:2019 market comparison, suggesting that we should compare last year to the last truly rational marketplace—instead of the 2020-2022 unicorn years. The result is fairly reassuring. For one, our sales have actually leveled off between 2019 and 2023, with growing inventory to boot. And while we have experienced a drastic appreciation in prices—between 59-87% in existing single-family homes—the increased market time and inventory should make the marketplace more buyer-friendly.

Still, no matter how good it may get for buyers in 2024, Grimes urges everyone to forget about 3% interest rates entirely. (If you are waiting for them, stop—because they are not coming back!) Instead, rejoice in the fact that bids are no longer track races, and that the 2010-2023 seller-dominated market may soon shift in your favor.

Commercial Real Estate

Matt Simmons is the Managing Partner of Maxwell, Hendry, & Simmons (MHS), the oldest and largest real estate appraisal and consulting firm in Southwest Florida. His discussion centered on commercial real estate, and it began with a somber message:

SWFL sales volume is down 28% from last year.

More, Simmons anticipates future concerns related to office space and multifamily properties due to demand remaining incongruous with cap rates and asking prices. But that is only part of the story.

Occupancy, Simmons says, has been tremendously stable. With rent growth rampant and asking rates up, occupancy across office (95-98%); retail (96-98%); and industrial (96-99%) sectors has not faltered. More, a shift in the retail space may further compensate for the lack of sales volume and lessen the widespread rate impacts across our region.

With commercial taking a step back and industrial increasing its market share (29%), retail has remained steady. In fact, many online retailers are returning to brick and mortar buildings due to the exorbitant cost of obtaining customers online. Even Netflix intends on opening physical retail locations! But the real budding star for retail, Simmons declared, is the embryonic “retail-tainment” concept.

As an emerging asset class in Southwest Florida, the retail-tainment market offers a physical location—typically, a restaurant or bar—that introduces a cocktail of entertainment-style activities to go along with your, well, cocktails. In effect, consumers simply “come to the party.” And investors are taking it seriously. Just look around: Backyard Social, TopGolf, Headpinz, Sugar Shack, and Rooftop at Riverside are all crushing it. And Bay Street Yard is not far behind—prospectively offering two bars, 3-4 food trucks, and an 8’ x 13’ LED wall for audiences to enjoy.

These developments are the future of the space, Simmons says, and for good reason: Not only are they fun, but they provide a new way for customers to reinvest in our economy as well. And, above all, these high-end concepts are geared towards providing a social experience that many of us have been missing.

Takeaways

The landscape of Southwest Florida real estate is shifting, but opportunities are bountiful for the well informed. Will you leverage this knowledge to navigate the changing tides, or will you let the comfort of ignorance hold sway? The power of knowledge, after all, is in how we use it to shape the future.

Kudos to the team at Priority Marketing for orchestrating such an educational event! Below is the video from the 2024 Market Trends presentation:

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