MARCO ISLAND UPDATE (Part 2)

WHERE WE ARE NOW

Disclaimer: Once again I want to remind you that I am not an economist or do I have a degree in economics. Nor do I have a crystal ball to predict the future. This report is solely based off of statistical evidence gather from the Marco Island Area Association of Realtors and my own personal observations and knowledge of the Marco Island housing market.

Now, let’s look at the historical pricing trends and where the market is positioned as of September 2006. Over the last 10 years, the real estate property values have tracked about a 12.5%-15% growth with the exception of the recent seller’s market increase. Due to the aforementioned growth factors (see Part 1), we currently have an excess of available properties. Lots have been most impacted by the market fluctuation. However, each category seems to be coming into line with the historical growth curve. In particular, single family homes are moving into a good position and seem to be well positioned to lead the charge back to normal market activity.

Single Family Homes

As of Sept of 2006, we have about 32 months of single family home inventory based on the current sales levels. However, if you take the average number of units sold per month (45) between 1/1/2000 and 12/31/2005, the number of months of inventory goes to about 14. Also, our average price point is up slightly and prices seem to be leveling off to the normal growth line. YTD Average Sell Price is about 92% of Average List Price, thus, indicating excellent bargaining power buyers.

All statistics derived from the Marco Island Area Association of Realtors. Data deemed accurate but not guaranteed.

As you can see, single family homes have demonstrated the most consistency over time and remain a solid option for second home buyers due to the flexibility and privacy provided with own a home vs. a condo, as well as, the intrinsic value of the land it sits on. Although we have excess inventory, single family homes are right on target to provide the best opportunity for potential buyers.

Many of the homes on Marco were built before 1990 and many are nearing the end of their useful lifespan due to the upscaling of the island. These homes are typically below the current structural guidelines enforce on new construction and will eventually become teardown candidates. If you’ve been tracking the growth of new construction on the island, you may have noticed the trend
towards two-story 2500+ square foot homes. There getting bigger and are built to withstand a significant windstorm.

Multi-Family Homes

Over the last 10 years, multi-family homes have bounced between 10% and 15% growth rate. As of Sept of 2006, the average price point is up over 6% YTD Average Sell Price is about 92% of Average List Price. We have about 37 months of multi-family home inventory if sales volumes remain at the current levels. If we take the average number of units sold per month (74) between 1/1/2000 and 12/31/2005, the inventory decreases to roughly 12 months worth.

All statistics derived from the Marco Island Area Association of Realtors. Data deemed accurate but not guaranteed.

Although we are moving back in line with the average growth curve, prices appear to have some additional adjustment room. For the moment, condos on Marco are not in vogue as they are in some other markets. However, the desire for beachfront access still is an enticing benefit for most retiring baby boomers and foreign visitors.

We are also near completion of the second phase of road improvements that have affected access to the beachfront condos. Collier Boulevard south of San Marco is completed and the interior lanes between San Marco north to the Smokehouse Bay Bridge should be completed before season arrives. This should take some of the pressure of the beachfront condo market.

Lots

Over the last 10 years, lots had experience growth better than 15% through 2003 then took a wild run for the last few years. Average prices rose almost 128% over a 3 year period followed by a decrease in average price point of 42% YTD. Average Sell Price is about 88.4% of Average List Price. We have about 88 months of lot inventory if sales volumes remain at the current levels. However, if we regain our average sales pace (32 per month) over the period between 2000 and 2005, the inventory would be decreased to 14 months inventory.

All statistics derived from the Marco Island Area Association of Realtors. Data deemed accurate but not guaranteed.

The lot market on Marco Island suffered the most from the recent sellers market. Because of its low maintenance cost, lots were a favorite vehicle for flippers. Average closed transactions rose by 37 percent from 2004 as compared to 2003 only to fall 62% in 2005. The good news is that this category may hit its stride as we near the 15% growth line. Expect the sales numbers to start to increase this season as more retirees look to build their place in paradise.

Other Market Conditions

Even though Marco Island took a direct hit by Category 3 Hurricane, we saw limited damage as a result of Hurricane Wilma. This is a testament to the quality of construction, in both old and new homes, as related to their ability to withstand of major hurricane. So far this year, weather has not been a factor. Although the media tried its hardest to keep the fear factor going, they have backed
off their gloom and doom forecast of this year’s season and we are finally seeing positive reports from them. The weather services are predicting conditions that are favorable to continue this trend through the storm season ending in November. Quite frankly, I’ve talked to a lot of long-term locals and they don’t remember a season quite like a 2004 and 2005. Could these seasons be just an anomaly caused be naturally occurring weather patterns? Our guess may be as good as the weatherman’s!

Property insurance rates have skyrocketed over the last year due to the last two hurricane seasons. Barring any unforeseen storm this year, Floridians should have enough ammunition to go after the insurance companies to reduce the rates. Otherwise, the insurance companies will be sitting on some FAT profits. Recently, a grass roots group in Monroe County (Florida Keys) got their rate reduced over 30 percent.

With the increase in property values, comes an increase in property taxes created a huge surplus of revenue. In a way, this is good because the county will need it to fund the cost of infrastructure to support the growth that is predicted for the area. In the meantime, the state and county is considering a property tax rate reduction in the short term as well as a bill to allow homeowners to
port their tax liability, or at least a portion, to a new home in the state. I will discuss this more in the next section.

THE BOTTOMLINE

Marco Island remains one of the most desirable second homes locations in the world. Although we have come through a significant cooling off period in the market place, we are optimistic about the future of Marco Island. We have transitioned from a market favoring the sellers to one that offers excellent opportunities for buyers. Our recent growth spurt and subsequent adjustment has positioned Marco’s real estate market for a more normal growth cycle for a second home market and has minimized the susceptibility to the investor’s flipping strategies, at least in the short term. What the price increase has created is a community that is in transition from its blue collar roots to one of affluence. The question is; where will this transition take us?

Don’t miss our next addition for Part 3 – The Shape of Things to
Come.

For more information on Marco Island Real Estate, contact:

Joseph A. Bartos, P.A.
Amerivest Realty
(239) 404-5068

mailto:jbartos@bartosgroup.com