Residential real estate market is correcting, not crashing

On paper, 2021’s real estate headlines looked eerily similar to Southwest Florida’s boom of the mid-2000s. Record numbers of homes sold. Properties sold at record prices. Inventory was quickly shrinking.

Unlike the real estate boom and bust 15 years ago, though, our residential real estate market is currently in a state of correcting itself – not crashing. That’s good news for all of us.

Flashing back to the mid-2000s, the bubble burst. It simply grew too quickly to sustain itself. What followed were years of what’s described as a “rationale recovery.”

Heading into the pandemic, our region had strong momentum. Florida reopened quickly for business. Water, warmth and way of life became even more appealing to buyers coming from outside Florida. Not only did our region experience economic stability, but we are seeing overall economic growth coming out of the pandemic.

Ideally, our market should grow 4% annually, or even a little less. As I noted in September during the Market Trends real estate summit, we don’t want fast, massive growth. We want slow and steady growth because that’s what wins the race.

Earlier this year, our market experienced a short-term surge as prices of luxury homes, starter homes and everything in between, including vacant lots, soared to new heights. That was abnormal. The growth lines simply were not sustainable.

In 2021, our region’s buyer profile changed. Typically, our growth is driven by sales of lower- and moderate-priced homes. This year’s buyers were interested in more expensive homes in desirable areas, especially residences on or near the water and within affluent gated communities. These buyers were coming from more expensive markets, so a four-bedroom, three-bath home priced at $500,000 or more did not cause a sticker shock.

Looking Ahead

The slowdown in monthly sales volume and prices is not a cause for concern. Buyers are more apprehensive than six or nine months ago. Rising inflation is a concern. Global economic and political stability are always factors.

Housing inventory is growing slightly, and homebuilders will be bringing more properties to the market in the next year or two.

In 2022, a key influence on our region’s residential real estate market will have nothing to do with open concept floorplans, granite countertops and stainless-steel appliances. Instead, it has to do with our quality of life.

Three factors drive migration to Southwest Florida: warmth, weather and our way of life. We are one of a few markets nationally to enjoy all three. However, we must be cognizant of the factors that cause people to pick up and move elsewhere: the environment, employment, education, cost of living, traffic and crime, among others.

California at one time had warmth, weather and way of life, but the current exodus of residents from the Golden State offers a warning sign that if we don’t protect our quality of life, the same trend could happen here. Our economy is strong because Florida, particularly Southwest Florida, is one of the most desirable places to live, work and play in America.

Southwest Florida’s real estate market is correcting, not crashing. Yes, the real estate buying frenzy is over, but getting back to “normal” in 2022 is a good thing.

Submitted by: Realtor Denny Grimes, president of Denny Grimes & Team at Keller Williams Realty, has 40 years of residential sales experience. For more information, please visit DennyGrimes.com or call 239-689-7600