FORT MYERS, Fla. – The future of Southwest Florida real estate looks bright, three high-profile area real estate experts say, but just how bright depends on several factors few of us have any control over: percentages, pricing and politics.
Randy Thibaut, founder of LSI Companies and CEO of Sage Communities likes to call them the three “Ps.” Percentages refers to interest rates. Pricing is the cost of real estate, politics refers to the volatile political climate in the state and nationally.
There’s a fourth “P” that is under our control: perspective.
Thibaut and Denny Grimes, residential real estate expert and president of Denny Grimes & Team at Keller Williams Realty, along with Justin Thibaut, Randy’s son and CEO of LSI Companies, all presented the facts and their perspectives on what the three “P”s might or not bring us, as we emerge from the COVID pandemic and navigate a way forward from probably the biggest natural weather disaster Southwest Florida has ever faced – Hurricane Ian.
No wonder the path is uncertain. What is certain is the resiliency of the residents of Southwest Florida and the resolve to move through it.
That’s why the theme of their event Market Trends, held recently before a sold-out crowd at the Caloosa Sound Convention Center in Fort Myers, was called “The Future Ain’t What It Used to Be.”
“You would think the pandemic and hurricane would devastate the market. It didn’t,” Randy Thibaut said. In COVID, people locked down, but Florida had an “open for business policy,” and the opportunity to escape more stringent restrictions elsewhere, he said.
Businesses using Zoom to communicate with employees confined to their homes meant you were no longer tied to your desk to do your job, Grimes said. Those who already planned to retire to Southwest Florida just decided to make the move earlier.
When talking about the housing market, “The elephant in the room is obviously Hurricane Ian,” Thibaut said. “Who ever thought that a devastating hurricane would cause a real estate boom?” In areas hurt the most – that is, the barrier islands – is where the real estate market is hottest, he said.
“Vulture buyers” swooped in immediately after the hurricane to buy up what’s left, he said. “Now the vultures are in a feeding frenzy,” and are continuing to pay significantly more for properties, he said. He doesn’t see the frenzy stopping anytime soon.
“Who could imagine a clean slate in Fort Myers Beach?” Thibaut asked. “The sky’s the limit.”
He sees Fort Myers Beach undergoing a kind of “renaissance and rebirth” and being rebuilt as an upscale community, bringing in a whole new demographic. “There are many people who love Fort Myers Beach and don’t want it to change. But it has to change because it has to be rebuilt,” he said. “Some owners are saying, ‘I’m never going to sell,’” he said. “That’s because they haven’t received the (right) offer yet.”
The scenario is multi-million-dollar condos, Thibaut said. The question is whether the local town government at the beach can handle it. “Are they able to handle the tidal wave coming this way?” They may need to ask Lee County for help, he said. “This is not for amateurs.”
Sanibel and Captiva islands are facing the same tidal wave, but on an even higher level, he said. People are buying properties that weren’t even damaged to redevelop them, he said. “There are opportunities galore for custom builders.”
Meanwhile, “Developers and builders are pounding their fists” and wanting building permits,” he said. The county staff have done a remarkable job, processing a whopping 35,000 permits since Ian, he said. Those permits were mostly for hurricane repair.
But builders and contractors are also on the fence as conditions are more uncertain. Interest rates are hovering around 7%. “There’s a big difference when you go from 3.5% to 7%,” he said. Buyers get priced out of the market. Those who already bought at 3.5% are holding on to what they have because now the rates are 7%.
Then there’s the turmoil of the political climate.
“I’m pretty confident when these three align (percentages, price and politics), we’ll go from a normal market to a bat-shit crazy market.”
Grimes presented statistics that show the residential real estate market has already been pretty crazy.
For example, when the housing bubble burst in 2009, the median sale price for an existing single family home in Lee County was $89,000. That price rose 180% to $249,000 in 2019. Since then, the price has risen another 67% to $416,000 at the end of 2022. Since the bubble burst in 2009 the price has gone up more than 340%. Currently, the median sale price in Lee County is $430,000, he said.
At the end of 2022, the median price for a single-family home in Lee was $416,250; in Collier County, $775,000 and in Charlotte County, $389,450.
Grimes said he hypothesized that the market would suffer more in Hurricane Ian than the rest of the state, but Lee and Collier counties actually outperformed the rest of the state, he said.
And the mantra is no longer location, location, location, he said. It is availability and higher ground. The best-selling communities in 2022 were Babcock Ranch and Ave Maria.
Last year, mortgage rates doubled in one year, Grimes said. He believes interest rates will go higher before they go lower. Even when they lower, no one should ever expect to see a 3% interest rate again. It’s still a seller’s market, but no longer at the level where a seller would tell a buyer “Jump” and the buyer would say, “How high?” he said.
“The best time to buy is when sellers fear tomorrow be will worse than today,” he said.
You will never see a market crushed permanently by a natural disaster, Grimes said. People still want the three “W”s: water, warmth, way of life. The danger is more from man-made disasters. For example, what is the difference between a toxic train derailment in Ohio and a toxic green algae bloom in Southwest Florida?, he asked. If we don’t take care of the environment, the market will lose demand, he said.
In the commercial real estate market, “interest rates from my perspective will probably get worse rather than better” in the short term, Justin Thibaut said.
Of the total transactions volume, 56% was in the retail sector, 24% in the industrial sector and 20% in the office sector. The hospitality sector was devastated by Hurricane Ian, from destruction to canceled reservations, and recovery is expected to be slow, he said. But we need to embrace the “new, exciting developments that will come,” as rebuilding continues on Fort Myers Beach and elsewhere, Mr. Thibaut said. “Don’t fight the new.”
For the industrial sector, there is 7 million square feet proposed in Lee County alone, he said. However, there needs to be less focus on large-scale facilities and more on small support facilities. Small, multi-tenant rental space is needed, he said.
In the office sector, it’s “the return of the pants,” Mr. Thibaut said. “Not every company wants their employees to work remotely.” So offices are going back to occupancy. But how much space do we really need? he asked. Development on this front is slow and steady.
Randy Thibaut said, “There is optimism from buyers, from builders, from developers. Southwest Florida has nothing but green lights in the future.”
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