short answer is no. We are in what is regarded one of the strongest and most sought-after real estate markets in the country and believe it or not, we have some serious foundational sus- tainability to our current local mar- ket. There’s just too much demand and projected future growth ahead for us to expect an imminent downturn. Furthermore, this market is not built on a house of cards like it was during the “Great Recession”. Here are a few related factors to consider: UNEMPLOYMENT As of February, it’s estimated that the Southwest Florida unemployment rate is down to 3.9% (compared with 6% nationally) which is pretty incred- ible considering where we were just a year ago. Construction jobs have boomed in March posting one of the largest monthly gains ever, and our local market is certainly reaping the benefit as a result. With the South - west Florida commercial market being ranked #1 nationally per NAR, institu- tional money is pouring in as a result of their bullish outlook. What comes with that is more insulation and jobs. MORTGAGE FORBEARANCE The overall forbearance rate has fallen below 5.5% for the first time in a year. It’s estimated that 90% of those currently in forbearance have at least 15% equity in their homes so even if people needed to sell, statistically speaking it should not be a distressed sale. The sellers should be able to walk away with some amount of money. Also, most lending institutions are working with their borrowers to help them stay in their homes as mortgage companies could face penalties if they don’t take steps to prevent a deluge of foreclo- sures. Let’s not forget the cash vs financing ratio in our market (48.3% in all of Southwest Florida).
Tappable Equity* of U.S. Mortgage Holders Surging
$8,000 in billions
*Tappable Equity - the amount available for homeowners to access before hitting a maximum 80% combined loan-to-value ratio
$7.3T
$7,000
$6,000
$5,000
$4.6T
$4,000
$3,000
$2,000
$1,000
$0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
CONTINUED GROWTH Per the Florida economic devel- opment directors, Lee County will receive $2 billion in funds while adding 6,500 jobs in the next 2 years and Collier County projects about $1.5 billion with an estimated 4,000 to 5,000 jobs. Barring any crazy unforeseen circumstance, South- west Florida is poised to see long term and sustainable infrastructure and job growth. It is estimated that 850 people will be moving to Florida per day for the next 5 years as many seek the weather, lifestyle, and many tax benefits offered here. EQUITY Americans are sitting on a record breaking $7.3 Trillion in untapped equity, up 18% since the end of 2019. Yet, we’re not tapping into them like our own personal piggy banks like during the “Great Recession”. In fact, in 2006 American’s cashed out $321 billion (89% of all refinances) vs $153 billion in 2020 (33% of all refinances), which represents only 47.7% of the total equity pulled back then.
WHERE DOES THE MARKET GO FROMHERE? SUPPLY VS DEMAND Until we find more of a balance between supply and buyer demand, we can expect these same trends to continue and drag on. Builders are pushing new homes out as fast as they can, but not fast enough to accommodate today’s demand thus creating a “bottleneck” Seller reluc- tance isn’t helping either. The short- age of available inventory is making sellers anxious about selling and thus finding themselves homeless. Demand has been consistently strong in spite of our international buyers mostly sidelined this past year, which is certainly an opportunity sector going forward. It’s not as easy as building more homes with material and labor costs continuing to rise, not to mention the tariff’s in place on Canadian lumber. At the current rate of production, it would take a few years to meet excess demand. •
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