Back to the list

Supply and Demand: Identifying Optimal Opportunities in a Seasonal Market  

It is a long-running and continuing debate as when to buy and sell real estate in this complex market. Whilst numerous real estate reports are prone to generalizing about the region in its entirety, they tend to sweep over the fact that Naples is a compilation of many diverse and disparate communities. This newsletter, therefore, aims to provide a more in-depth analysis of seasonal fluctuations specific to Park Shore, Moorings, Coquina Sands, Olde Naples, Aqualane and Port Royal. 

The statistics focus on the pending activity of sales of $1m+ properties in the subject areas during the period from July 1, 2016 to June 30, 2017. The use of pending statistics identifies when the buyer made the decision to purchase a property, thereby removing the convoluted time-lag caused by the closing process. Over this 12-month period the number of pendings formed a sinusoidal pattern: from a low starting point in July, pendings grew steadily throughout the autumn and winter, peaked in February and March before beginning a predictable descent at the end of spring and into early summer. The ‘pending’ graph on the penultimate page demonstrates that this movement largely conformed to the traditional definition of season in general – the four months of January, February, March and April witnessed 50.6% of the entire year’s transactions. More insights can be revealed in comparing this data set of pendings to new inventory, which are proxies for demand and supply, respectively. The higher the pending/inventory ratio, the more buyers there are in relation to supply– thus ideal for sellers. Conversely, the months with lower ratios provide a supply/demand balance theoretically in favour of the buyer. The data suggests, if possible, it may be in the best interest of the seller in these areas to delay listing a property until the seasonal months of January, February and March to ensure maximum exposure and avoid cumulating days on market. For buyers, July and August present opportunities which perhaps, historically, have not been maximised to the fullest. The data also suggests there may be advantageous moments to act in the months of September, October and November. 

This supply/demand curves reveals a panoply of local and specific seasonal movement that is further supported by an analysis of sales price discounts. The sold/original list price ratio, which accounts for all price reductions during a property’s time on the market, is the most useful for identifying opportunities. To illustrate this metric’s efficacy, this newsletter contains a chart comparing sold/original list price to more traditionally quoted sold/list price. When these two data sets are plotted side-by-side, discrepancies normally masked by the massaged sold/list price figure surface. The most revealing ratio occurred in April, when buyers purchased properties at a sold/original list price ratio of 82.8%. This reduction hints at the psychological impact of the seasonal market in the subject areas and latent behavioural biases: sellers keen to shift a property before summer created a self-fulfilling prophecy that many buyers in turn eagerly exploited. These buyers, in turn, bore the risk of missing out on unique properties and faced dwindling quality inventory as market activity peaked before April. However, for buyers weighing many similar options, such as those interested in the large supply of new construction, the reward could outweigh the risk. 

 This amalgam of statistics highlights the undeniable, localized seasonality of the subject markets. The undulating rhythm of peak and troughs creates inflection points that offer optimal opportunities to act. When and whether to take advantage of these moments, however, will come down to personal circumstances, the nature of the property and its intended purpose, so please call Irby & Associations for more guidance.