With April 1st marking the end Q1 2017, many developers and investors are reflecting on the results from the first three months of the year. After a lackluster 2016 widely attributed to the contentious national election, many industry professionals were predicting a positive increase in luxury home sales.
For communities targeting Florida’s winter residents, high season typically begins on January 15th and runs through mid April. This year, President Trump settled into the White House and quickly became a frequent visitor to South Florida. Besides having a new administration in place in Washington, and the new Winter White House established on Palm Beach – what changes did the real estate market experience in Q1?
1. Stock Market Surges – In January 2016, the stock market took an unexpected dip essentially stalling the momentum in discretionary real estate sales. The continued lack of political stability created “pause” in the market as buyers waited out the year-long campaign. With the election behind us, optimism has returned to the market best indicated by the historic stock market gains in the first quarter. Many potential homebuyers are the beneficiaries of asset appreciation, but whether they will jump back into the real estate market in force is yet to be seen.
2. Traffic – Life is booming again. By all accounts, the number of visitors, traffic counts, retail sales and other metrics show an upward trend. New home sales centers are busy with plenty of potential customers touring decorated models or preconstruction offerings. Today, many value driven communities are gaining market share in a world where homebuyers continue to be ultra sensitive to HOA fees, CDD fees and other costs associated with luxe amenity packages. Although the luxury segment is returning, communities continue to experience slower than anticipated sales volume.
3. Timing – Homebuyers are doing their homework. Researching communities on line and visiting their short-list, but with many markets having already returned to pre-recession price levels, we are experiencing a lack of urgency in the market. This wait-and-see outlook includes homebuyers expecting post-season price reductions on standing inventory. Getting the customer to make a final decision was one of the biggest obstacles to sale in the first quarter.
4. Sales Outlook – Financial projects and population trends remain strong for real estate development over the coming decade. Millions of baby boomers have reached retirement age, and there is a pent-up demand because they have been working longer than anticipated. While the recession may have delayed their plans, they will be re-entering the real estate market over the coming years.
Traditionally Q1 has been the boom season for real estate sales, and many expected smooth sailing in 2017. The continued gridlock in Washington has many homebuyers continuing their wait and see attitude. It is our belief new home communities will see an increase in return visitors throughout the spring and summer, and 2017 will be a successful sales year. Breaking with tradition, sales contracts will be written throughout the entire year as buyers regain confidence and stability returns.
Since 1983, Cotton & Company has been working exclusively in the residential real estate industry. Over the past four decades we have assisted more than 1700 properties with sales and marketing expertise, spanning from Panama to Poland. To learn more about current market activity, discuss development plans or request a complete marketing audit, register on line or contact Laurie Andrews at 772.600.3501.