Riding the Boom

Just as surely as snowbirds return each fall, property values continue to explode, with some areas of Lee and Collier counties boasting double-digit increases from year to year. Monthly housing sales numbers, soaring property values and an onslaught of new construction projects tell the story: Property in Southwest Florida is a good investment. Unlike the fickle stock market, high-tech start-ups or once-promising IPOs, property-be it developed or untouched-continues its upward mobility. With national housing values 8.8 percent higher than just a year ago-the highest gain since the mid-1980s-home ownership is one of the hottest investments around.

But before snatching up the last remaining piece of developable swampland, do your research and heed the advice of local experts who say area real estate investments are a sure bet only for investors in it for the long haul. The cyclical nature of real estate means that property and home values, which have posted dramatic leaps since 1995, will eventually level off or decline. It's simply the nature of the business.

"Naples, particularly Old Naples and Port Royal, really defy economic terms," says Michael Timmerman, president and CEO of Feasonomics Inc., a Naples-based consulting firm that tracks local sales trends in residential housing. "People are buying property without any regard for market price because they want the property and it's scarce. It's unique and they love it."

Just as a lunar or solar eclipse needs the right timing and alignment of earth, sun and moon, three major engines worked together to propel Southwest Florida into the boom-the growth of Southwest Florida International Airport, the completion of Interstate 75 and the opening of Florida Gulf Coast University. Add a fourth factor-an environment that screams real estate's "location, location, location" mantra-and you've got a market like no other.

A strong national economy, newfound wealth delivered by dot-com companies and the Internet, and the discovery of Southwest Florida as the playground for the rich and famous also fueled the most recent drive. It's not unusual to hear about homebuyers purchasing fourth and fifth homes here for several million dollars-for cash. Nor is it rare for these homes to be torn down, only to be replaced by bigger and better structures.

Southwest Florida by the numbers shows gains almost across the board. Between 1995 and 2000, Collier County's taxable properties nearly doubled, from $16.9 billion to $33.3 billion, with a 20-percent gain from 1999 to 2000. Lee County's values rose 12.4 percent in the past year to a total of $31.8 billion, boosted in part by a 35.5-percent gain in Estero. While much of this can be attributed to new construction, the numbers show that values on existing property rose 14 percent in Collier County, where the average sale price of a home is $334,000. By contrast, the average price of a home in Lee County still falls below the $200,000 mark.

Although Lee County home prices tend to lag behind those in Collier, one Lee locale topped its neighbor to the south on Worth magazine's annual "America's Richest Towns" list. Captiva Island ranked 17th with a median single-family home price of $1.395 million. Appearing for the first time, Naples was rated 142 with a $632,205 median price.

Such attention is good news for homeowners, simply because of the basic supply-and-demand principles of economics. "The more demand, the more valuable the supply," says Frank D'Alessandro, a broker with Grubb & Ellis/VIP D'Alessandro in Fort Myers. "The growth markets we're seeing put price pressure on remaining property."

Both D'Alessandro and Feasonomics' Timmerman predicted Southwest Florida's growth two decades ago. Timmerman had been visiting Naples since the '60s, when Pine Ridge Road ended at Airport Pulling and his uncle was the town's only doctor. It didn't take him long to recognize the churning growth mechanisms. "Interstate 75 opened the floodgates," he recalls. "More than any other factor, it propelled Collier County from being rural to becoming urban."

"When I came here 20 years ago, you could just about throw a dart at a map of Lee or Collier county and couldn't miss," says D'Alessandro. "You could buy that particular area. Today, you need to be more selective in your investments because a lot of areas are user-priced, not investor-priced."

In Lee County, rapid growth in Estero and Bonita Springs surprised even D'Alessandro. "I thought it would take longer for north to meet the south," he says. "But it was the last remaining area with large tracts of land. Developers were drawn to it."

While he predicted phenomenal growth, Timmerman wasn't quite prepared for the wealth of today's homebuyers. "People pay $30 million for a piece of property on the beach, tear it down, and build something in its place," he says, referring to a Gordon Drive home in Naples that set an all-time Florida record when it sold for $30 million this year. "Naples is like no other place I know of. There's a combination of people with a tremendous amount of wealth and something they want-land-that there's very little of."

Because Bonita Springs, Estero and North Naples are the fastest-growing local real estate markets, all with annual double-digit increases in property values, D'Alessandro says those looking for a little more bang for their buck should look further north and east-to Cape Coral, Lehigh Acres and Golden Gate.

As available land disappears elsewhere, upscale development is beginning to find its way to Cape Coral, where, in the past, gated communities have been slow to catch on. Once a mecca for middle-income retirees and young families, Cape Coral is starting to get some respect, aided by a 10-percent increase in property values in the last year. New development in the southwest and northwest Cape boasts some of the city's first $1 million homes. Even the Bonita Bay Group, creator of upscale communities with Naples and Bonita Springs addresses, has assembled a large tract in Cape Coral.

This upscale development of Cape Coral is made possible by the availability of land, although D'Alessandro says prices are quickly on the rise. "Two years ago, you could buy a waterfront lot on a saltwater canal for $10,000. That same lot is $16,000 to $20,000 today. You could have doubled your money in two years."

As developable land with a prestigious Naples address is quickly being gobbled up, all eyes are beginning to turn north.

"There's decades and decades of development left, mostly in Lee and northern Collier," says D'Alessandro. "Naples will run out of land first, then Lee, then ultimately growth will head north to Charlotte. What we're seeing now are the major players like WCI and Bonita Bay assembling large tracts for future development."

While Timmerman agrees that development will creep north and east-especially along Immokalee Road and in Estero from the university to the airport-he also sees the character of communities changing, as they enhance their amenities and services and thus increase their value. "We're already seeing amenities evolve. They're becoming more complicated and a lot more complete with concierge service, beach amenities, town centers, old neighborhood-type amenities," he explains.

Monroe Randol, a long time Sarasota" target="_blank">Charlotte County realtor, predicts a 10-year reprieve until the growth seen in the counties to the south spreads into Charlotte, where lots sell from $1,000 to $10,000 depending on the area and available infrastructure. "I've been in Charlotte since 1957, and lot prices still go up and down. They're mostly sold by developers to people up North who will build retirement homes on them someday. But developers are beginning to piece together large tracts. That will be coming. It will happen, but not on the same scale as Lee and Collier."

Understanding where prices in Southwest Florida are going means knowing where they've been. Because real estate tends to be a cyclical venture, investing in prime property has to be viewed as a long-term investment. Prices will rise, even fall somewhat substantially, according to Timmerman and D'Alessandro.

"The market is currently in the same cycle as it was in the late '80s, when land values escalated drastically," says Timmerman. "When the economy changed and softened in 1991, values dropped everywhere, in Port Royal and along the beaches. Really, land values were settling back down to market reality."

While a national softening is evi-denced by fewer home sales last year than in 1999, the real estate market continues to be strong.

Timmerman says a slowdown would provide welcomed breathing room, a chance to play catch-up with infra-structure. But even in a slowdown, Southwest Florida will continue to boom, mainly because of the demo-graphics of homebuyers and news-grabbing headlines like the Worth magazine article. "More people are aware now of Naples and Collier County," he notes. "There are more celebrities putting Naples on the map. It's going to continue as long as people have wealth. Naples is an extremely unique real estate market. Those of us who have been here 20 years see that."