In January of each year many economists, bankers, and advisors offer their prognostication for the year ahead. From the stock market to the real estate market, and sometimes even the farmer’s market. As usual, the predictions are all over the place and depend on a myriad of factors. With all the hype that the real estate market is changing, I want to assert that the local market has not changed, the same dynamics have been in place for the past few years.
In the late 18th century and early 19th century honeymoons became a thing after marriage. More than 200 years later, Sarasota, Florida has been ranked the #1 affordable honeymoon destination in the US by Livability.com?
The Affordable versus Mid to High-End Markets
Conventional wisdom suggests that a balanced real estate market is when there are six months of housing inventory. Less than six months of inventory typically signals a Seller’s market and rising prices, while more than six months is indicative of a Buyer’s market.
For the last several years, our real estate market has had both a seller’s and a buyer’s market simultaneously:
1. The Seller’s market has existed for years for properties for sale under $500k.
- For those properties in the truly affordable range (priced $200k and less) there is less than 4 months of inventory.
- In the $200-$500k segment- which constitutes close to 60% of our market – there is a bit less than 6 months of inventory. It slightly favors Sellers.
2. Once we move above $500k the market flips to favor Buyers.
- In the ultra luxury market (those properties listed for $3M or more) there are about 40 months of inventory.
- For homes and condominiums over $1M, about 21 months of inventory.
- In the segment from $500-800k there are about 10 ½ months of product available.
Of course, there are always exceptions based on external factors such as the weather or stock market, and internal factors such as property condition and pricing. Pristine, hard to find properties can sell within days or weeks and those that are functionally obsolete and/or mispriced may stick around for a while.
The Flight to New Construction
One of the major pieces driving our market is a flight to new builds. While the most visible construction is in downtown Sarasota, the vast majority of the growth is east of Interstate 75. In 2018, builders broke ground on 6,158 new single-family homes in our area. Sarasota is getting a far bigger footprint and this is having an irreversible impact on our community. For many, moving into a new single-family home now forces the tradeoff having a brand new versus being 30-45 minutes further away from Sarasota’s cultural district and beaches.
The Florida Chamber of Commerce projects Florida to grow from the world’s 17th to the world’s 10th largest economy, and the population to increase from 21.4M to 26M in the next 11 years.
With this forecast, we expect market demand to increase and prices on properties closer to the coast to continue on an upward trend. Meanwhile, those inland- especially resales- to stay flat. This seems to be especially true of ginormous communities. Today we learned of a new project out east with 4500 homes. It is hard to see a path for much appreciation for the owner who buys new and then sells in three years. There is a ceiling to the appreciation based on pricing of new product.
When you are ready for expert advice on your next real estate transaction give me a call: 941.587.0740.