SAR Year-End Report Validates Upward Trend

 

As reported in my Year-End Sarasota Real Estate Market Report last week, the key statistical markers are pointing toward sustained recovery.  As further evidence I am attaching the Sarasota Association of Realtor’s recently released analysis of our region’s 2011 results. 

Property sales up 8.2 percent for full year 2011; prices stable

For the full year 2011, property sales of members of the Sarasota Association of Realtors® jumped by 8.2 percent to 8,224, achieving the highest level since 2005. The surge in sales was accompanied by stabilization in the median sale prices, which now stand at $155,925 for single family homes and $156,800 for condos over the full year, and have not fluctuated much for the past 12 months.

Once again, the market has demonstrated that Sarasota is a destination of choice for many homebuyers. For the overall year of 2011, the resurgence in sales was dramatic, and represents a 44 percent increase over the low point of the downturn in 2008, when only 5,820 properties changed hands.

“This is really incredible news, and demonstrates how far this market has improved in only three short years,” said SAR President Laura Benson. “Now, we also offer very affordable pricing. Combined with the high quality of homes and condos on the market, I think we clearly have the best values in Florida, without question.” 

Property transactions in the Sarasota real estate market jumped 7.3 percent in December 2011, compared to the November totals. Combined sales stood at 648, up from last month’s figure of 602 and the October 2011 sales of 577. This sales resurgence has paralleled the drop in the available inventory, and put the remaining months of inventory in the range of a seller’s market.

The inventory of available properties for sale in Sarasota was at 4,567 in December, down slightly from the 4,672 in November. The inventory fell to a 10-year low of 4,408 in August 2011. As the inventory has slid, the months of inventory has dropped and now stands at 6.3 months for single family homes and 9.2 months for condos. A figure of 6 months is considered equilibrium between a buyer’s and a seller’s market. 

The December 2011 median sale price for condos recovered strongly to $150,000 from November’s figure of $127,000. This was the highest level since August 2011. Condo prices have been fluctuating for several months, with the year-to-date median sale price at $156,800. 

For single family homes, the median sale price dropped slightly in December to $160,000 from $162,000 in November 2011. For the overall year, the figures have remained remarkably steady, indicating a stabilizing market.

“There is a real sense of optimism and excitement returning to the market,” Benson noted. “We’re entering the height of the season, and the open houses have been bustling with energy and interest. Recent news of new home sales doubling in one community and setting records for annual sales in another are clear signs of the strength of the current market.”

Pending sales were at 694 in December 2011, down slightly from the November 2011 number of 782. Last month, 504 single family homes and 190 condos went under contract.

Distressed property sales continued to represent a higher percentage than normal in the local market for the fourth quarter of 2011. In total, 41.7 percent of sales in the fourth quarter were distressed property sales (foreclosures and short sales). This was somewhat higher than the third quarter, when the overall percentage was 38.8 percent, but well below the market high of over 50 percent in the second quarter of 2010. 

Median sale prices continued to show three distinct markets, with normal market transaction sales prices more than double those for bank-owned transactions. But the price gap has narrowed somewhat, particularly during the past two quarters. For the second quarter of 2011, foreclosed condos sold for a median price of $62,250, while market condo transactions saw a $270,000 median. For the quarter just ended, those prices were at $73,500 and $193,500, respectively.

“Realtors® and consumers have adjusted to the market realities, and it appears that pricing in all categories has become more reflective of the current conditions,” said Benson. “We continue to watch and hope for a break in the distressed property cycle, and we anticipate the improving economy and lower unemployment rate will eventually bring these figures down to lower levels. The positive side is that our market offers incredible buying opportunities that won’t last long.” 

Click HERE for the complete press release in PDF format, plus six pages of statistical charts.

Year-End 2011 Signals Optimism in 2012

 

All indications point to an active 2012 selling season as the Sarasota real estate market continues to show strong signs of recovery. While I think price appreciation this year will be modest, the general consensus from industry experts is that our prices bottomed out in 2011 and will continue to hover at this level through the better part of the 2012 with nominal upward movement. Realistic motivated sellers are getting their properties sold following the advice of seasoned professional realtors who know our market well and where the current tipping point is. 

Sarasota’s monthly average of 657 closed properties indicates that we currently have 6 ½ months of inventory in all price points, a good measure of the marketplace’s positive and stable course, given that a six month supply is the demarcation of equilibrium between a buyers and seller’s market. The overall inventory has declined 25% since the end of 2010, which is 1,434 less properties for sale, and 1,800 fewer properties than the end of 2009. This compression of available properties is contributing to the recent news that homebuilder confidence is rising and, after several years of limited new homes entering the market, we are hopeful some high quality product will be added to the supply chain to feed the already evident increased buyer interest. 

This year 481 more properties sold than during 2010, a healthy 7% increase. We have a similar number of pending sales to start 2012 as we had to start 2011. As a result of the average month’s closings activity the past year, there is now only 5 months of inventory for properties listed under $500,000, compared with 7 months at the beginning of the year and 11 months at the beginning of 2010. In the segment between $500,000 and $1,000,000, there is a 15 month inventory vs. 19 months to begin the past year. The inventory of available luxury properties over $1,000,000 has reduced by 16%, 116 less properties since the beginning of the year and now represents a 25 month supply, down from 28 months at the beginning of the year, and now at one of the lowest levels since before the boom in the luxury market that began in 2002 and nearly 70% below the market crowning in 2006. And with the median sale price of luxury properties almost 16% higher than December 2010, (Sarasota is one of the country’s highest ranking regions in increases in home prices,) and the dwindling supply of move-in ready homes, this will be an interesting market to watch. 

The Sarasota area continues to have an abundance of properties listed as Short Sales or Bank Owned. This segment represented 43% of the sales in 2011 and approximately 50% of the sales under $500,000. This is expected to continue to be the case in 2012 as more properties are finally getting through the judicial foreclosure process. Banks are clearly motivated to manage their foreclosures better and are attempting to expedite short sales, so I am optimistic the market will absorb these and the effect on overall pricing and sales will be somewhat marginalized.

As I have noted in my recent blog posts, with economic vital signs such as improvements in the unemployment rate and evidence of increased consumer and builder confidence, added to continued low interest rates and pent-up demand, the Sarasota Real Estate market appears poised for sustained recovery.  When all of the factors noted in this report are blended with the many extraordinary natural, cultural and business attributes that make Sarasota the greatest community in the nation to live and work; I think we are on the verge of a steady and sustained recovery. Though elements necessary for an extended recovery are still fragile, there are many reasons to be optimistic. 

 

The following statistical data is provided through the Multiple Listing Service (MLS) of the Sarasota Association of Realtors. The table summarizes what happened in each price segment. The Sold (Closed), Pending and Listings columns are sales and listings for the month of the report, and the Pending and Listed are the current totals of each in the MLS system. The Sold column is the total sales for the stated year. The Listed YE (Year-End) column shows the listing inventory at the end of 2011 and 2010. The SS/REO stands for properties that were either sold as a Short Sale or were owned by a lender at the time of the sale, commonly referred to as distressed sales. The amount of these distressed sales is included in the sold column. 

 

Below is a second table showing the past seven years of sales history. 481 properties or 7% more closed this year over 2010, the highest amount since the height of the market in 2005. There has been a steady increase of closed sales each year since the low of 2006. 

The Case for Real Estate Investment

This week Michael Saunders makes the case quite clearly that, despite the recent years of woe in the housing market, real estate remains a secure and desirable form of investment. In Michael’s weekly market report attached below, she cites data prepared by Steve Harney, a national real estate authority, in which he reports that over the last 12 years, “had you invested $100 in each in early 2000, by now you would have netted $140 in real estate, $112 on the Dow, $90 on the S&P and $70 on NASDAQ.”

Though our regional real estate market continues to be in a somewhat fragile state, it is well reported that 2011 saw sustained increases in key markers such as price and volume, and all indicators are pointing to further improvement in 2012. Buying a home in Sarasota has never been more “affordable”. With the prices lowered across the board plus record low interest rates…add to that the incredible lifestyle of Sarasota’s magnificent setting and infinite options for dining, entertainment and cultural activities, investing in Sarasota real estate is a safe bet!

http://www.thesaundersblog.com/southwest-florida-real-estate-take-that-dow-jones/

The Power of the Region’s Dominant Broker

 

In Michael Saunders’ most recent blog post, not only is it revealed that agents of our fine firm represented 11 “sides” of Sarasota’s top 10 sales in 2011 but, she also reminds us that Michael Saunders & Co. continues to be the market leader in selling the region’s luxury properties. The article further cites economic conditions and statistical evidence of the area’s positive positioning for continued real estate market recovery.

In addition, with the largest two of the transactions coming from foreign buyers, I reflect back to a 2011 Moulton Report in which I reported on the importance of International buyers to Florida Real Estate. An estimated 25% of all real estate acquisitions in the state are credited to foreigners, with the majority executed with cash. The foreign interest in our region’s properties tends to reflect perception of value, the large selection of well-priced options, a desire to diversify investments, the opportunity for rental income, and a belief in long-term security with real estate investment in our area. Michael Saunders & Co. and her team have created unparalleled visibility around the globe for our buyers and sellers. By establishing a carefully chosen group of essential partnerships, the extraordinary transnational exposure for Sarasota Real Estate through our company cannot be understated.

I invite you to read the Michael Saunders blog posted here to read for yourself more about why “Performance Matters” when selecting the best agent to represent you in your real estate transaction.

http://www.thesaundersblog.com/when-performance-matters/

10 Common Real Estate Investing Mistakes

The slow but steady rebound of the housing market has brought about a rise in real estate investing. But investing in property is no easy business, although the dozens of money gurus on the Internet would tell you otherwise. There is a right way to go about it—it’s just a matter of finding it while avoiding the many pitfalls. Here are ten of the most common real estate investing mistakes and how you can avoid them.

Not having a game plan

Atlanta-based investor Andy Heller says many new investors take the plunge without a plan: they snap up good deal, then don’t know what to do with it. Eventually they’ll end up with a number of properties just gathering dust. Your first step should be choosing your strategy, then finding a home that fits it.

Expecting returns overnight

What the Internet ads don’t tell you is that a lot of work, time, and money goes into real estate. For your cash to work for you, you need to make smart decisions, develop negotiation strategies, and understand the risks of the business. It takes time, but with good direction, it’ll start paying off eventually.

Working alone

If you think real estate agents are just for first-time buyers, think again. A good network is part of any successful investor’s arsenal, both for buying his own properties and selling them off. Build strong relations with professionals in the field. Ideally, you should be on good terms with at least one realtor, a lender, a home inspector, an appraiser, and a closing attorney.

Over-valuing properties

The idea is simple: you buy a property, then you sell it off for a profit. So the point is to not pay too much for a home—but according to Heller, that’s what a lot of new investors do. Take the time you need to analyze the value of a home—how much it’s worth, what improvements will be needed—before putting your money into it.

Not doing research

First-time investors are often taken aback by the complexities of the real estate business, and this often leads to costly mistakes. Start by joining a National Real Estate Investors Association (REIA) chapter in your area. The monthly meetings touch on a wide range of topics, from buying short sales and foreclosures to leasing issues.

Counting on appreciation

A lot of buyers snapped up properties during the housing boom, thinking they can make quick profits given the strong seller’s market. But the ensuing crash taught them a hard lesson. There’s no telling where the market will go, but with sufficient research and smart analysis, you can lower your risk and find other ways to make proft.

Miscalculating costs

There’s a lot more to home ownership than the asking price. Mortgage, insurance, and property taxes add up over time. And since it takes time to lease or sell a home in today’s market, you’ll be paying them out of your own pocket for a good while. If you’re not prepared, what started out as an asset will become a liability before you know it.

Focusing on single deals

It takes more than one deal at a time to run a real estate investing business. Besides, you miss out on many opportunities by limiting your volume. Build a steady stream of prospects; with enough deals on the horizon, the good ones will naturally come to the fore.

Not having an exit strategy

So you have a plan, but what if it doesn’t work out? Make sure you have at least two backup plans so you don’t get stuck with a property. Plan A might be to work on the home before reselling it. If the market is slow, Plan B could be a lease-purchase offer. And if that doesn’t work out, you can either just rent it out. The profits may be lower with succeeding plans, but it’s better than losing money by simply holding on to it.

Underestimating rehabs

You don’t need an engineering degree to estimate costs, but you do need a good buffer. When you decide to rehab a home, always set aside twice as much time and money as what you would expect it to take—and if you can still make a profit then, it’s worth taking on. This will give you a comfortable cushion against any problems.

Secure and Grow Your Property Investment Return

If you are a buyer with money to invest in today’s housing market, there are a number of strategies that have stood the test of time when it comes to property investment and realizing a return on those investments. Below are 8 tips from the authors of Investing In Real Estate (McLean and Eldred 2006) for maximizing your real estate assets.

  1. Maintain a positive cash flow. The rent on your investment properties should cover the mortgage, taxes, insurance, and any other related fees. When all is said and done and paid, there should be money left over each month. It’s also a smart idea to hold enough money in reserve to cover mortgage-related expenses in the event the property is vacant for a period of time. How much money you hold in reserve is your decision and will likely depend on how the rental market is performing.

  2. Leverage OPM. OPM, or other people’s money, is a principal factor in growing your own net worth. In other words, as your tenants provide you with their money to pay down mortgage debt each month, your equity as the owner of the property grows. This is often referred to as equity growth via amortization.

  3. Improve your properties. Perhaps the most common form of investment return, property improvements have the potential to result in a greater property resale value. Consequently, your ability to sell the property for substantially more than you paid for it results in a profit. For example, if you purchase a house for $60,000 that requires a little TLC, and you spend another $10,000 making improvements, you may be able to sell the more attractive and marketable house for $100,000 resulting in a $30,000 profit.

  4. Buy wholesale. In terms of housing, wholesale refers to properties whose prices are lower than market value due to foreclosure or tax sales. When you buy properties at a bargain that is well below market price, you build your net worth and equity holdings.

  5. Take advantage of tax breaks. Real estate investment comes with its perks. One of the biggest perks comes in the form of tax deductions, tax credits, and other government-sponsored programs for real estate investors that cut your tax bill, thereby increasing your bottom line and equity growth.

  6. Care for your assets. Property structures—be they residential or commercial—are no different than any other asset that needs regular attention and maintenance. Think of your property investments just as you would your own vehicle or home. Regular maintenance helps retain value and is a necessity, not a luxury of ownership. It’s not a good idea to wait until something breaks before you fix it. In fact, it usually costs more! Managing your property asset is just as important as buying smart and positive cash flow.

  7. Asset + time = equity. In many respects, property investments are similar to stock market investments; the longer you wait, the greater your return. As your property increases in value, so does your wealth. When you buy at today’s prices and take advantage of wholesale bargains, your asset grows in value over time because of local appreciation. When added to the amortization principle described above (see #2), you’ve got a number of factors working in your equity’s favor.

  8. Remember that rent is not a fixed price. When you are actively managing your property portfolio, pay attention to costs that are affected by the rising cost of living. For example, higher insurance rates, property taxes, and maintenance fees that you must pay are all legitimate pass-through factors to consider in increasing your rent cash flow.