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.