The Moulton Sarasota Real Estate Report – June 2013
The good news surrounding a stabilized market continues to flow in the media. Household asset values are recovering along with the economy giving rise to consumer financial comfort. Though market experts suggest they remain “cautiously optimistic” since the economy is still somewhat fragile, the projections they are making call for a continued improvement in the housing market, one of the leading contributors to the overall nation’s economic recovery, and certainly an essential piece of our local economic health.
The inquiries from buyers that I have been receiving during our traditionally slower summer season are at a pace that, even as a seasoned professional in this market, I don’t recall seeing for many years. And the buyers that are looking at the market are ready to move quickly. As an example, last month I represented a seller in a transaction that was complete before I could even get the property listed!
Homebuilder Confidence
The most recent survey of sentiment of homebuilders for confidence in the market for newly built single-family homes rose more than 10% over the previous month, and representing the strongest reading since 2006 for this important segment of the market. As the inventory of existing homes continues to shrink, homebuilders have reported seeing more motivated buyers viewing their models and making commitments on new homes. Another measurement taken in the survey by the National Homebuilders Association measures the sentiment of its members for continued growth in the next six months. This gauge also rose more than 10%.
As I reported in my May Sarasota Real Estate Market Report, the Sarasota region saw an increase in permits pulled for new construction that beat last year’s pace by 45%. Nationally single-family housing starts are up 11.5%. Both stats are encouraging, now if only we could help the builders find qualified help and finish experts we might have those entering the market at a pace that would truly take the edge off the drought of move-in ready, well-located properties.
Inventory
Inventory overall has grown since the beginning of the year with U.S. available homes up more than 18%, yet still down almost 11% compared to last year at the end of the 2nd quarter. In Sarasota, our inventory has fallen 31% since the beginning of the year, still 18% lower than last year at this time, and per the Sarasota Association of Realtors, the lowest in 10 years.
My research shows that our region has only three months of supply and total available properties is now a staggering 72% less than four years ago. The greatest challenge continues to be in the under $500,000 market, which is struggling to gain ground on its barely two-months of supply. At the mid-point of $500,000 – $1 million the supply is sitting at a balanced level of six-months, and in the luxury market at over $1 million, the market has 15-months of supply, which is considered healthy for the high-end of the market. At the worst time in our market in 2008 single-family homes had a 24-months of supply and condos were a stunning 41-months of supply. Overall, our market has moved from over 9,500 properties on the market to only 2,500 today.
Home Prices and Affordability
The uncertainty in the mortgage market is certainly making headlines. The volatility experienced over the last month or so made even the most optimistic market authority a little edgy. This month’s Fed Reserve Chairman Bernanke hearings in front of the House Financial Services Committee spurred tension as the media attempted to interpret or foretell what may or may not occur as a result of his comments.
My read on what may be to come is a continued gradual rise in interest rates. Drastic change is not something I see occurring, but more of the same inching up is reasonable and likely. Based on the analysts that I follow, it is projected that rates will have a gradual growth and may reach 5% a year from now.
Home prices in Florida are still more than 39% from their peak in 2006. In the Sarasota area median prices edged up another 13% compared to the same month last year with single-family homes reaching $200,000 and condos at $192,500. Even if this pace continues, our region is within what is considered a “high level of affordability” per market analysts. In reviewing a number of resources, the general consensus that I see is that U.S. home prices will increase about 5% in the next year, however because Sarasota is a unique market with considerably higher demand that the “average” U.S. market, our prices should rise a slightly higher rate.
For those prospective buyers that have been sitting on the sidelines waiting for some sign that conditions are moving back in the direction of a buyer’s market, that just doesn’t appear to me to be a probable development. For sellers hopeful waiting for a sharp rise in prices, delaying too long to enter the game could result in hitting the market as the considerable supply of new homes under construction are completed, interest rates indeed pick up pace, and the dramatic rise in home prices slows as a result.
Distressed Inventory
The recent news released in our region discussing the back-log of foreclosures and bank-owned properties yet to enter the market sounds alarming if you are looking for something to worry about. It is true, there are still a substantial number of distressed properties yet to enter the market, however, based on my research, our region has worked through a considerable number of these leaving us at the end of June with an improvement over the last three years from 2010’s 51% of homes listed falling into the distressed category to only 379 properties, or just 12% of current listings falling into the classification today. One promising sign I saw reported this month is that in Florida the month of June saw a decrease in foreclosure starts month-to-month of 26%. Projections of bank repossessions nationally this year are expected to fall 25% from what was seen in 2012.
There’s no question, Florida is at the top of the heap as foreclosure activity goes, however smart tactics by banks and the improved prices we’re seeing regionally will help to work through this troubling situation. And with the foreclosure process estimated to be over 900 days in the State of Florida, which gives homeowners ample time to work with their lenders to try to find alternatives before actual foreclosure takes place. The inching up of home equity has helped to remove some of the underwater homeowners from the classification and, one good piece of recommended legislation according to the Federal Reserve Bank of NY, possible relaxing of certain rules for HARP refinancing is being considered, which the NY Fed states could increase eligibility by over 55% and ease the number of homeowners struggling with little to no equity.
Cash Sales Effect
Another locally charged topic has been the cash buying of homes by national corporations and REITs and the implication that this is a negative event in our market. In my opinion, these investments, often a result of these large entities being “cash rich” after the recession due to reduced risk-taking and investments during the downturn, have helped to reduce the number of distressed properties in the area, helping to eliminate these from our court docket and the banks’ roles of non-performing loans. According to well-informed economic experts, the cash investment in markets like ours helped to stabilize our market, have hit their peak and are now receding. Now that our market is seeing a consistent increase in home prices, it is expected that these all-cash buyers will move to other markets where conditions have not seen the improvement that ours has.
My Market View
With June sales in the region achieving 2% growth (even during one of our historically slowest months of the year,) pending sales once again topping last year by more than 20%, median prices climbing in the Sarasota area 12% over last June, the narrowing of the spread between listing and sale price, and the quickened pace of properties going under contract, Sarasota is experiencing much more balance and has all the components needed for a stable and sustainable market. Recently billionaire hedge fund manager, John Paulsen known for his prediction of the housing collapse, has been betting on the market’s recovery. He recently stated at a CNBC investment conference, “I still think buying a home is the best investment an individual can make…Buy a home, and if you can, buy a second home!” I like his thinking!
As mentioned in previous postings of mine, I have a unique market analysis to work with you on correctly evaluating your specific property and establishing the “right-price” to sell it. With number of days from listing to contract tightening 22% from this time last year in the Sarasota area and the national trend dropping more than 40%, it is clear that the opportunity to sell your home so that you can upgrade, relocate or purchase investment property are excellent right now. If you are a buyer and think you should wait for inventory to expand or other factors that might slow the market’s recovery, you are at risk of missing out on a terrific opportunity.
It is true, the uncertainty of interest rates, the slower than demand entry of new construction hitting the market, possible entry of a number of distressed properties to inventory, and other factors could slow the growth in demand and prices. However, I believe that no matter the challenge that is reported in the media there are many more that point to continued sustainability of our growing market, making this an excellent time in the Sarasota Real Estate Market to be a buyer or seller!
The following statistical data is provided through the Sarasota Association of Realtors by agents within our local board. The table summarizes what happened in each price segment. The Sold, Pending Sale and Listed columns are sales and new listings for the month of the report, and the Pending Total and Listed Total are the current totals of each. YTD (Year to Date).
SARASOTA MARKET REVIEW JUNE 2013
