Sarasota Real Estate Market Continues Up
The Sarasota Real Estate Market is peaking at higher levels both in units sold and price as we predicted at the end of last year. This is good news for sellers in this market. For buyers who believe history repeats itself, there may be opportunities to buy at relatively attractive levels over the summer.
Sales May be at a Seasonal Peak
Sales appear to be peaking at the same time as the previous two years during early summer but at an almost 10% higher level than last year in terms of units sold. After making two attempts at breaking the $137 per square foot level in May and December 2012, the average price per square foot broke into new territory to $145 per sq.ft. in May representing an almost 6% increase in price. The average cost of a Sarasota home also is at recent highs at $278,000.
Timing Your Home Purchase
We place a lot of weight on the 3-month rolling average to smooth out the dips and spikes that occur normally. This month, we have overlaid the actual monthly number to confirm that the trend is beginning a seasonal flattening we have seen over the past three years. What we see is the month to month number is coming down to meet the three-month average. What this might mean is history is setting up to repeat itself and the buying opportunity is going to be this summer. Remember, our reporting date is the closing date so if you roll back 30-60 days. This is a good approximation of the date the home was contracted for. Since 2010, closing prices tend to be better for buyers in between August and October which means, contracts written between June and August were the best deals for buyers.
Interest rates below 4% are at historic lows. Factors like an improving job and real estate market may influence the Fed to raise their rates to banks. Higher interest rates may cool appreciation levels in the future if such action is taken. Unless you are paying cash, interest rates do affect the overall cost of ownership. The thought of hoping for higher interest rates to cool prices is not a sound approach to buying a home. A 1% increase from a 4% increase represents a 25% increase in the interest rate paid.
For example, a $100,000 loan amortized over 30 years costs $477/mo. The same loan at 5% costs $537/mo. This is a 12.5% higher payment which works out to $3,600 per $100,000 borrowed over a five year period.
Annual Real Estate Comparison
Annually, the average price for a Sarasota home is at $263,872 compared to 2012’s $247,528. The average sale price to list price ratio is up 1% from 94% of asking to 95%. The average cost per square foot is up from $131 to $139, a 6% increase. Days-to contract is down from 115 last year to 95 through May of this year. All are indications that the market is stronger than last year. This has been the trend for the past three years.
Inventory levels in Sarasota County fell below the 4,000 mark once again. With 1,183 total recorded sales in May, this means that inventories are at less than a four month supply. A typical real estate market is considered to be “in-balance” with a six month supply of homes. That is, taking the monthly sales and dividing by available inventory gives you the monthly supply. This fact may cause the seasonal dip to be less than in prior years when inventory was higher and the total numbers of sales were less.
Inventory levels are at 3,898 as of the time this was written. See the inventory levels right now in comparison.
The Foreclosure Picture
New foreclosure filings continued on a downward trend. There still remain a lot of foreclosure properties that are “in-process” yet the supply of foreclosures represents a fraction of the total sales. We would not recommend looking just for a foreclosure in your property search. We suggest you look for the property you are interested in and in the event there is a foreclosure that fits your search, we automatically include the foreclosed property in your update.
Sales Breakdown by Type
Out of the total number of sales, foreclosures and short sales are at historic lows in terms of the percentage of total sales. Normal sales have risen to account for over 80% of the total sales while short sales are less than 10% and foreclosures are at slightly higher than 10%.
Condiser Purchasing before Next Season
We expect sales to be brisk and the general trend is for pricing to continue upward. We suggest that if you are in the market to buy, there might be a better chance of getting your best deal over the summer vs. waiting until the snowbirds are back next fall. We also expect a flattening in the number of sales simply due to limited inventory. This will only worsen for buyers in the fall. We also see some pressure on the Fed to raise interest rates over the coming months which will only push the cost of ownership higher.
Historically, real estate runs in 5 to 7 year cycles. We don't expect 10% per year as with last year but a more modest 5% would be sustainable even if the Fed does raise rates in the next year. It would not be unreasonable to expect this upward cycle to continue closer to a 7 year cycle given the depth of the last downward cycle.
We hope you enjoy and find our analysis helpful. We look forward to helping you find your home in Paradise. We welcome your comments and positive response!
Sarasota Real Estate Group
PS - For those following our market updates. We changed our search basis to eliminate
docks and slips. These sales are showing 1 square foot which is throwing off the cost
per sqaure foot number. You will see a difference in the current charts for May 2012
from prior posts.
- Annual Market Report for Sarasota
- When is the Best Time to Buy
- Real Estate Sales in Sarasota are Cash 2 to 1
- Sarasota Real Estate Search
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