Sarasota Real Estate Sales Mostly Cash

While sales for 2012 look to be on par with the final year of the boom year in 2005, an interesting dynamic has taken hold with respect to financing.  Even with good credit, substantial assets, and lower prices, cash sales are higher than ever before.

Let’s take a look at the trend since 2004.  The following is a chart of total sales and those listed as “all cash.”  The percentage is calculated from the MLS and non-cash sales are the difference between total sales and cash sales.  2012 numbers are incomplete but there should not be a significant change once all sales are finally booked for the year.

   Year       Sold     Cash     Non-Cash      %Cash     %Change     #Change
2004 12036 2089 9947 17.36    
2005 10999 1701 9298 15.47 -2 -388
2006 6807 934 5873 13.72 -2 -767
2007 6360 1131 5229 17.78 +4 197
2008 6824 2674 4150 39.19 +21 1543
2009 8246 4543 3703 55.09 +16 1869
2010 8966 5546 3420 61.86 +7 1003
2011 9573 6201 3372 64.78 +3 655
2012 10536 6706 3830 63.65 -1 505

Sarasota Real Estate Market Returns without the Banks

The lowest year for financed transactions occurred in 2006 and 2007 when the beginning of the “bad time” started.  For the most part, the second half of 20Chart of Cash vs. Non-Cash Sales for Sasota since 200406 was as inactive as a real estate market can be.  The largest jump came in 2008 when cash sales jumped 21%.  In 2009, we see a continued rise in total sales and the number of cash sales exceeded financed sales for the first time.  This trend has held ever since.

The test for financing in 2004 consisted of very lax qualification standards.  The pendulum has definitely swung the other direction but in spite of these challenges, buyers recognized that a 50% loss in market value was enough to figure out ways to purchase properties despite the banks overly strict standards.

Waterfront Properties go Cash

Siesta Key Real Estate, especially Condominiums had 251 all cash sales out of 359 total sales or 71% cashLongboat Key Condos saw 265 all cash sales out of the total 356 sales of 74%.  1871 single family Sarasota residences were cash out of the 3,498 total sales which works out to 53.4% which is quite a bit less than the average.

Difficulty exists when financing many of the condominiums on the barrier islands.  This is due to lender issues with on-site rentals and less than 30 day minimum rentals which is often the case with these units.   These loans no longer are considered “conforming” as they were in 2004 and generally require above market interest rates and larger down payments.   Rates and down payments will be very credit score sensitive but generally, 30% down is expected and borrowers with very good credit scores can expect to pay about 1% over what is advertised.  It is more important than ever to have these questions answered about financing before you even go out and look.  Even though these transactions are reflected as cash, I suspect the other alternative to many are purchasing by using assets on primary residences or other assets available to the buyers.

Future Rewards for Today's Buyers

I would expect lending standards to ease somewhat over the next few years.  The ease (or lack thereof) of buyers obtaining financing does influence prices.  Not everyone has the cash but once the standards come back to the middle, more buyers will be in position to buy. It’s just simple economics, more buyers for a fixed number of condos means prices will continue to go up.  The folks buying now might just have one more incetive to buy now.

Remember, "follow the cash" is one of those things we here when talking about finance.  Right now, the cash is flowing into the Sarasota Real Estate market.  Yes, it is time.

See you in Sarasota,
John Woodward
Sarasota Real Estate Group

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Remember, this is largely opinion and when it comes to determining if and how to purchase Sarasota Real Estate, consult your advisors to see how the current market applies to your unique situation.