Monday, June 30, 2008
The question on everyone's mind: Is this a good time to buy real estate in Sarasota??
Read the attached Herald Tribune article and I think you will agree that things are definitely looking up. Inventories are down from their highs (but still plenty to choose from), prices are down to a level in keeping with historic trends, and interest rates have leveled off and probably won't be lower any time soon.
That sure seems like a recipe for getting buyers off the fence!
Email me and let me know what you think...
Article published Jun 30, 2008
Have home prices hit bottom?
In the Sarasota-Bradenton area, sales of existing homes the past few months have moved steadily in one direction: up.The big question now is: Are prices done going down?For the past 10 months, median home-sale prices appear to have stabilized in a band between $240,000 and $270,000. The May figures released last week showed prices dropping a bit from the previous month but staying within that band.A new analysis by the Herald-Tribune of historical price appreciation in Sarasota and Manatee counties suggests that prices may be approaching a more normal level. The newspaper overlaid the actual path that home prices have taken the last several years with what they might have been without the 2004-06 bubble.The difference in the two paths is closing, though a gap remains, and the width of that gap varies based on what level of historic appreciation is assumed. At 6 percent, the gap is more than $30,000. At 7 percent, the gap is within a few thousand dollars. (The graphic at right shows Sarasota-Bradenton prices tracking the 7 percent line for the few years before the boom.)Trying to predict pricing based on a "normal" market is at best an educated guess. Abundant demand, for one, can cause prices to rise at more than a normal rate.The effects of distressed properties can cause them to fall at more than a normal rate. Among market watchers, it is a truism that a market bottom is only visible in the rear-view mirror; no one knows whether prices have bottomed out until long after the fact.But there are signs that the housing market is in transition.Since March, the number of homes listed for sale in the Sarasota Multiple Listing Service has dropped by 12 percent, or nearly a thousand homes. That still leaves more than 7,000 homes on the market, about three times the normal number. As recently as December 2007, however, the Sarasota MLS showed a glut of about 140 weeks of inventory on hand. As of early June, that figure had dropped to 82 weeks and kept falling.Helping fuel sales is more realistic pricing on the part of sellers, who appear to be getting the message that the boom is dead and buried.Buyers are looking, but many are looking for deals, and all are being discriminating about price. Adding to the mix is a wave of foreclosure sales that are further bringing prices down.A historical pictureThe Herald-Tribune examined median sales price data from the Florida Association of Realtors going back to the mid-1990s, and looked at what a "normal" rate of appreciation would have been for single-family homes, compared with the boom-fueled price growth that actually took place.In 1994, the median price in Sarasota-Bradenton was just $94,000.Two years later, it crossed the $100,000 threshold, rising to $102,000. By 2000, it had grown to $138,500.Most economists agree that in a normal market, homes appreciate about 6 percent a year on average; the more generous put that figure at 6 to 7 percent.So how were things faring in the year 2000? Just about right.Starting with the median 1994 price and clocking it forward at 6 percent per year, by 2000 that house would sell for about $134,000. With 7 percent appreciation, it would sell for about $141,000.The actual 2000 median price -- $138,500 -- is comfortably in the middle of the range.But in subsequent years, something begins to happen. The actual median price in Sarasota-Bradenton slips out of the comfort zone in 2001 (just barely), then continues to break away in 2002. By 2003, the gap gets big.The year-end median sales price in 2003 was $189,700, according to Florida Association of Realtors data -- a 15.9 increase.By the end of 2004, it had skyrocketed another 29 percent to $244,100. Comparatively, that steady 6 percent appreciation line would have reached a little under $169,000.The bubble had arrived.The biggest jump was yet to come. In 2005, the median price rose 32 percent to $322,700. If that steady 6 percent rate had continued, the price would have been only $179,000. Even at the generous 7 percent, it would have been just $198,000."It wasn't a lot different than the dot-com bust," said Jody Hudgins, executive vice president of First National Bank's Florida region. "It was greed; it was unsustainable. You had easy, irresponsible mortgage money leading to an inflated demand, and you had people who were able to buy and sell their homes for profit without even trying. People were drinking the Kool-Aid."The high water mark might have been July 2005, when Sarasota MLS members were selling more than 150 homes each week and barely 1,600 homes were actively listed (in normal times, that number would be about 2,500).By the end of 2005, though, the inventory had grown to nearly 4,500 homes. By April 2006, it was more than 7,000. In early 2007, it approached 8,000 -- where it generally remained until just a few weeks ago.So where does that leave us today?The year-end figures for 2007 put Sarasota-Bradenton's median price at $285,700. The 6 percent growth line? A little under $201,000 at that point. Seven percent would have yielded $227,000. Still quite a disparity.But the median price has continued to come down. In May, it reached $246,200.Drawing those 6 percent and 7 percent trend lines out to the end of this year puts them at about $213,000 and $243,000, respectively.Do the numbers lie?Median home prices do not always tell the full story about the true value of the homes in a market.In times of falling prices, the median tends to skew upward, buoyed by those who suddenly feel like they can get more for their money."People tend to buy the most house they can afford," said Steve Dutoit, a Realtor with Keller Williams. "It's only natural, but it means the median price doesn't always reflect the actual market value."Consider the following example: a couple looking to buy a home two years ago qualified for a $200,000 house.They find a $200,000 house they really like, but decide not to buy.Now, two years later, that $200,000 house is only worth $160,000, down 20 percent. If the couple decides to buy the house now, they will have saved themselves $40,000, and the market should reflect a 20 decline in value.But in many cases, the couple is likely to be aspirational -- they do not buy the $160,000 house anymore because they can afford a better house.Homes that were selling for $250,000 or $270,000 two years ago are now selling for -- you guessed it -- $200,000.So given they are already qualified for $200,000, the typical couple tends to spend the money and buy what they see as the better house.The MLS records a $200,000 sale, even though the value of that original house they looked at has indeed fallen to $160,000.That price will not appear until someone else buys it -- and those buyers are aspirational as well, albeit further down the chain. The pattern cascades from there.When all those choices are compounded, a down market may show a 10 percent drop in median price, though the actual value of the typical home has dropped by 20 percent.Key factor: when you boughtThough their usefulness is limited, median sales prices remain one of the few measures to look to for signs of where a market is going and where it has been.So if prices continue to fall, the real question may be: What does that mean for the typical resident? How does that affect those looking to enter, or leave, the real estate market?The answer may depend largely on one factor -- when a person bought their home.If you bought during the boom, well, you are in a pickle. Prices were so inflated that your mortgage is now likely more than your house is worth. Even if you paid cash or borrowed little, the drop in home values means your investment has substantially evaporated.The choices, then, are not good. You can take a financial hit by selling or hold onto the property until prices start rising.Even when they do, though, the home is unlikely to appreciate back to the boom price anytime soon.Some opportunitiesHowever, if you are not an unlucky boom-buyer, falling prices may present some opportunities.First-time home buyers without the baggage of a previous purchase have many more options than before.Another group may benefit as well."For 'move-up' buyers especially, they really can do very well for themselves right now," DuToit said.A "move-up" buyer is someone looking to sell his or her house and upgrade to a bigger, more expensive house. DuToit said it is this group in particular -- if they bought their current home pre-boom (say in the 1990s) -- that can really catch a break.How is that possible?Let's say a couple owned a modest home that during the boom was valued at $300,000. But the couple had been saving for years to move up to a pricier home.During the boom, they came across a neighborhood where the houses were selling for $600,000. They did not buy at the time.Now, because of the falling market, the couple's home will sell for only $200,000. It has dropped by a third in only a few years. Their dream is over, right? Not exactly."Although the typical mid-range house has dropped significantly, we've seen that the more expensive homes have dropped even more in price," DuToit said.So the $600,000 home the couple contemplated buying during the boom can now be bought for $400,000. A desperate seller may even be willing to sell for $350,000.Do some quick math, and it becomes apparent that the couple could sell their house today for $200,000 and buy the one they wanted for $350,000, and they will spend an extra $150,000 to do so.During the boom they would have received $300,000 for their house but their dream home would have cost $600,000 -- meaning they would have had to pay an additional $300,000.Theoretically, the couple can upgrade today for half the money it would have cost a few years ago.Of course, any such deals depend on having the money in the first place.
Read the attached Herald Tribune article and I think you will agree that things are definitely looking up. Inventories are down from their highs (but still plenty to choose from), prices are down to a level in keeping with historic trends, and interest rates have leveled off and probably won't be lower any time soon.
That sure seems like a recipe for getting buyers off the fence!
Email me and let me know what you think...
Article published Jun 30, 2008
Have home prices hit bottom?
In the Sarasota-Bradenton area, sales of existing homes the past few months have moved steadily in one direction: up.The big question now is: Are prices done going down?For the past 10 months, median home-sale prices appear to have stabilized in a band between $240,000 and $270,000. The May figures released last week showed prices dropping a bit from the previous month but staying within that band.A new analysis by the Herald-Tribune of historical price appreciation in Sarasota and Manatee counties suggests that prices may be approaching a more normal level. The newspaper overlaid the actual path that home prices have taken the last several years with what they might have been without the 2004-06 bubble.The difference in the two paths is closing, though a gap remains, and the width of that gap varies based on what level of historic appreciation is assumed. At 6 percent, the gap is more than $30,000. At 7 percent, the gap is within a few thousand dollars. (The graphic at right shows Sarasota-Bradenton prices tracking the 7 percent line for the few years before the boom.)Trying to predict pricing based on a "normal" market is at best an educated guess. Abundant demand, for one, can cause prices to rise at more than a normal rate.The effects of distressed properties can cause them to fall at more than a normal rate. Among market watchers, it is a truism that a market bottom is only visible in the rear-view mirror; no one knows whether prices have bottomed out until long after the fact.But there are signs that the housing market is in transition.Since March, the number of homes listed for sale in the Sarasota Multiple Listing Service has dropped by 12 percent, or nearly a thousand homes. That still leaves more than 7,000 homes on the market, about three times the normal number. As recently as December 2007, however, the Sarasota MLS showed a glut of about 140 weeks of inventory on hand. As of early June, that figure had dropped to 82 weeks and kept falling.Helping fuel sales is more realistic pricing on the part of sellers, who appear to be getting the message that the boom is dead and buried.Buyers are looking, but many are looking for deals, and all are being discriminating about price. Adding to the mix is a wave of foreclosure sales that are further bringing prices down.A historical pictureThe Herald-Tribune examined median sales price data from the Florida Association of Realtors going back to the mid-1990s, and looked at what a "normal" rate of appreciation would have been for single-family homes, compared with the boom-fueled price growth that actually took place.In 1994, the median price in Sarasota-Bradenton was just $94,000.Two years later, it crossed the $100,000 threshold, rising to $102,000. By 2000, it had grown to $138,500.Most economists agree that in a normal market, homes appreciate about 6 percent a year on average; the more generous put that figure at 6 to 7 percent.So how were things faring in the year 2000? Just about right.Starting with the median 1994 price and clocking it forward at 6 percent per year, by 2000 that house would sell for about $134,000. With 7 percent appreciation, it would sell for about $141,000.The actual 2000 median price -- $138,500 -- is comfortably in the middle of the range.But in subsequent years, something begins to happen. The actual median price in Sarasota-Bradenton slips out of the comfort zone in 2001 (just barely), then continues to break away in 2002. By 2003, the gap gets big.The year-end median sales price in 2003 was $189,700, according to Florida Association of Realtors data -- a 15.9 increase.By the end of 2004, it had skyrocketed another 29 percent to $244,100. Comparatively, that steady 6 percent appreciation line would have reached a little under $169,000.The bubble had arrived.The biggest jump was yet to come. In 2005, the median price rose 32 percent to $322,700. If that steady 6 percent rate had continued, the price would have been only $179,000. Even at the generous 7 percent, it would have been just $198,000."It wasn't a lot different than the dot-com bust," said Jody Hudgins, executive vice president of First National Bank's Florida region. "It was greed; it was unsustainable. You had easy, irresponsible mortgage money leading to an inflated demand, and you had people who were able to buy and sell their homes for profit without even trying. People were drinking the Kool-Aid."The high water mark might have been July 2005, when Sarasota MLS members were selling more than 150 homes each week and barely 1,600 homes were actively listed (in normal times, that number would be about 2,500).By the end of 2005, though, the inventory had grown to nearly 4,500 homes. By April 2006, it was more than 7,000. In early 2007, it approached 8,000 -- where it generally remained until just a few weeks ago.So where does that leave us today?The year-end figures for 2007 put Sarasota-Bradenton's median price at $285,700. The 6 percent growth line? A little under $201,000 at that point. Seven percent would have yielded $227,000. Still quite a disparity.But the median price has continued to come down. In May, it reached $246,200.Drawing those 6 percent and 7 percent trend lines out to the end of this year puts them at about $213,000 and $243,000, respectively.Do the numbers lie?Median home prices do not always tell the full story about the true value of the homes in a market.In times of falling prices, the median tends to skew upward, buoyed by those who suddenly feel like they can get more for their money."People tend to buy the most house they can afford," said Steve Dutoit, a Realtor with Keller Williams. "It's only natural, but it means the median price doesn't always reflect the actual market value."Consider the following example: a couple looking to buy a home two years ago qualified for a $200,000 house.They find a $200,000 house they really like, but decide not to buy.Now, two years later, that $200,000 house is only worth $160,000, down 20 percent. If the couple decides to buy the house now, they will have saved themselves $40,000, and the market should reflect a 20 decline in value.But in many cases, the couple is likely to be aspirational -- they do not buy the $160,000 house anymore because they can afford a better house.Homes that were selling for $250,000 or $270,000 two years ago are now selling for -- you guessed it -- $200,000.So given they are already qualified for $200,000, the typical couple tends to spend the money and buy what they see as the better house.The MLS records a $200,000 sale, even though the value of that original house they looked at has indeed fallen to $160,000.That price will not appear until someone else buys it -- and those buyers are aspirational as well, albeit further down the chain. The pattern cascades from there.When all those choices are compounded, a down market may show a 10 percent drop in median price, though the actual value of the typical home has dropped by 20 percent.Key factor: when you boughtThough their usefulness is limited, median sales prices remain one of the few measures to look to for signs of where a market is going and where it has been.So if prices continue to fall, the real question may be: What does that mean for the typical resident? How does that affect those looking to enter, or leave, the real estate market?The answer may depend largely on one factor -- when a person bought their home.If you bought during the boom, well, you are in a pickle. Prices were so inflated that your mortgage is now likely more than your house is worth. Even if you paid cash or borrowed little, the drop in home values means your investment has substantially evaporated.The choices, then, are not good. You can take a financial hit by selling or hold onto the property until prices start rising.Even when they do, though, the home is unlikely to appreciate back to the boom price anytime soon.Some opportunitiesHowever, if you are not an unlucky boom-buyer, falling prices may present some opportunities.First-time home buyers without the baggage of a previous purchase have many more options than before.Another group may benefit as well."For 'move-up' buyers especially, they really can do very well for themselves right now," DuToit said.A "move-up" buyer is someone looking to sell his or her house and upgrade to a bigger, more expensive house. DuToit said it is this group in particular -- if they bought their current home pre-boom (say in the 1990s) -- that can really catch a break.How is that possible?Let's say a couple owned a modest home that during the boom was valued at $300,000. But the couple had been saving for years to move up to a pricier home.During the boom, they came across a neighborhood where the houses were selling for $600,000. They did not buy at the time.Now, because of the falling market, the couple's home will sell for only $200,000. It has dropped by a third in only a few years. Their dream is over, right? Not exactly."Although the typical mid-range house has dropped significantly, we've seen that the more expensive homes have dropped even more in price," DuToit said.So the $600,000 home the couple contemplated buying during the boom can now be bought for $400,000. A desperate seller may even be willing to sell for $350,000.Do some quick math, and it becomes apparent that the couple could sell their house today for $200,000 and buy the one they wanted for $350,000, and they will spend an extra $150,000 to do so.During the boom they would have received $300,000 for their house but their dream home would have cost $600,000 -- meaning they would have had to pay an additional $300,000.Theoretically, the couple can upgrade today for half the money it would have cost a few years ago.Of course, any such deals depend on having the money in the first place.
Labels: Prices Hit Bottom?
