To say we were busy in 2014 is an understatement: as it turns out, we were the busiest we’ve ever been. Home sales in Sarasota averaged almost 1,000 transactions per month throughout the year – and there’s no end in sight to our current appreciation.
What Does This Mean For Me?
If you’re a homeowner in the Sarasota area then it means things are sitting pretty. The average home has seen double digit annual appreciation for three years running now and most homeowners are finding they have significant equity in their homes again. There’s limited inventory available and multiple offers for homes in lower price ranges are the norm, not the exception.
If you’re thinking about purchasing then this should be a wake-up call. Our median price right now for a single family home is $195,500. At twelve percent appreciation that means a wait of just six months will raise your expected purchase price by almost $12,000.
… OK, But What’s Going To Happen This Year?
The short answer is that home prices are likely to continue to rise as we face stunningly limited inventory and strong buyer responses to new, properly marketed listings. It’s hard to keep up with the volume of buyer calls and I’ve dedicated four full-time buyer’s agents on my team to handle the influx of buyers. The longer I can keep them busy the higher prices will go.
Long term I think more homeowners will take advantage of higher prices and lower interest rates and list their homes for sale. Most sellers will turn around and buy something else (our population density almost always goes up regardless of the housing market – why would anyone want to live anywhere BUT here??). Interest rates are under 4% for most buyers and sellers want to be able to take advantage of positive appreciation quickly on the home they move into,.
… So Does This Mean We’re In A Bubble?
There’s the million dollar question! Let’s contrast what’s happening this year with the housing bubble of ’04-’06.
During our previous housing boom most buyers were financed, and many were placed into dangerous loan products with interest-only loans and/or negative amortization; after a year of payments, they’d actually owe MORE on their home than at the beginning of the year. These days borrowers have to run a mortgage gauntlet and have to demonstrate a continued ability to repay the loan – a significant change from ten years ago.
Another major factor is the preponderance of cash buyers in our market. In some price points the buyers pay cash up to 70% of the time. That’s double the national average of cash buyers and it means that most buyers don’t just have significant equity: they have nothing BUT equity, which means lower long-term carrying costs and the ability to sit out down markets.
Prices will eventually start to slide. That’s normal, and a little stabilization is good for any housing market. I just don’t think it’s going to happen in 2015. I also don’t think we’re going to see a bubble like before – the contributing factors just aren’t there.
Prices Are Up – What’s Your Home Worth?
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