MARKET UPDATE:
A Solid May Portends

A reporter from a local television station called the other day to ask if we could set her up to film a home that sold recently. She had heard that sales of existing single-family homes were on the upswing in Sarasota and wanted her viewers to see exactly what types of homes are selling in today’s recovering market. We gently reminded her that it isn’t any specific type of home that is finally luring buyers off the fence. It isn’t necessarily the more modest homes on the market; nor the most luxurious ones. No, we told her, the homes that are moving today are the ones in every price range that are tagged below all others in their competitive sets—period.

At first she seemed crestfallen that her idea for a good story with a compelling visual had disintegrated with one phone call. Then she got the message: Today’s market is all about “price-price-price” in the real world left behind by the unreal boom of 2004-2006.

When the Florida Association of Realtors released their sales recap for May 2008, the news happily confirmed what we had already sensed from the bustle of activity cycling through our 15 residential sales offices. Homes in Sarasota-Bradenton sold at a rate 11 percent higher than last May and 75 percent higher than just this past January. Since the beginning of the year, unit sales have risen with each passing month, causing the number of homes listed for sale to drop from 140 weeks of inventory on hand at the end of 2007 to 82 weeks at the end of June; and we still continue to vastly outsell much larger Florida markets, like Miami, where sellers have yet to fully accept the new realities of today’s competitive pricing.

It’s fascinating to note that May’s median price of $246,200 for an existing single-family in Sarasota-Bradenton, although 13 percent less than this time a year ago, is almost exactly what it would have been at this moment in time had normal annual appreciation of seven percent not been supplanted by the wildly unsustainable boom-time appreciation of 2003-2006. This according to the Sarasota Herald-Tribune, whose examination of median prices during the boom showed a jump of 15.9 percent in 2003; then 29 percent in 2004, and 32 percent in 2005.

In a related article, the newspaper reports that there is resumed growth in the region’s mortgage market. No surprise there. It stands to reason that more homes selling and going pending would ignite a corresponding increase in mortgage loan applications. What is more important to note, amid recurring reports of turmoil and problems in the lending industry, is that good fixed-rate loans—with the most favorable interest rates in years—are plentiful for qualified buyers. Interest rates are not expected to go any lower this year, as the Fed worries less about the housing market than shoring up the dollar, stemming the rise in oil prices and keeping inflation in check.

“You could say the market is returning to the home prices of five years ago,” the article quotes John O’Neill, chief executive of Century Bank in Sarasota, as saying. “And that we are returning to the lending practices of five years ago.” O’Neill is referring to the more traditional methods of qualifying borrowers that existed prior to the boom. “The person who qualifies today is very strong in their job, their income and their ability to put money down. We are talking about fully documented loans.”

So there you have it. Unit sales are on the increase, prices are where they should be, inventories are diminishing, interest rates are unlikely to go any lower in the foreseeable future and mortgage loans are plentiful for buyers who can pass muster on traditional qualifying methods. All the fences have been removed.