Whether you are a buyer, seller, agent or broker of residential real estate, the world in early 2025 probably feels like it has flipped upside down. You might be seriously pondering your next steps. Uncertainty can breed fear, and fear can cause anyone to make mistakes. My advice? Take a few deep breaths. Find an expert who has been through this before, and you will get through this too. The opportunities ahead might surprise you. First, let’s look at what has changed. After the chaos of the COVID pandemic in 2020 and 2021, it was an undisputed sellers’ market, especially here on the Gulf Coast of Florida. Interest rates were low, inventory was low, and demand was high. Sellers were regaling their friends and business associates with how easy it was to sell their properties. Then starting in 2023 and 2024, we entered a period where inventory was still low, but demand seemed to flatten, even though we had a reasonably strong economy. This was caused largely by the spike in interest rates and resulting pressure on mortgage financing. Cash is always king, but for a time in 2024, it seemed as though there were two interest-related factors at work. The first factor was the simple pressure of higher mortgage interest rates. The second factor was the expectation that interest rates might fall significantly late in 2024 or early 2025. This second factor caused many savvy buyers to defer purchases in hopes of obtaining more advantageous financing. The result was plateauing in some sectors of the market. In Sarasota County, for example, we saw fewer homes selling for lower prices than in 2023. There were only about 7,500 single family home sales in 2024. That was a decline of more than 1.5 percent from the year before. Not only that, but the median sale price fell from $515,000 to $505,000. The decline was even steeper for townhouses and condominiums. Other pressures on the market included insurance costs, the memories of the two hurricanes that struck Florida last fall, and condo fees. So, where are we now? The clearest description would be we are in a more balanced environment. On the buyers’ side, inventory is higher than in recent memory. In Sarasota and Manatee counties, we have about a six-month supply in the single-family residential market. This means that buyers have more to choose from than they had even a year ago. Also, median sales prices have softened. This is true in all niches of the market.
Sales competition is getting more creative. For example, in new construction, builders are finding ways to compete apart from price. Some developers are offering buyers incentives, such as buying down their mortgage rates.
With more inventory and less urgency, buyers finally have the luxury of time to more carefully consider their options, to ensure the property they are buying is not just a fair deal but aligns as closely as possible with their needs and desires. That all helps to make this a great time to buy. On the sellers’ side, sales are taking longer to finalize. The average time to close is drifting closer to 90 days. But that’s not out of line with historic averages. Moreover, realization seems to have landed that fixed mortgage rates of around 6.7 percent for 30-year loans and 5.9 percent for 15-year mortgages are the new normal. (That may sound high to some people, but when Michael Saunders and Company started 48 years ago, a 30-year-fixed mortgage was nearly 9 percent and broke 16 percent in 1981. Mortgage rates didn’t fall below 8 percent again until the 1990s.) Acceptance of normative interest rates may induce people to stop deferring a purchase and to get into the market. And so, we expect to see an increase in financed purchases. All in all, this is still a good time to sell.
I offer a caveat, however. With more reflection on the part of prospective buyers, sellers will have the need and the opportunity to highlight the distinctive qualities of their properties and to focus their efforts appropriately. This requires skill and care.
When you read about real estate news—including essays like this one—you are given a lot of macroeconomic data about median prices, inventory and other big data points. This is, of course, important information because it paints a picture of the overall market in which transactions are taking place. But it is also very important to remember that each buyer, seller and piece of property has unique qualities and characteristics that ultimately decide the outcome of each sale. It’s this matching of dozens of specific and very important aspects that makes the business of real estate so interesting and rewarding. The best real estate firms understand this no matter what the market is like. And when we are in a dynamic market like we are now, it is especially important to give careful attention to these details. So, in addition to the macroeconomic data, we drill down to the micro-data that affects individual transactions. We then use the insights we can develop from these data points and observations to help our clients, whether they are on the buyer’s or seller’s side of the table to understand all the factors at play and to achieve a favorable outcome. This is the best advice I can give to anyone trying to make sense of the current market. Find a trusted guide to help you strategize and navigate a transitioning market like this. Part of this must include gathering as much information as you possibly can which should include data about the market, unique attributes about the neighborhood where the property is located, key facts about the qualities the property has, and especially the things that set it apart. If you are selling, find as much insight into a buyer’s mindset as possible. Things are interesting; and making an informed decision is always the most critical aspect of any decision to buy or sell. -- Drayton Saunders, President, Michael Saunders & Company Read the original article in Scene Magazine here.
