Contradictions of 2016: Sales Slow as Median Prices Rise
In 2016 sales were 5% lower than in 2015. I feel that the acceleration of our market in 2013, 2014, & 2015 was attributable to the many buyers who delayed their Sarasota purchase coming out of the real estate downturn until it was clear the market had stabilized. The appreciation rates we experienced in these 3 years, however, was unsustainable. It appears that in 2016 the market recalibrated and sales slowed a bit. But that is only part of the story…
Before we discuss where I feel we are going, Let’s visit the important themes from the final quarter of 2016:
- Sales for the 4th quarter compared to the year prior were flat. Sales typically taper off in general in this quarter. I suspect the focus on the election also had an impact here.
- Sarasota continues to become less affordable as median prices rise, and there is less and less inventory under 200k. It is 15% smaller during the 4th quarter of 2016 than in 2015.
- The distressed market is shrinking. Distressed sales were down 60% more than they were during the same period last year. In the 4th quarter, about 1 of every 20 sales was a distressed property.
Ultra Luxury Market: Real Estate Wants vs. Needs
In the luxury market, inventory is increasing and taking longer to sell, yet at the same time, the high-end market (above 3M) has seen more unit sales over the prior year. I suspect there is some impact on existing inventory given the number of new construction options coming to market.
In this area of the market, buying property in Sarasota is typically a want, not a need. Those financially able to buy high-end properties have been postponing purchases for a myriad of reasons. More uncertainty about the markets overall is having an impact on this segment.
The luxury market also contracted during the 4th quarter which it does every year. This year it is 9% smaller than the same period a year ago. There is now about 18 months of inventory in the luxury market.
2017 and beyond: Changes in Sarasota’s Real Estate Market
I believe we are at a flexion point in the Sarasota Real Estate Market. So when I share the sales numbers above, I feel that it is underrepresenting the tremendous momentum of sales in new construction. There are definitely a lot of pending sales in this segment as a lot of property under construction has been pre-sold but has not closed and therefore is not recorded.
With all of the cranes in downtown Sarasota, it should be no mystery that the big story for 2016 and going into 2017 is new construction. And it is just not in downtown Sarasota – there are some on the barrier islands and a lot to the north, south, and east of downtown. Throughout Sarasota County, there has been and will continue to be an incredible influx of new condominiums and single-family houses available to current and prospective residents of Sarasota.
This brings me back to two large drivers in our market. The pie is getting bigger. While the immediate effect of new construction opportunities may be taking away from the resale market, I also believe that the pie is getting bigger. With additional development, there are a lot more marketing dollars focusing on living in Sarasota which is getting more attention.
Let’s look just at the real estate in downtown Sarasota. We expect to see 600 hotel rooms become available this year alone. That is double the current capacity. This translates into an additional 218,000 nights of lodging available to welcome back visitors and introduce more people to Sarasota. [See my presentation on this topic here: The Changing Face of Sarasota].
Once visitors experience Sarasota, some will want to have a place of their own which will fill new developments on the mainland and create price appreciation on the barrier islands.
If you are considering buying or selling, I feel it is important for you to know all these dynamics and their impact on current real estate values that are playing out differently in different areas.
Real Estate is hyper local. If you like to understand this for your situation call me @ 941.587.0740
