The median sales price in Sarasota continues to climb upward. As a broker in Sarasota’s luxury market, I want our clients to know:
- Why is this happening?
- Is this sustainable?
The answer to the second part is easy: rapid appreciation rates that are a significant departure from historical norms are NOT sustainable. With historical appreciation rates somewhere between 3-6.5%, we have had double-digit appreciation of median prices 3 of the last 4 years.
Let’s take a look at our recent history to understand who has been buying and their motivations.
Global Buyers Took Control After the Crash
In 2010, 2011, and early 2012 as our Sarasota property market was searching for a bottom, we benefited from tremendous foreign investment. Properties were very inexpensive, and exchange rates contributed to even better “bargain” prices for the global buyer. This group had a better vantage point and the ability to see the whole forest – and they bought up a huge portion of inventory throughout the state of Florida.
Pent up Demand Precipitated the Next Wave of Growth
While there is overlap in the market forces, and rates of change differ both at the community and neighborhood level, 2012 was a significant transition year.
Domestic buyers were beginning to express themselves. This was a group that had suspended their plans and put their lives on hold while waiting for the 7-year real estate decline to end and a recovery to unfold. This reemergence and their pent-up demand strongly contributed to market growth into 2014.
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Stock Market Gains and Foreign Currencies Weaken – Who was Buying Next?
Investor wealth was also increasing. By 2013, the stock market had gained back all of its losses and then some. In fact demand for real estate increased as more domestic buyers had the opportunity to move their positions from stocks to real estate.
In mid-2014 the foreign currency markets turned in favor of the US$ (most noticeably the Euro and the Canadian dollar). With the weakened buying power of the global buyer, along with rapid appreciation, Florida real estate sales to the global buyer (as purchases shifted from incredible bargains to good opportunities) did indeed fall off for almost a year. Since many buyers who had been waiting also had already purchased, you would think this would soften the market.
Going into 2015 I thought that the market would stabilize and return to more historical norms, yet this has not occurred.
Why Is There Still So Much Momentum, And Will It Hold?
Here we are at the beginning of 2016, more than three years into this phase and prices are not just rising but they are rising rapidly. Is it the price of oil, the cost of the 30-year mortgage rate, or a reawakening of the Force?
I predict this momentum will hold for some time. Read part 2 of 2: Rapid Appreciation in Sarasota Real Estate
Call me with any real estate question: 941.587.0740.
