First, let me address three things that I believe are going to drive long-term value in our local real estate market:
- “Season” gets longer and longer. I think it’s about 10 to 10 ½ months right now. While there are plenty that make Sarasota their seasonal residence, there is distinctly less seasonality. Residents are staying longer in Sarasota, and more are making it their full-time home. A prominent developer from Naples recently said that Sarasota has a vibe, energy, and amenities that Naples only wished it had. All this bodes well as it stabilizes revenue in key sectors of our economy.
- Upswing in Flights. If you look at flights at our airport, flights have increased as they always do in November. However, these seasonal flights are staying around longer and longer. This correlates with what I said above. That just means we are a more year-round community.
- Sarasota, Bradenton, North Port was announced to have the best job creation among small businesses in the entire country. This is great because small businesses drive our economy and tend to pay higher wages than their entrenched counterparts.
A Tug-of-War Between Buyer’s Market and Seller’s Market
In the short term, how is our real estate market? Let me comment from the perspective of whether you are a buyer or seller:
Buyers
First, I think it’s a great, great time for buyers. Yes, I said that. I think we’re in a lull right now when it comes to buying activity and I expect this to continue into the first week of 2023. As we move beyond this period and into the high season, I think it’s going to get tougher for buyers. We have a lot of buyers who are waiting in the wings as they have still not been able to secure a place here. But right at this moment, I think there’s a unique opportunity to be very, very aggressive when you find a property that you’re looking for. Inventory levels are still tight, so it’s not completely flipped to a buyer’s market. As an illustration, I was at an open house on Sunday. The agent had printed 40 flyers and those were gone within the hour. Buyers are interested in owning but are trying to interpret conflicting messages as to what to do. Yesterday during a conversation about mortgages, one company feels that the uptick in 30-year money has a 2-3 year lifespan. If that is the case, then there are attractive ARMs in the very low 5% range with a 10-year horizon. As always pay more attention to the local market to determine what is right for you.
Sellers
For sellers, I think that there is some pushback. Sellers need to do those extra couple of things that are going to make their properties easier to sell, or to put it another way, easier for a buyer to purchase. Don’t be stingy, do those extra things. We are able to advise you on the specific things that should be addressed to optimize your chances of attracting buyers. Part of the reason to do this is the cost of insurance for the next buyer.*
💡 Insurance sidebar:
* We have seen an increase in insurance premiums over the past few years. This is due to many things including the cost of materials, increased labor, and fraud within the insurance industry. Due to a roof insurance fraud scheme one person estimates that there are over 130,000 lawsuits equally about $8,000,000,000.00 in claims against insurance companies. And while storms do have an impact it remains a small piece of the cost. After all, storms in Florida are not a mystery and insurance companies have had them built into their models for decades.
To provide a concrete example: We have suggested to Sellers that even though the 18-year-old air conditioning system is blowing cold air, it is getting close if not already past its useful life. Many sellers are realizing significant gains on the sale of their properties ($200,000-$2,000,000). And while the cost ($6,000-$10,000) is not much relative to the net gain, sellers still adopt an “if it ain’t broke don’t fix it” mentally. This may not work as well with the current sellers who don’t have all of the power market. A more expensive suggestion is roof replacement. Like the air conditioning, the roof is part of the 4-point inspection required by insurance companies. Because of the widespread roof fraud, some insurance companies are requiring new owners to replace roofs if the existing roof is older than 12 years. Cash buyers have more flexibility as they can self-insure. Buyers who finance part of their purchase (regardless of how small of a percent) don’t have any flexibility. The silver lining for sellers is that new, newer roofs, and air conditioning systems reduce a buyer’s ability to “discount” a property due to the age of these items and make the property easier to sell.
For those sellers that have unique properties, I think the market is very, very stable and they should be patient, even if they get some offers that are below what they’re expecting to receive.
There’s a ton of activity here in Sarasota and with activity, we have a lot of people looking to buy and sell in the real estate market. When you’re ready to get good sound advice for your specific situation, give me a call @ 941.587.0740.
