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Major Inventory Reduction Underscores Market Recovery

The unsold inventory of homes in Sarasota County is at its lowest level since June of 2006; this according to the latest update from Trendgraphix. And while this level has yet to approach the six month supply considered healthy, the inventory has almost been cut in half since reaching a high of 33.5 months of available inventory in January 2008. By May, thanks to a steady increase in monthly sales, that number shrank by a considerable margin considerably to 17.2 months of available inventory.

A decline in inventory is significant to the anatomy of a market turnaround. Global Insight, one of the most highly-respected forecasting companies in the world, said in one of its most recent industry forecasts that “A housing market will not hit bottom until its inventory level starts to come down.” So we have definitely taken a giant step in the right direction with improved sales contributing to a drastic erosion in inventory.

Newcomers to Florida might also want to consider another important fact before choosing where to live: Global Insight now lists Sarasota-Manatee as one of the eight Florida markets (out of a total of 20) that are now considered undervalued. After being overvalued by as much as 40.4 % in the 1st Quarter of 2006, Sarasota-Manatee is now listed as being undervalued by -4.8% for the 1st Quarter of 2008. Interestingly enough six of the eight undervalued Florida markets are on the West Coast, while only two are on the East Coast, where sellers’ reluctance to lower prices has stymied the pace of their correction. The other 12 major real estate markets in Florida are still considered overvalued. Miami leads the pack with a 27% overvaluation.

  • User Gravatar ToddinFL
    July 10th, 2008

    Michael Saunders said:

    “After being overvalued by as much as 40.4 % in the 1st Quarter of 2006, Sarasota-Manatee is now listed as being undervalued by -4.8% for the 1st Quarter of 2008.”

    As many investors in the U.S. financial sector can attest to over the last 2-3 years, ‘undervalued’ can become much MORE undervalued; sometimes by a large amount. Just ask shareholders in Bear Stearns, Lehman Brothers, Citigroup, KeyBank, FanniMae, FreddieMac, Washington Mutual, etc …

    Real estate transactions in SRQ may be up; but prices have still further to fall. Until deficit spending comes to a halt – both on a personal and governmental level, real estate prices will continue to fall.

    We’re a considerable distance from that realization in this country. But we’re getting closer every day, which is a positive development.

    Just one person’s opinion.

  • User Gravatar Jim Golm
    October 1st, 2008

    The inventory was cut in half because we all took our properties off of the market! In order to cut the “real” inventories, programs will have to be offered to get the buyer motivated and the seller motivated to sell. I have suggested the following to multiple venues. Perhaps it is too simple to be understood?

    I suggest the following be included in the buyout package: for the next six months, on any privately offered house purchased, the buyer would be able to double his/her mortgage deduction for the next five years. Additionally, the seller would receive a tax credit on the amount proven to be a loss including the cost of sale. Limit the program to homesteads and limit the deductions to median home values in the particular market. So a home purchased in Los Angeles would have a higher deduction possibility then a home in Fort Wayne. If the sellers knew that buyers were on the market again for a short six month period; prices might drop to sell the home and buyers might get some sense of urgency to start looking. If this part is not included these foreclosed homes will so overshadow the free market houses that the free market homes will become the problem very soon!
    This is not a bailout; it is not a cheesy rebate check. It does not help the speculative housing market. It does not provide help to the stupid sub-prime lenders who were giving away money. It would cost the government nothing because now with nothing happening there are no tax revenues! All it does is help the common person buy or sell a home.

    Perhaps a creative realty firm could fashion something similar without government input?

  • User Gravatar Bobby
    October 12th, 2008

    I believe after reviewing all the recent inventory and pricing that this fabulous market will not return to a seller’s market or for that matter a “normal” market until prices come down further to the 999-2000 range. My reasoning is simple. The majority of buyers are retirees from northern states with a recent influx of foreign buyers currently taking advantage of the exchange rates.

    Both types of buyers have now suffered substantial losses to their retirement accounts. Both have suffered substantial losses of their primary home equity and to make matters worse lenders have moved away from lending to foreigners without substantial down-payments of 40-50%.

    Thus, it is crucial for all sellers through the help of their Realtors as well as other industry experts to set the expectations to the realities of our times. Prices must continue to drop to allow those buyers up north and from abroad who buy in masses at $150-$350k to come back to the market. For those wealthier individuals the trend to buy the premiere properties will continue but in fewer numbers as the ranks of the wealthy also continue to be depleted.

    Sellers must recognize that their attempt to recoup their investment is no longer sustainable in a spiraling market. Sellers will need to do everything possible to decrease their obligations and get out from under their upside down properties. For those who can wait, it’s a different story. But for those who continue to believe that they will get a buyer willing to pay what they paid from 2001-2006 is wishful thinking.

    The latest market crash has changed the landscape enormously and people will no longer be willing to plunk down more than they can afford. Conservative buyers will make a tough market even tougher by waiting for prices to align with the new standards set by market changes.

    The sooner the market reacts to this new era of conservative spending, the quicker our real estate markets will return to an order of normalcy. Sellers who truly want to sell no longer have the option or luxury of recouping lost equity. A sad situation for many, but without a reality check, the entire market is affected.

    Just my humble opinion.

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