“Can you believe they’re at it again?” muttered the Starbucks customer, eyes wide, mouth agape as she looked up from her newspaper. “So many homes for sale and they’re building new ones?” she muttered again, sounding even more incredulous as she peered over her glasses at no one in particular. Having read the same article only minutes earlier, we didn’t have to guess what she was referring to.
The Sarasota Herald-Tribune was reporting for the second time in as many weeks that new home building in Southwest Florida is ramping-up again. Mind you, not the big homes with all the bells and whistles that sprouted up like so many mushrooms during the boom; but smaller, more affordable homes designed to appeal to families, first time buyers, retirees and vacation home purchasers. In other words, genuine buyers with genuine needs; rather than rampant speculators out for the quick flip.
What the lady apparently didn’t realize is this. Not since November 2005—amid the glory days of the boom—have there been so few homes available to those who would gladly buy them. No doubt this has plenty to do with prices not seen since before the turn of the century—with historically-low interest rates as an added bonus. This perfect storm of major savings has fueled such steady new demand for housing that building from scratch suddenly makes perfect sense again; which is great news for buyers who want new construction and even better news for the region’s beleaguered job market. You can bet that builders who survived the crash are savvy enough not to build again until plenty of new demand is demonstrably in place.
Here’s why we think it is. The huge inventory of available homes priced below $1 million—that finally peaked in early 2007—has been pared-down by half. In June, combined sales and pending sales for Sarasota County totaled 1,711; far exceeding the 1,034 sales and pendings recorded in November 2005. (Source: Trendgraphix) In other words, unit sales of the most aggressively priced properties in today’s corrected market are out-booming some of the headiest days of the boom.
These same records show that two-thirds of this buying spree took place in the price range below $300,000, which now has only 5.5 months of available inventory based on the present rate of closed sales; and only 5.8 months based on pending sales. In normal times, this technically makes ours a sellers’ market; because any amount below 6 months typically supports seller pricing.
Needless-to-say, these aren’t normal times, with an uncertain number of potential foreclosures and short sales still muddling the picture. For buyers it’s still all about price and bending the market to their will. Sellers who think the market is now healthy enough to raise prices will suddenly find themselves alone in the wilderness. If your home isn’t priced in line with competitive properties, it will only help sell the ones that are.
The market for properties between $300,000 and $500,000 is likewise responding favorably to corrected pricing. The reduced number of listings in this price range as of June 2010—1,224 in all—reflects levels not seen since 1,225 properties were for sale in August 2005. Additionally, June’s 10.6 months of available inventory is lower than at any time since October 2005; by which time months of available inventory had actually risen to 9.1 from the boom-time low of 2.5, recorded in December 2004. Clearly this segment of the market is healing too—albeit more slowly—fulfilling predictions that the overall recovery would start in the bottom price ranges and work its way up.
The most challenged segment of the under-$1 million market is for properties from $500,000 to $1 million. Even here, inventories have been depleted to almost a third of what they were at their height in early 2007. Where months of available inventory were once as high as 71.1—in October of 2007—they are now down to 17.2 in June of 2010; and have continued to occupy this range since falling sharply in March (from 47.6). As in all price ranges, the best-priced properties sell first; and are being further expedited by the relative ease in which non-conforming, or “jumbo” loans, can now be secured through MS&C Mortgage for qualified borrowers with good credit who can also meet down-payment requirements and provide all requested documentation—including income and assets disclosures.
It should warm everyone’s heart to see our local builders selling, building and hiring again; and to watch as these activities ripple positively throughout our entire economy. That residential building starts are down across the country—while buyers here have chewed through such a huge inventory of existing properties that it’s necessary to start building again—speaks volumes about the unshakeable allure of our region.