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Tag: real estate prices

Castles in the Sand

Are we starting to turn a corner?

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

It’s a fact – the number of real estate sales around the country appears to be slowing, but the sale prices aren’t. There is no way to spin this. It’s a fact. The question is, what does it mean and where will it lead?

The June median national sales price was $416,000, according to the National Association of Realtors. However, sales activity continued to slow under pressure from higher mortgage costs and higher asking prices.

Locally, as we saw last week, Manatee County is also seeing a slowdown in sales, but no significant change in selling price – the median single-family home was $550,000 for the second month. June’s percentage of increase for Manatee County was 35.7% from last year, compared to the national average of 13.4%.

The demand for homes continues to exceed the unusually low levels of supply, pushing prices higher all over. High interest rates and record home prices are eliminating buyers from the market every day… not a good position for the real estate market since first-time buyers and move-up buyers are the engine of the market and the single thing that keeps it moving.

And as usual, the economists are all over the place in their opinions about the future. Some expect higher rates to slow the home price growth this year and others expect the home prices to keep rising around 5% this year per the chief economist for Fannie Mae.

I started noticing something interesting as I perused realtor.com for listing and selling prices. I took a sampling of the most recent sales as of this writing in the three cities on Anna Maria Island and Cortez. Out of the sampling of 10 closing in Anna Maria, only three properties sold at full price. Out of my sampling of 10 properties in the combined cities of Holmes Beach and Bradenton Beach, only one sold at full price. And in Cortez, I was only able to use five property sales, but even for those sales, only one sold at full price.

This analysis is, of course, totally random and not very scientific, but it does speak to me that there may be a slight shift. I was frankly surprised – what happened to all those full price and over offers that were going on for so long? Well, maybe what happened is that the market is starting to run out of steam just a little. It would appear there is still plenty of activity and the buyers are out there and being aggressive, but with a little more of a level approach. But what about the sellers? Are they starting to think that negotiating may not be a bad thing?

At the Federal Reserve’s meeting last week, the basis point was raised 0.75% as expected. Generally, every time the Feds raise the rate, it does result in mortgage interest rates increasing. That’s not written in stone, so we’ll see what happens over the next few weeks. I’ve said this many times, but mortgage rates between 5.5% and 6.5% may be a shock to the new generation of buyers, however, those of us who have bought and sold properties or have been in the real estate business for years have lived through much higher rates.

So, are we starting to see a chink in the real estate armor or is it just a little scratch? Is even the mighty Anna Maria Island showing signs of battle fatigue? Or maybe it’s just a normal readjustment of the market to where it should be – you make an offer, the seller counter offers and you meet somewhere in the middle. Those were the days.

Castles in the Sand

Mortgage interest rates rising again

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

Here’s a little perspective on the continuing increase of the 30-year, fixed-rate mortgage. Several months ago, I did an analysis of the average fixed-rate mortgage rates starting in 1971 recorded on Freddie Mac’s website. At the time, something told me that I should hang onto this research, however, I had no idea how much I would be referring to it during the past couple of months.

Since the Federal Reserve decided to increase interest rates in an effort to control inflation, the housing market has been substantially disrupted. Currently, the U.S. mortgage rates have reached their highest level in more than 13 years. The average interest rate for 2008 was 6.3% and we are already seeing rates at or near 6%. In June, the Federal Reserve increased rates by 0.75% points and Fed Chairman Jerome Powell indicates things are not likely to change soon. He hints that at the July meeting there will be another 0.75% increase. Mortgage rates don’t automatically increase when the Fed raises rates, but they are heavily influenced by it.

What we’re seeing happening around the country and in Florida is a decline in the number of sales, not a decline in sale price. Even though there is some increase in the number of new properties hitting the market, it is so marginal it doesn’t even come close to providing enough inventory to satisfy hungry buyers. In Manatee County in May, the supply of single-family homes finally exceeded one month, which is anemic when you consider that a six-month supply of available properties has traditionally been the benchmark for a healthy real estate market.

Complicating the availability versus demand ratio even further is the fact that so many homeowners refinanced their mortgages when rates were under and just over 3%. These homeowners have no incentive to sell any time soon and move on or up to another home. Even potential retirees are rethinking the benefit of selling, helping to freeze the market, not to mention the pandemic providing a new way to do business remotely, allowing employees to work from areas of the country with lower housing prices shifting the market.

Because the interest rates were so low for so long, buyers were able to purchase larger and more expensive homes. However, now with less purchasing power, young buyers are facing the reality of settling for a smaller home with fewer amenities in an area they may not really want to be. Housing costs in the country have jumped from 24% of the average household budget in the early 1970s to 27% in the late 1980s to 35% in 2019 with higher housing costs likely to come based on the increase in sale prices.

Most real estate professionals and economists don’t see prices going down. Goldman Sachs estimates housing prices will grow around 10% this year nationally and Bank of America forecasts 15%. So, it doesn’t look like the Federal Reserve’s plan to lower the heat on the housing market by increasing mortgage rates has worked; there is still a huge demand for properties. It has, however, brought a lot of pain to first time and marginal buyers.

Tony Veldkamp, the president of the Realtor Association of Sarasota and Manatee wisely says, “If the time is right for someone to purchase a home, they should not let interest rates deter them if they can afford the increase in payments. Homes can be permanent, whereas interest rates are temporary.”

I agree. The big picture is that interest rates are still low relative to other times in our history, and that’s my perspective.

Castles in the Sand

Are we starting to see a normal market?

Written by Louise Bolger on . Posted in Business, Castles in the Sand, Real estate | Development.

I’m starting to read in national publications that the real estate market is beginning to return to normal with more new listings hitting the market, especially in what is considered the luxury market. Well, if that’s true, no one told the homeowners and homebuyers in Manatee and Sarasota counties.

But could this be a predictor of the future?

According to Realtor.com, nationally new active listings for June were 43% less than June of last year – an improvement from May of this year, when the difference was 60% from May of last year. Those numbers do show a trend in more active listings nationwide. According to Realtor.com, this change is reflected in the new listing prices going down as well in June.

In addition, Realtor.com is reporting that the number of new listings over $1 million jumped 17.5% for the week ended June 19 compared to the same week last year. By comparison, new listings priced under $350,000 were down 7.4% for the same week. Obviously, lower-end homeowners never have the same flexibility that higher-end homeowners do, especially since many of the higher-end properties are second homes.

Real estate analysts are taking the position that more houses are coming on the market particularly for high-end properties. Owners who decided not to list during the worst of the pandemic when it wasn’t practical to list their homes are now ready to move on. Also, even those homeowners who were not thinking about selling are now rethinking their decision when they see the sale prices zooming up. That said, it is still a hot market with very low interest rates for mortgages. However, per the National Association of Realtors, it is no longer a frenzy where the sky’s the limit.

So, do homeowners in Manatee County believe any of this? It sure doesn’t appear that they do. April, May, and June’s new listings are stable at 797, 787 and 784, respectively. Pending numbers are also very close with April at 1,167, May at 1,180 and June at 1,080. And, there is certainly no negative effect on the median selling price at $405,000 for April, $400,000 for May and $405,305 for June.

That said, the last three month’s new listings, pending listings and median single-family sale price appear to be leveling off. Is it buyer fatigue or are we about to see some changes? Florida has seen a large influx of new residents that started before the pandemic but has accelerated since. We are now the third-largest state in population in the country and have attracted many northeastern homeowners and businesses, alike. So, will Florida follow the national trend?

Maybe. A more normal market would be beneficial for everyone. I just don’t think we’re there yet, regardless of what may be happening in other parts of the country. Florida steps to its own drummer and has always surprised the high-end market in what is considered the more sophisticated areas of the country. But those days may be over.

You don’t need to be a prophet to know that you can’t time the stock market and you can’t time the real estate market. If it’s the right time for you to sell for reasons beyond maximizing your profit, then you must do it. If it’s the right time for you to buy, you need to find the best possible property for your family and try and make it work financially. Thankfully, none of us are Nostradamus. Where’s the fun in being him, anyway?

Castles in the Sand

Home prices, new construction soaring

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

It seems like new home construction and home renovations are taking over Manatee County. If you dare to take a ride east of the beach, you’ll run into new construction starting on Cortez Road, then on El Conquistador Parkway, and don’t even ask about Lakewood Ranch and Parrish. Even the new construction and major renovation projects on Anna Maria Island are making the traffic out here worse than in recent years.

There is a lot of construction activity not only here in Florida, where it seems everyone wants to move, but also around the country. This demand is adding to a shortage of lumber and an increase in lumber prices. The National Association of Home Builders reported that there has been an unprecedented spike in lumber prices, adding more than $24,000 to the price of the average new single-family home and $9,000 to the price of a multi-family home.

Basically, there is a shortage of domestic lumber since lumber mills have closed because of COVID-19. There is also a shortage of Canadian lumber because of COVID as well, but also because of a recent United States tariff on imports from Canada. In addition, although builders have increased activity in the past year, they are hampered by shortages of labor as well as all materials – not just lumber.

A deficit of new construction, as well as the continuing shortage of resale properties, has made the U.S. housing market 3.8 million short on single-family homes. This figure was determined by Freddie Mac after a recent analysis. This single-family home shortage is especially damaging for entry-level buyers who can’t keep up with the ever-increasing sale prices and competition from cash buyers.

Across the country, housing prices are climbing at the fastest pace in 15 years. The January average national home price grew 11.2% from last year. The S&P CoreLogic Case-Schiller National Home Price index reported the price growth rate in two major cities in Florida. Tampa’s prices increased 11.9% and Miami increased 10.4% for single-family homes since last year.

We’re certainly not immune to any of this, as you can see from the March sales statistics for Manatee County reported by the Realtor Association of Sarasota and Manatee.

March single-family properties closed 37.8% more than last March. The median sale price was $395,000, up 23.6%, and the average sale price was $536,981, up 37.4%. The median time to contract was nine days, 79.5% less than last year, and the month’s supply of properties is 0.7% months, 79.4% less than last year.

March condos closed 63.7% more than last March. The median sale price was $245,000, up 14% above last year, and the average sale price was $299,824, 19.4% higher than last year. The median time to contract was 19 days, 55.8% less than last year, and the month’s supply of properties was 0.8 months, 81.8% less than last year.

Cash sales were up for both single-family homes and condos – 75.4% for single-family homes and 40.3% for condos. Unfortunately, this makes buyers who require financing less competitive, resulting in a serious negotiating disadvantage.

The Manatee County housing market continues to surpass all pre-pandemic levels for March, according to the Realtor Association of Sarasota and Manatee. They go on to say that half of all single-family homes are closing above list price, and lack of inventory continues to be the biggest challenge to our real estate market.

If the amount of new construction and the soaring sales prices bring a little shiver to your spine, you’re not alone. I spend several days a week wondering where exactly we’re headed; as always, be careful what you wish for. Stay safe.