June 2007 MLS Market Stats (and more)

Since I started publishing my the monthly MLS market stats again, I received a lot of feedback from fellow Sarasota Realtors that they would prefer it if we keep the market area that is covered by the analysis to Sarasota County, rather than including listings in Manatee and Charlotte County.

I gave this some thought and I guess it does make sense since the numbers simply are not complete in those areas - i.e. we do not have all Manatee listings on the Sarasota MLS and therefore we don't get a full and accurate picture.

So, beginning with this month's report I will focus solely on Sarasota MLS areas for the report. This of course has resulted in a 'reduction in inventory' but nevertheless, the numbers are still quite staggering.

The good news is that properties are moving. In June we literally wrote the same number of contracts as we did in the 5 months before. Buyers are looking and they are making offers, and sellers who are willing to price their properties aggressively it seems are getting showings and are having a better chance at selling than say, 6 months ago.

Does this mean we have hit 'the bottom'? Well, I frankly don't know but I would like to hope so. There are still too many unknowns lurking in the shadows of this industry. Just today an article was released on money.cnn.com entitled ARMageddon: Record bill due, dealing with the fact that over $50 Billion in adjustable rate subprime mortgages are scheduled to reset in the next few months, a large percentage of which are right here in Florida. And this on the heels of another story a few days earlier, also on CNN, entitled Florida Foreclosure Future Shock.

I know what many of you will say -- the media is manipulating the facts, etc. but I would take a bit more cautious approach. It simply is a fact that scores of buyers (many of which were playing 'investor') took out HELOCs at 4% prime rate at the time, to use as a down payment to buy that expensive property that they could have never afforded save for the convenient Pay Option ARM mortgages with their initial 1 or 2% teaser rates. All in hopes that we would flip the property for a huge profit within a year or less. Of course this did not happen and now those buyers are faced with the realities: their HELOC rate is now 8.25% (double the payment) and their ARM's will adjust, all against the backdrop of not being able to sell and rents don't even come close to cover ongoing expenses... and that's before any rate adjustments of possibly 30% or more.

One of my collegues feels that it may get yet much uglier. I don't know but I do know this for sure... homes are selling abait at a significantly slower pace, even vs. last year, which was a difficult year to begin with.

Here are the stats in a nut shell: In the below $1 MM market, number of sales are down just shy of 25% vs. 2006. Currently there are 8,352 homes and condos listed for sale (Sarasota only, not including Lakewood Ranch, Manatee, North Port or Port Charlotte!). Based on current sales volume it will take 21 months to clear out this inventory, but of course we know it'll take a lot longer since we are still seeing significantly more homes coming on the market then there are sales.

My word of advise for sellers: Look at recent actual sales and price your home accordingly. Prices are not going to come up any time soon and why would anyone want to pay more when they can get an identical home for significantly less?

For buyers I have this to say: Don't get greedy. Many sellers have reduced to rock bottom and their prices are in line with what homes are actually selling for. Expecting a 20% discount off asking prices that are already truly in line with market values is not going to work. Now with homs that are still vastly overpriced that's of course a different story.

Overall, with respect to the market overall, and with a 5+ year perspective in mind, I am extremely bullish. This area continues to grow very strong and it is only a matter of time until the current inventory will begin to be absorbed. The fact that new home starts are down drasticaly will only add to this. Last year our net migration rate was just over 20,000 for Sarasota County. You do the math. We do live in one of the most desireable areas in the entire state of Florida and as such will always attract our share of newcomers.

So as an investor I must say, that this is truly an outstanding time to start making deals. And amongst the many overpriced listings there are bargains to be found. Today you can buy a brand new 3 BR home in Northport for $140,000. 5 years from now there is no question in my mind that these homes will be priced in the $200K+ range. That would represent a $60K or over 40% increase in values or 8% per year, certainly not an outrageous projection by any means but as any real estate investor knows, by utilizing leverage the actual return on investment would be significantly higher.

As regular readers of my blog know, I am certainly not a the 'darling' of the Realtor associations, but in some respect, now "Is the Time to Buy"indeed.

To access the June MLS Report, please click here.

Your comments and feedback are welcome as always.