A few days ago, I was representing a family that wanted to make an offer on a single-family home. As their Realtor, I asked the price they would like to offer. They suggested a price that was under the list price, and they wanted the seller to pay the closing cost. I asked how they arrived at their suggested offer, and they felt the demand for real estate had lowered due to the increase in the mortgage rate. Unfortunately for them, the demand for real estate on the west coast of Florida is still very high and our inventory is still very low.
The latest statistics from The Realtor Association of Sarasota and Manatee reveal our monthly supply of inventory is still extremely low 0.8 months for single-family homes and for condos 0.6 months of inventory. Surrounding counties are experiencing similar numbers.
To understand the Sarasota, Florida current market, we must look at our past, starting with the Great Recession. In 2008 our months of inventory exceeded 19 months according to the Sarasota Association of Realtors compared to the 0.8 months we are currently experiencing. The high inventory caused a decrease in home prices by 52%. This abundance of inventory created a decade of underbuilding, which has finally caught up with us. Danielle Hale, Chief Economist at Realtor.com stated, “At the end of 2021, the U.S. was 5.8 million single-family homes short. It essentially means we’re five years behind when it comes to construction.”
Although builders are trying to keep up with the demand, supply chain issues combined with a labor shortage are making the construction process take longer than usual. Additionally, we cannot rely on existing homeowners to increase the supply by placing their homes on the market, because they will buy again and contribute to the greater than normal demand.
How long will it take to achieve a “normal market”? Industry experts suggest 2 to 3 years.
As far as the mortgage rates increasing, we again need to look at our past. In the mid 90’s, I was a first-time home buyer. My elders shared with me that the interest rate they received for their first home purchase was anywhere from 12-14%. Therefore, when I received an interest rate of 7%, I thought I scored big time! The current mortgage interest rate is 5.25%. Over the past several years we have been conditioned to believe we are getting “hosed” at any rate over 4%. The proof is in the numbers: According to the Florida Association of Realtors, approximately half of the closed sales last month in Sarasota were financed.
What happened with the family mentioned in the first paragraph of this article? We found a home that is perfect for them. The offer was slightly over the list price, and they are paying their own closing cost.
