Sarasota 2015 Housing Forecast
Realty Trac—a leading provider of data for the housing industry—began the New Year by reporting that three Florida metro areas experienced some of the nation’s largest gains in median home prices in 2014. One of them,
Sarasota, saw a 12% year-over-year increase. There is little doubt that low inventories amid persistent high demand are the cause. Still, the double-digit rise means that substantial levels of home equity are seeping back into the market, giving local homeowners a real incentive to list their homes and pursue their own long-deferred housing goals. A greater selection of homes will also hasten a balanced market and establish a more sustainable rate of annual property appreciation. Building from the premise that equity is surging back into our homes, there are plenty of reasons to be optimistic about the region’s housing market. Barring any unwanted jolts to the economy, here is our basic forecast for the region’s housing market in 2015:
Inventory Levels Will Continue To Rise
After declining for most of 2014, local inventories began to trend higher in September; improving at an average monthly rate of 3.9%. We expect the trend to accelerate as rising equity encourages more owners to sell their homes this year. Sarasota and Manatee Counties have 5.2 and 5.0 months respectively of inventory based on the current rate of sales. This is just below the 6-month level that is considered the threshold of a balanced supply. Charlotte County has 6.4-months of inventory. Concurrently, builders are finally catching up with the demand for new construction. Everywhere you look new home and condominium communities are springing to life as orders are taken and fulfilled. As proof, building permits rose by 24% during Sarasota County’s fiscal year 2014, compared with the previous fiscal. Meanwhile the foreclosure crisis—which helped home prices plummet by as much as 60% from their highs—appears to be waning. As such, there are fewer distressed properties to exert any additional drag on home prices.
Demand Will Continue To Pulse At Healthy Levels
With more people finding jobs, the region’s improved employment picture has buyers feeling confident about taking on debt, even as rents continue to skyrocket. Moreover, a recent survey by
Fannie Mae showed that 9 in 10 younger renters would prefer to own. Demand in our region will continue to be strongest among retiring baby boomers. But they will be followed close behind by a growing contingent of “millennials” (people born between 1981 and 2000). Look for our region to attract more than its fair share of older millennials who now have secure jobs, growing families, far less debt; and are weary of renting. According to Jonathan Smoke, Chief Economist at
realtor.com, 65% of all first-time home buyers are millennials; and of those planning to buy, 86% indicate their motivation is a change in family size.
Interest Rates Will Rise
The historically low rates of the past several years are expected to rise in 2015 as the Federal Reserve’s system of quantitative easing acknowledges the resumption of solid growth in the economy and job market. The good news is the current rate of 3.9% on a 30-year fixed-rate
mortgage is not expected to exceed 5% by year’s end—and most of us can remember when 5% was considered low. Still, if you are planning to finance a home in 2015, find it soon and lock in the lowest possible rate. Doing so will significantly lessen your monthly payment; and save a modest fortune over the life of the loan. These predictions don’t account for what could easily happen if some of today’s stricter credit and down payment requirements are modulated. Once too lenient, many are now deemed overly restrictive. Should the pendulum swing more toward the middle ground—with credit made easier for qualified and responsible borrowers—all bets would be off. This would be a remarkable game changer for the housing market. Time will tell. SaundersBlog 1/7/2015
