Overvalued Southwest Florida Markets See Declining Sales, But Median Prices Holding

The national housing market cool-off is being felt by South Florida real estate buyers and sellers, with sales down 16 percent in the Sarasota-Bradenton market and down 6 percent in Charlotte County-North Port during 2005.

The Sarasota Herald-Tribune says the downturn was even more pronounced during December, with sales down 42 percent and 25 percent in the two markets, respectively, compared with the same time last year. Listings in the region have been skyrocketing, meanwhile. There were 5,369 homes on the market in Sarasota at week’s end, compared with 3,525 at the end of November, the Sarasota Association of Realtors reports.

Industry insiders blame the shift on the flight of speculators and investors, estimated to have comprised about a third of the area’s real estate players in recent years. The lack of action has also caused small-time Sarasota real estate investors who bought homes during the last six to 18 months hoping for a quick profit to suddenly look for an exit. And there isn’t one, at least not at a price they are satisfied with.

“There are lots of new listings. The competition’s fierce, and there’s a lot of disappointment out there. The investors have completely gone away,” said Thomas Heimann of Sarasota’s Bravo Real Estate.

Prices are still holding, however. The Sarasota housing market finished 2005 with a median sale price of $322,700, a 32 percent increase from the previous year. The December median was $344,300, up 25 percent from the same month in 2004, the Florida Association of Realtors reported Wednesday. Charlotte County-North Port’s median price was $216,300 for 2005, up 29 percent, while its December median was $223,800, good for a 26 percent bump.

• No Florida market saw a decline in value, either during December or 2005 as a whole.
• The state’s annual increases ranged from 10 percent in Tallahassee to 44 percent in Cape Coral Fort-Myers, as North Florida real estate proved much more affordable for buyers.
• Naples real estate, meanwhile, a market considered by many to be overvalued, and often compared with Sarasota-Bradenton, posted a 4 percent increase in the number of homes sold in 2005 and held on to its (perhaps undesirable) title of Florida’s most expensive community with a median price of $482,400, up 30 percent since the prior year.

But what’s clear is that Florida’s residential real estate boom is sputtering. Statewide, sales dropped 15 percent during December. A total of 248,565 homes changed hands in the state during 2005, a 2 percent increase from 2004, while the median price rose 28 percent to $235,100. Despite its weak fourth quarter, 2005 was the fifth-straight record year nationally for home sales, with more than 7 million units. That was up 4.2 percent from 2004.

Realtors were disappointed with the 671 closings in the Sarasota-Bradenton area during December. Some real estate agents blame the downturn in sales on prices that have escalated beyond reason, as well as recent “red tide” and a hyperactive 2005 hurricane season.

“The red tide was terrible, I’d take people out to the beach and we’d all start coughing. They’d say, ‘I’m not so sure I want to live so close to the water,’” said Beth Barnett, a Coldwell Banker Realtor in Manatee County.

Others are more optimistic that the recent doldrums are temporary, and that the factors returning the market to normal levels are natural.

“We have our dips, but other than that, it is a strong market. We still have a strong influx of baby boomers coming into this area. I’m selling all the time to guys in their mid-to-late 40s. The only slow stuff is the $3 million-plus condos downtown. Because a lot of the projects like the Ritz, the Beau Ciel, there were a lot of investors, and now they are reselling their units, so there is a lot of inventory $3 million-plus,” said Rod Phillips of Sarasota’s Waterside Realty.

December is usually a very slow month, with the exception of wild 2003 and 2004 periods where sales were off the charts. Realtors think the region is simply heading back to a more of a normal market. People may be reducing prices, but typically those prices that are being lowered were probably a little high to begin with. Buying patterns have also shifted.

“Last year, sellers could ask any price they wanted, stick a sign up and it’d be sold in days. The builders were only paying Realtors 2 percent commission for buyers and sticking too many clauses against investors. Now they’re paying 4 percent and offering us bonuses,” Barnett said.

So, if you are looking to capitalize on low Florida home loan rates in the coming months, keep a close watch on overvalued markets to see if prices come down a bit — and that you don’t pay more than a property is worth.