Breathe deeply, the fire isn't over yet
If you were reading the local and national papers a few weeks ago when the July housing statistics were published, you would have gotten the impression that we were in the middle of a nationwide fire sale on residential housing. True, there were some impressive numbers giving hope to buyers, sellers and real estate professionals, but take a deep breath the fire isn’t over yet.
The National Association of Realtors reported that home sales rose 7.2 percent during the month of July over June. This represented the fourth straight monthly increase and the highest level of sales since August 2007, the biggest spike in a decade. A third of these sales were foreclosures and other distressed properties selling at deep discounts, dragging down the national median sales price by 15 percent to $178,400.
Locally, our numbers are even better. The Sarasota-Bradenton market home sales rose 30 percent during July representing the biggest percentage point move in the region since June 2004. In addition, the July median price for Sarasota-Bradenton was the highest since September. This is leading local real estate professionals to predict the bottom has been reached in the under $350,000 market with the potential of buyers stepping up to the next higher price point.
The primary reason that is driving all of this activity is the federal tax credit to first time buyers due to expire at the end of November. The tax credit is 10 percent of the purchase price, or up to $8,000. The real estate industry is lobbying Congress to have this credit extended, which as of this writing has not been concluded.
So what’s the problem? Isn’t this all a good thing? Yes and no. Yes, it’s great to be getting inventory off the market, but once sellers perceive the market is improving, chances are you will see a whole new set of properties listed that have been hiding in the shadows just waiting. Yes, it may be great to get everything under $350,000 sold, but if all the first time buyers are gone, who’s going to step in and take their place?
And don’t forget about the unemployment rate that is still climbing, opening up the possibility of additional foreclosures flooding the market, as well as the five-year adjustable rate mortgages getting ready to reset. Florida has also been known as a mecca for second home and retirement buyers, unfortunately these buyers are either not retiring or can’t sell their homes in other states in order to move.
Finally, by now every Manatee County homeowner has received the annual notice of proposed property taxes. If you haven’t already, take a look at the value information portion near the bottom, you’re in for a shock. The market value comparison from last year to this year is staggering, mine went down 30 percent, numbers that sophisticated buyers can easily find out.
I’m not here to rain on anyone’s parade, only to say proceed with caution and don’t expect miracles. Any sales activity is, of course, a good thing, and we may very well be on the first rung of the recovery ladder, but it’s a big fire and we’re going to need a long ladder to get to the top of it.