Posted by Scott Norris on Fri, Mar 12, 2010 @ 08:27 PM
If you look at the 6 month rolling chart for Sarasota condo sales, you will notice that the peaks in the charts are all in the late summer (July or August). This trend is caused by the way the chart is constructed and by our seasonal traffic pattern. The six months ended in July, includes all of the sales made during our winter (tourist) season and is usually about 40% larger than the sales in the second half of the year.
But look at the overall pattern of the chart. First look at the July 2007 peak. The sales during this period were inflated by the closing (sales) of a couple of large downtown buildings. Although all of the sales closed and were booked in the first half of 2007, they represented contracts that were signed over the past couple of years. The sales do not represent true demand during that 6 month period. These closings inflated the period's sales by over 250 units.
Without these closings, sales at the 2007 peak would have been closer to 600 units, below the subsequent peak in July 2008 (which was 692). The most recent peak in July 2009 was 832 unit sales (Again, these are rolling 6 month figures, so the sales figures quoted are for the 6 months ended on July 31st.) This gives us 3 seasons of progressively higher demand.
But the most exciting part of the chart is the activity after July 2009. Instead of falling off during the trough period of July through December, sales have remained steady. In fact, the trough month is January and sales in this perid are usually about 70% of the previous peak. For January 2009, the rolling 6 month sales figure is about the same as the previous peak (823 in January vs 832 in July). If we move up the usual 40% from here, the 6 month sales figure at the 2010 peak could break 1200 units (back to 2005 levels). If inventory levels stay the same (and they have been flat or decreasing every month since June 2007) the condo absorption rate could drop to under a year.
Another good piece of news is that these condo sales have not been driven by foreclosures. Bank owned sales for the past 6 months have only accounted for 71 of the 823 sales or about 8.5%. So, if there is a wave of foreclosures in condo inventory, they should all be devoured in short order given the short absorption period for foreclosures (See my post on Foreclosure Overhang for more info on this.)