Top 5 Pieces of Good News for the Downtown Sarasota Condo Market
The Case-Shiller home price indices for January released last month (click here to read my post) were not the best news in the world for those hoping for a sign that the market might be turning. Every market was either down or flat compared to the prior month and the same month in 2010. This only added to the bad news released the week before that harped on the fact that February 2011 was a record low for new home sales. Also mentioned was how the slowdown in the foreclosure process was going to create a significant amount of “shadow inventory” ultimately flooding the market with more distressed inventory.
With these to data points, the media was abuzz with articles on a double dip (i.e. another prolonged period of decreasing prices) in the housing market. I don’t dispute any of the facts quoted in the articles, but I don’t think they necessarily point to the apocalyptic market collapse that most of the articles suggest, especially here in downtown Sarasota.
In fact, here are my top 5 signs that the market is closer to rebound than collapse.
5. Unemployment nationally, while still annoyingly high, has at least dropped below 9%. Say what you want about how the statistic has been artificially reduced by people leaving the workforce permanently or the fact that it does not reflect under employment (people accepting jobs at salaries significantly less than their prior job), at least the statistic is dropping. Also for the record, I think the national UE rate more important to the downtown market than the local rate, given the profile of the typical downtown condo buyer. Most aren't counting employment income from Sarasota County. If anything, potential buyers are counting on someone in the northeast or midwest buying their primary residence in the north.
4. With regard to the Case-Shiller results, you could argue that we are already in a double dip. Prices started moving up and now they are moving down again. However, I see this as more of the bottoming process than a sign that we are nearing an abyss. Whether you are talking stocks, commodities or real estate, markets rarely go straight back up after crashing. They chop around for awhile moving up and down before making any sort of a meaningful move in any direction. If you asked industry experts two years ago what the bottom would look like, most would say it would look like we have now.
3. Credit related stats are improving. This hasn’t been reported at all, but the S&P/Experian Consumer Credit Default Indices on every type of consumer debt are falling and are now actually back to near pre-recession levels. The weighted average composite index is now at 2.54, back to the December 2007 level. This index ranged between 1.32 and 1.60 during the boom days of 2005, and did not break above 1.60 until March 2007. It peaked in May 2009 at 5.51.
2. There are very few bank owned and pre-foreclosure units in downtown. The chart below shows distressed property information by building for the newer buildings in downtown. There are only 3 remaining bank owned units in this group and a total of 12 listings in MLS that are distressed properties. There are 43 properties with foreclosure notices filed against them but even this larger number is less than 4% of the total. Given that , in 2010, 28% of all condo sales in all of Sarasota County were distressed sales, 4% seems trivial.
1. The levels of unsold condos in downtown Sarasota continue to fall. At the end of March 2011, there were only 301 condos listed for sale in ZIP code 34236, 20% fewer than at March 2010. In fact, you have to go back to December of 2002 to find a point when there were fewer condos on the market. As you can see from this post, the relationship between sales and inventory is still not great and will keep pressure on prices (over a years' supply of inventory). But ever-decreasing inventories is, to me, the biggest sign that things are getting better, not worse.
A final note about the resilience of this market
Currently, the Sarasota County Property Appraiser site indicates that there are 3,710 condo residences in just the downtown section of ZIP code 34236 (i.e excluding Lido). Of those units 989 were constructed in 2004 or earlier. This means that in the 6 and a quarter years between January 2005 and today, the downtown market absorbed 989 newly constructed residences (roughly 36% of the January 2005 base). Those 989 unit sales represent more than 3 years worth of 2010 sales.
Additionally, during this 6.25 year time frame, all of the resales from the new units and base units were aborbed by the market such that by April 2011, the level of unsold inventory was back below the Janauary 2004 levels - in fact is only about 75% of the January 2004 level. And only about 2% of the inventory remaining is distressed.
Even more impressive is that this all occured during the rockiest period for real estate since the Florida land bust in the 1920's.