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In a recent office meeting, the president of our brokerage delivered a full “state-of-the-real-estate-market” address summarizing an article he had just published in the local newspaper. Crowley was inspired by his parents by his parents, the retired founders of RE/MAX Alliance Group, to write the article after they expressed their concerns about the market based on what they were seeing in the media.
“If you only paid attention to news headlines, you would be convinced that the real estate market is in a free fall. Citing sensational statistics like “Pending home sales crash 30%” or “Record number of price reductions” may lead one to think that home prices are falling and the pendulum has shifted into the hands of buyers.
Not so fast …”
Crowley went on to say it’s important to put these statistics into some perspective to understand what is really happening in our local real estate market.
The onset of the pandemic initially throttled the real estate market to almost zero. But what happened after the lockdowns were lifted was completely unexpected. Things like low interest rates, ’work at home’ and ‘work anywhere in the USA’, plus early retirement decisions and frankly, people fleeing the onerous policies of their state and local governments, set the stage for booming demand in The Sunshine State:
Inventory hit all-time lows. Prices hit all-time highs. Days on market went from 30-45 days down to 3-4 days. Multiple offers. 20 was not unheard of, though I personally presented a high of 8. The escalation clause was even implemented to create a closed-end auction by giving buyers the opportunity to increase their offer price in defined increments, up to a maximum bid.
And in an imperfect storm scenario, inflation kicked in, triggering a series of rate hikes that ended a long run of historically low interest rates. Combined with rising appreciation and less mortgage buying power, half the buying market opted out and the market softened.
“…sellers are coming back to the reality that a home must be competitively priced in order to sell.”
As Crowley stated and I agree, 2019 was the last “normal” real estate market. And when you compare all the indicators of today with 2019, you’ll actually find that overall, the current market is more robust today than in 2019.
In spite of this cooling off, the market is still quite out of balance with supply and demand, which will continue to support strong home values. Just not the runaway appreciation. I also recall a prior office meeting where our managing broker stated that during the boom, you could have increased inventory by a full 30% and still not met the demand the market was experiencing.
So in one sense, we welcome ourselves back to 2019. While we’re still experiencing record appreciation and a shortage of listings, absent is the chaos of multiple offers, escalation clauses and going under contract in just hours instead of weeks and months.
Those were exciting times in 2021, which was by far our busiest real estate market in history. But like so many other things, ‘exciting’ is not always sustainable. We were still doing the same 65 Things to close the sale, only in a 10th of the normal time. Talk about a lot of frazzled nerves in mortgage, title, inspections, repairs, marketing, you name it. Yet they remained true professionals and always came through for us, accomplishing the mission each and every time.
Even buyers and sellers weren’t spared the excitement: Outlandish contract terms, super fast closings and unbelievable pricing. Oddly enough, the offseason rental market even flourished as savvy buyers started setting up camp here, ready to pounce on the next new listing. Gone were the days you flew in for a long weekend on the Suncoast, kicked a few tires, signed a deal and spent the rest of the weekend on the beach. Buyer fundamentals are diligence and motivation. Seller fundamentals are competitive pricing and accepting the fact that new construction is still competition.
In closing, Crowley emphasized that this return back to “normal” is just plain healthy. The combination of cash purchases and tighter mortgage underwriting guidelines will help ensure the market stays that way. With this frenzy now behind us, we can resume a calm and orderly tempo.
Want to know how your Suncoast home stacks up in the marketplace? Need answers to questions about the Suncoast real estate market? Looking for your Florida Dream Home? Call, click or text. I’m always here to help.
Peter Crowley is president of Re/Max Alliance Group.