Better weather on the Keys (By Raul Elizalde, 9/07)

A significant improvement in the market for Siesta Key and Longboat Key condos bodes well for sellers.

Despite doom-and-gloom media coverage and serious problems in the mortgage front, real estate market conditions in Sarasota have undoubtedly improved compared to last year. More sales are taking place and the number of condos and homes for sale in Sarasota has gone down. This reversal of fortune is quite clear in the Longboat Key condo and Siesta Key condo markets.

The number of condos for sale on Siesta Key went down by more than 10% to 545 at the end of July from a peak of 620 during February. Condos for sale on Longboat Key declined over 16% to 420 from the March high of 503. At the same time, monthly sales increased on both Keys: the number of condos sold on Longboat roughly doubled, while on Siesta it almost tripled compared to the extra-sluggish months of 2006.

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Sarasota Waterfront Values

The value of Sarasota waterfront homes has climbed steadily over time.

(By Raul Elizalde, 7/07)  

When talking about waterfront, it is often said that “they are not making any more of it”. That is intended to mean that the scarcity of waterfront properties is an important contributor to their sustained value and that because of it, they withstand the ebbs and flows of the general market than other properties. When it comes to Sarasota and Siesta waterfront homes, this is certainly the case.

Read more of Sarasota Waterfront Properties here:

Sarasota Real Estate Insights-Longboat Key and Siesta Key Condos

Demand and supply conditions for Longboat Key Condos seem better than for Siesta Key Condos, especially for Bayside units.

(By Raul Elizalde, 6/07)  

Readers might recall that last month I showed how different price brackets of real estate in Sarasota show very different supply/demand conditions. In the aggregate, single-family Sarasota homes priced well below $1mm sell more often and have less competition than higher-priced homes. The interesting fact, however, was that at higher prices the relationship breaks down: more homes sell in the $2-2.25mm category relative to supply than in the $1.75-2mm bracket, for example. This finding reflects the much-larger supply of Sarasota homes at the lower range, while the volume of past sales is roughly comparable I also warned that these findings are applicable to all Sarasota County homes as a whole, but every area is different and has to be analyzed on its own. Siesta Key and Longboat Key condos illustrate this point well. Gulfside condos in Siesta Key and Longboat Key have a roughly similar pattern of inventory accumulation for prices below $1mm. On the basis of the last 12-month sales volume, both Keys have around 20 months of inventory. In the lower price ranges, both have a bit of a glut in the lower range (below $600,000). In the above-$1mm category, however, Longboat Key condos seem to be in a much healthier position than Siesta Key condos. Inventory at the higher price levels reaches the phenomenal 10-year worth of supply (around $1.1mm) on Siesta Key

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Listen To a Sarasota Real Estate Podcast

from the Sarasota Herald Tribune featuring Sarasota realtor Raul Elizalde. Raul talks about buyers who “lowball” sellers.

Sarasota Real Estate Insights: Willing to Negotiate

Sellers balk at reducing listing prices, but yield to the softer market at the closing table. (By Raul Elizalde, 5/07)

It is becoming more and more clear to sellers of homes in Sarasota that the only way to bring traffic to their properties is to price them realistically. Since many sellers are still priced too high for the current market, properties that are priced correctly stand out and get more showings than their overpriced counterparts.

On the other hand, buyers, who are becoming aware of having the upper hand, tend to make offers at significant discounts from whatever the listing price may be, sometimes regardless of whether or not the property in play was priced correctly.

What is a seller to do, then? Price the home low to bring traffic but open the door to unreasonably low offers, or price the home high to leave a hopeful cushion but sacrifice the traffic? This is a tough dilemma.

Read more of Sarasota Real estate, Properties for sale here

Sarasota Real Estate Insights: Time 2 Buy or Time 2 W8?

Should buyers wait for further price drops? Signs of a bottom are near, and it’s all about psychology. Read on.
(By Raul Elizalde, 4/07)

In my November 2006 newsletter (Listing Price vs. Selling Price, November 2006 ) I looked at a common measure of the market: the ratio of Selling Price to Listing Price (SP/LP), which is reported to be around 90% for single family homes in Sarasota. The November article explained that the number is somewhat misleading, because the ratio is defined on the basis of the last listing price before a property goes under contract. Any previous price reductions are ignored.

A better measure is the ratio of Selling Price to Original Listing Price (SP/OLP). Using this ratio reveals a clearer picture of the market. As prices weaken, reductions become more common and the ratio SP/OLP decreases. Also, even without intervening price reductions, sellers become more willing to take low offers and settle for less.

Is it a good time for you to buy a house in Sarasota? Read more Sarasota Real estate updates here:

Sarasota Real Estate Insights: “When will my home sell?”

Inventories are high, but they will eventually return to normal.
(By Raul Elizalde, 3/07)

There were 4781 homes for sale in Sarasota County at the end of January. Considering that during that month only 145 sold, one could say that it would take 33 months like January to sell all those homes. This is a common inventory measure used by Realtors.

But is this the right way of measuring how long a home for sale in Sarasota would take to sell? A better measure would be to take into consideration the total number of sales for the last 12 months, not just for the last month. Because 2708 Sarasota homes sold in the past 12 months, the expected time to sell all these homes would then be 21 months.

In my opinion, these numbers are too pessimistic. On average, sellers will be able to sell their homes in a shorter period of time. Why? Because these extremely long inventory periods are calculated on the basis of recent sales, which have been abnormally depressed since mid-2006. If and when sales return to a “normal” level, then the current inventory appears much more manageable.

But what is a “normal” level?

Looking back to historical sales, the period 2002-2003 appears to show consistent monthly sales averaging 400 single-family homes per month. After that, during 2004 and the first half of 2005, sales levels increased to 450 per month, only to fall below the trend during the second half of 2005 and 2006 to the current levels of just 234.

If we assume that the 2002-2003 level of 400 sales per month was a more “normal” market, then under “normal” conditions the current inventory of 4781 units would take 12 months to sell – that is, an average of 6 months on the market, which is a reasonable length of time.

The question, of course, is: when will sales return to “normal”?.

During most of 2006, prospective buyers were subject to relentless reporting of falling home prices. Why buy, if prices would be lower in a few months? Many prospective buyers, who wanted to buy, were either scared into waiting or decided to postpone their purchases hoping to get a better deal.

As this year starts, there are some indications that the psychology of buyers might be changing. In fact, preliminary sales figures for February indicate that sales of Sarasota homes are higher than those of January, even though February has fewer days and has been one of the seasonally slowest months.

A change of psychology can also be brought about by recent media headlines suggesting that the Sarasota real estate market has found its bottom. Furthermore, interest-rate futures suggest that two more interest-rate cuts are likely this year. Supported by a benign interest-rate environment, the built-up demand from 2006 may well provide a “kick” to sales that might bring the pace of purchases closer to a “normal” level and thus help homeowners sell their properties.

When it comes to knowing the Sarasota real estate market, Alison and Raul Elizalde have the expertise and knowledge to help you see where you stand when negotiating your real estate transaction, whether you are buying or selling a property. Our track record, added to the unsurpassed reputation of Michael Saunders & Company as the premier real estate company in Florida’s Gulf Coast, give you the peace of mind you deserve. Alison and Raul have been named Best in Customer Satisfaction by an independent research company.

Call us today at 941-350-7904 for a consultation, and visit our website, www.SarasotaProperty.info, for monthly updates on the Sarasota real estate market.

Sarasota Real Estate Insights: Winners and Losers

When it comes to prices, Lakewood Ranch took it on the chin – but other areas were barely affected.
(By Raul Elizalde, 1/07)

Following up on my previous newsletter, this month I focus on how prices for similar properties changed in various neighborhoods of Sarasota over the course of the year. I compared selling prices for Sarasota homes and condos in the last quarter of 2005 with the last quarter of 2006.

The media reported a significant price drop in Sarasota real estate prices for the year, and last month I argued that this drop, although real, was probably overstated due to measurement problems. Coming up with an accurate price drop measure is difficult because properties that sold at the end of 2005 were not readily comparable to properties sold at the end of 2006.

For example, if one year most sales are of waterfront properties and the following year most sales are of mobile homes, the median price would register a massive decline. Yet, this does not necessarily mean that the price of any property has gone down; only that buyers, a year later, decide to purchase cheaper properties.

Because the collection of properties that sell at different times is not exactly the same, calculating the exact price change is virtually impossible.

To minimize these problems, I compared homes and condos in Sarasota that sold a year apart fitting very strict definitions, i.e. within a narrow range of square footage, number of bedrooms, age, and so on. Not all areas in Sarasota had enough property sales to make relevant comparisons, but I have found a few areas that had a meaningful number of transactions to provide a reliable estimate.

Here is what I found:

Area	Median Price Change (4Q05-4Q06)	Median $/SF change (4Q05-4Q06)
Central Sarasota (Between Fruitville and University, US41 and I75)	-3%	-6%
Central Sarasota (Between Clark & Bee Ridge, US41 and I75)	-12%	-16%
Central Sarasota (Between Bee Ridge and Fruitville, US41 and I75)	-18%	-13%
Lakewood Ranch	-20%	-21%
Gulf Gate	-16%	-13%
Siesta Key, Bayside Condos	-9%	-3%
Longboat Key (Gulfside and Bayside Condos)	9%	2%

With the exception of Longboat Key condos (more on them later) all areas showed a median price decline. The same is true for the median price per square foot, which is possibly a more accurate measure. Central Sarasota homes fell unevenly, with the area between Bee Ridge Road and Fruitville Road showing the largest decline. A possible reason for this is that this “East of the Trail” area was popular with investors during the heyday. It might be that prices a year ago were somewhat inflated because of this, or that this year investors are willing to take a price cut to unload their investments quickly. In general, the presence of investors lead to wider price swings.

Lakewood Ranch, an area that saw explosive growth in recent years, registered the largest drop in this sample of Sarasota real estate areas. Possible overbuilding might have been a reason. Every single month since 1/05, the number of properties for sale in Lakewood Ranch has been higher than the previous month, showing an 11-fold increase in listings from 56 homes to 612 in less than two years. Inevitably, this kind of supply puts a lot of pressure on prices, which is reflected in the sizable price drop I measured.

Longboat Key condos seem to have bucked the trend since the median price change shows an increase. But the factor here is that in the last quarter of 2006 many of the condos sold were on the Gulf side of the road or had access to the beach. In the prior year, however, condos of the same size and age were sold exclusively on the Bay side of the road, which are less expensive. This is a real-life example of how numbers alone can be misleading. I included Longboat Key condos in this analysis just to illustrate this point.

All this reaffirms my previous month conclusion that the 18% median price drop reported in the newspaper does not explain much. Every neighborhood in Sarasota has fared differently. I also continue to believe that this number is probably overstated when applied to the entire Sarasota real estate.

When it comes to knowing the Sarasota real estate market, Alison and Raul Elizalde have the expertise and knowledge to help you see where you stand when negotiating your real estate transaction, whether you are buying or selling a property. Our track record, added to the unsurpassed reputation of Michael Saunders & Company as the premier real estate company in Florida’s Gulf Coast, give you the peace of mind you deserve. Alison and Raul have been named Best in Customer Satisfaction by an independent research company.

Call us today at 941-350-7904 for a consultation, and visit our website, www.SarasotaProperty.info, for monthly updates on the Sarasota real estate market.

Sarasota Real Estate Insights: Measuring the Price Drop

Published statistics state that the price of Sarasota homes fell 18% in a year. That’s true – sort of.
(By Raul Elizalde, 12/06)

Recent media reports pointed to a significant drop in Sarasota real estate prices. The report from the Florida Association of Realtors stated that the median price of Sarasota homes in October 2006 was 18% lower than the prior year, from $340,700 to $277,900. This drop is probably overstated because of measurement problems. And because of these problems, reports of even larger declines are almost certain in the months ahead. Read on to see why.

There is no question that Sarasota property prices have come down and that sellers have been increasingly willing to lower their expectations. Last month I showed that the ratio of sales price to original listing price has been dropping steadily for more than a year, a trend that is not over yet.

However, the extent of the price drop is unclear, and the problem lies in the way that prices are measured.

The median Sarasota home sales price fell, from $340,700 to $277,900. The median price is the price of the home right in the middle of the pack: half of the homes sold for more than that particular home, the other half sold for less. The idea behind using the median price is that, generally speaking, the group of homes that sell at any time is roughly the same as in any other time, so the “middle home” is basically the same one and can be used as a comparison over time.

This time, this happens not to be true.

The proportion of homes sold at less than $300,000 reached a bottom in the last quarter of 2005, and grew steadily ever since. Since today more homes are selling in the less expensive category, the samples are not comparable.

One way of understanding this is to take it to an extreme.

Suppose that in a particular month 100 homes sell at $200,000, and 101 homes sell at $400,000. The median price of homes that month is the price of the first home to sell at $400,000 – the home in the middle of the pack. The following month, 101 homes sell at $200,000, and 100 homes sell at $400,000. The “middle home” now is the last one to sell at $200,000, which is the new median price.

In this extreme example, the median price declined 50% because there was a slight increase in cheaper-home sales. But the median price decline is meaningless, or worse, misleading, because the market behaved just about the same from one month to the next.

I draw two conclusions from these facts:
The measurements are skewed in such a way that the reported price drop of Sarasota homes is probably larger than the actual decline.

Measurements are likely to be even more skewed in the next few months because of the fourth-quarter trough shown in the graph above. Therefore, be prepared to read reports of larger median price drops for November through February.

One interesting fact is that higher-priced properties are selling at roughly the same pace as in the past. As this graph shows, Sarasota homes priced between $1mm and $2mm are selling steady at around 4% of total sales, while homes priced above $2mm hover at the 2% mark. The toughest-hit price segment seems to be the $300,000-$1mm bracket (not shown), which shows the largest declines of sales as a percentage of total sales.

When it comes to knowing the Sarasota real estate market, Alison and Raul Elizalde have the expertise and knowledge to help you see where you stand when negotiating your real estate transaction, whether you are buying or selling a property. Our track record, added to the unsurpassed reputation of Michael Saunders & Company as the premier real estate company in Florida’s Gulf Coast, give you the peace of mind you deserve. Alison and Raul have been named Best in Customer Satisfaction by an independent research company.

Call us today at 941-350-7904 for a consultation, and visit our website, www.SarasotaProperty.info, for monthly updates on the Sarasota real estate market.

Sarasota Real Estate Insights: Selling Price vs. Listing Price

Published statistics state that Sarasota homes sell for 93%-95% of their asking price. Don’t believe it. (By Raul Elizalde, 11/06)

Statistics from the Sarasota Association of Realtors state that condos and homes for sale in Sarasota end up selling at 93% to 95% of their asking price. Strictly speaking, this is correct, but it is also misleading. The main problem with this number is that the sales price is computed as a percentage of the last listing price – the one just before the property went under contract. This ignores any price reduction that might have taken place after the original listing date. Sellers would be quite mistaken if they expect their properties to sell at a 5% to 7% average discount from their asking prices.

I have computed instead the sales-to-original-listing-price ratio and observing how it has evolved with time. This is an improvement over the published numbers because it takes into account all intervening price reductions after the first day of the listing.

It could be further improved by capturing those instances where sellers relist their properties at a lower price. Using instead the original price of the very first listing would give the most accurate picture. This is especially true today, when relisting at a lower price is an increasingly common event. Therefore, the sales-to-original-listing-price ratio that I present here is somewhat optimistic. The true ratio is likely to be even lower.

Look at the 30-day average of the sales-to-original-price ratio since the beginning of 2005 for single-family Sarasota homes. As one would expect, the final sales price has decreased in recent months as a percentage of the original listing price. It is also much lower than the 93.5% published by the Sarasota Association of Realtors.

For all Sarasota homes, the sales price currently averages 89% of the original listing price. What is striking is that Sarasota homes priced above $1 million are currently selling at around 82% of their original listing price. Proportionally, higher-priced homes are enduring larger price cuts than lower-priced homes.

This fact needs context. I suspect that luxury or waterfront homes in Sarasota have experienced higher appreciation than others in the last 2 or 3 years. If that is the case, the current larger price cuts still leave the owners of luxury Sarasota homes better off than those holding more modest properties. Also, homes that come to market properly priced do not necessarily need to suffer such large discounts in order to sell. It is important to keep in mind that these ratios are averages; some Sarasota homes might experience much larger cuts, while others – priced properly and in excellent showing condition – sell much closer to their asking price.

Still, this spells opportunity for buyers. Sellers are unquestionably willing to negotiate and accept larger price reductions than at any time in the last few years. Those who are looking to buy a home in Sarasota but want to wait for an even better environment risk facing less favorable conditions ahead.

When it comes to knowing the Sarasota real estate market, Alison and Raul Elizalde have the expertise and knowledge to help you see where you stand when negotiating your real estate transaction, whether you are buying or selling a property. Our track record, added to the unsurpassed reputation of Michael Saunders & Company as the premier real estate company in Florida’s Gulf Coast, give you the peace of mind you deserve. Alison and Raul have been named Best in Customer Satisfaction by an independent research company.

Call us today at 941-350-7904 for a consultation, and visit our website, www.SarasotaProperty.info, for monthly updates on the Sarasota real estate market.