Image courtesy Sarasota's Finest Properties

As buyers in the mid-tiers of the Sarasota Real Estate Market hit the pause button to wait out rising interest rates, increases in housing prices, and an improvement in inventory, luxury buyers appear to be staying on pace with purchases.

The Fed’s rapid increase in interest rates as a strategy to regulate the economy has resulted in the same pace of increase in borrowing rates. Though mortgage rates are still well below historical averages, they are now nearly twice what they were last year. Most sales in the mid-tier sectors rely on mortgages, thereby reducing a buyer’s budget or creating hesitancy in buying a home until they feel rates have stabilized.

Rising interest rates are also a disincentive for existing homeowners to list their properties, as most in the mid-price ranges will need to borrow for their next property. This conundrum has caused listings of properties under $1 million to stall significantly, and sales to drop more than 50% year-over-year.

However, in the luxury tiers over $1 million, October experienced 80% growth in sales and a steady flow of new listings coming to market compared to last year. Most luxury buyers are using alternative financing strategies for their purchases, including full-cash transactions, which are not affected by interest rate fluctuations.
In addition, during volatile economies, affluent buyers are driven more by quality of life and the sense that real estate is a safe long-term investment.

Those Fed market strategies noted earlier have also created volatility in the investment markets and fear of a potential recession, compelling even more affluent buyers to consider moving their money into vacation or investment property.

In the attached chart you will see how Sarasota’s luxury sector has fared month-end October over the last four years when comparing inventory, sales, and length of time from listing to sale.

Many seeking homes in the Sarasota area have been on the hunt for some time. They have narrowed their search to specific communities, neighborhoods, and buildings – some precise addresses or condominium numbers. They can wait, their means of purchasing is established, but I am seeing their price expectations very firm. Sellers are realizing that the days of multiple offers over list price as seen these last few years has faded, and it is time to align with buyer value expectations more closely.

The Sarasota Real Estate Market is known for its value when compared to other highly desired resort areas, and our properties will hold their value over the long-term. These factors help both domestic and international buyers consider our region a “safe haven” for their real estate investment.

Economists believe it is likely the US economy may move into a modest recession in early 2023, which should influence the Fed to pull back on rates creating a more normalized/flat rate environment by mid-year. Because of the relative strength of the real estate market’s foundation, it is expected that housing will be a catalyst to lead the economy out of what is predicted to be a brief recession.

Though year-over-year sales, inventory and pending sales have slowed, they are similar to pre-pandemic levels. Inventory in all price points is still at historically low levels, and demand remains high. Prices in our region continue to grow at a pace well above Florida and US markets, leading me to believe The Sarasota Real Estate Market will stay stable during the bumpy economic months ahead.

Michael Moulton is a Realtor with Michael Saunders & Company.

Image courtesy Sarasota's Finest Properties

Sarasota's Finest Properties