There has never been a better time to sell a home. Sellers are in the driver’s seat from start to finish. “Give me your tired, your dated, your wallpapered and overgrown”. In this market, no task is too great. Finicky buyers who want “move-in condition” are finding they often have little choice but to take on a project. This makes it the perfect time to sell a home that has been “well loved” and “well lived-in”. Location is always king, and we have it in abundance here in Sarasota County. The following is proof of my assertion.
The Bureau of Labor Statisticsreported that 467,000 jobs were created in January. At 4% unemployment rate, essentially full employment, spending and inflation can only go up. It can no longer be assumed that inflation will fade on its own. As a result, within the past few weeks, the yield on the 10-year Treasury has gone from 1.5% at the beginning of January to 2% on Thursday, down slightly to 1.951% on Friday. The 30-year mortgage rate, following the yield at an approximate 2x factor, topped 4% by the end of last week. As mortgage rates rise, still at historically low levels, I am hopeful that it will bring some balance to the market, increase days on the market, and slow the rate of appreciation.
Here’s what appreciation looks like. In January the median sold price for single family homes in Sarasota County was $465,000, 36.8% higher than last year and 6.9% higher than last month. That is super-hot on top of an already steaming housing market. What continues to drive prices higher is persistent and continuing record breaking low inventory. That’s a big concern of mine. We are in our prime home buying season. Inventory should be increasing, not decreasing. But that is not occurring. At the end of January, consistent with post COVID trends, there were only 410 homes for sale (53.5% less than last year) and 775 new listings (15.7% less than last month).
It is estimated that cash sales account for approximately 60% of home sales in Sarasota County. Which conversely means 40% are financed. 40% of the market significantly impacts home values and the ability of our feeder markets up north to sell their homes. Rising mortgage rates are the only thing I see to bring some balance to home sales. It will increase days on the market and inventory levels from its new all-time lows. It will slow the rate of appreciation.
We can’t change demographics, the need for housing from the growing migration of Millennials, Gen X, Baby Boomers, and their families to move to smaller metro areas, particularly on the Gulf Coast and Sarasota County. The US Census estimates the current population of Sarasota County at 455,981, 20.2% increase since 2010. Accordingly, our expanding population will continue to fuel the inexhaustible demand for homes beyond the supply. Prices will continue to appreciate.
Only increasing mortgage rates will cool down the hyper-hot rate of appreciation. It won’t be a direct lineal line. Rates will go up, move down a bit, and then matriculate higher. And it won’t take much. A 1% increase approximates $100,000 loss in buying power. Mortgage rates averaged 2.96% in 2021. If rates reach 4.5%, that will erase $150,000 in buying power. It will have a cooling effect, increasing days on the market, cooling the rate of appreciation, but not stopping it. Nothing lasts forever. This is a real opportunity, whether you are a buyer or seller to assess the lifestyle you want and take action to move forward on your next phase.