A culmination of events beyond our control has resulted in a booming Seller’s Market.
Home sales, new and resales, at all price points, whether it be single family, condos, villas or townhomes are slaying it. Home prices are up, home building is up, pending sales are up, sold prices are way up.
In September, new listings jumped 17.4% over September 2019. But still it’s still lagging buyer demand, notwithstanding homes went under contract at an accelerated pace, 72 days verses 80 days compared to the same month last year.
The obvious question is whether the housing market is over-heating. In a word, “NO”. I believe we are in the 1st year of at least a 4-year run. COVID has made the home the center of our lives. We’re home more than ever. For many it is now our office, gym, entertainment and dining center. We work, exercise, garden, pray, eat and cocoon with Netflix. People are rethinking what “home” means, redesigning their lives within it, and where they want to be. Expensive city living is being traded for extra square footage in the suburbs. The escalating flight from major cities to suburbs and smaller communities will increase home sales in Sarasota County, attracted by our Gulf Coast lifestyle.
Of note is the looming demographics of the Millennials. It is a demographic even larger than the Baby Boomers. The first group of Millennials are now in their 30s, starting families and of prime home buying age. As the Millennials purchase Baby Boomer homes, especially in our northern feeder markets, more Baby Boomers will accelerate their plans to move here. It is reported that Florida is attracting close to 1,000 new residents a day.
Year over year, 25.9% more homes sold in September. Pended sales increased a breathtaking 59.6%. It leaves buyers with less choices, 28.8% less homes for sale. That’s a meager 2.1-month supply of homes for sale based on closed sales, 43.1% less than last year. Pending sales are even hotter, 1.9 months, 55.1% less than the same time last year. 6 months is considered a balanced market. At the advent of the Great Recession in 2007, the supply of homes for sale rose to a staggering 29.6 months, virtually shutting down the housing market. We have been on a correction ever since. Starting in 2012 through March 2020, inventory based on pended sales has fluctuated between 3 – 5 months. The housing market temporarily froze during the initial shutdown in March. By May buyers were out in force. Today, there is less than a 2-month supply. Historically low.
With a scarcity of available homes for sale, in September 2020 the average active list price was up 13.6% from September 2019, and the average square foot sold price was up 20.2%. The median sold price was up 7.5%, while the average sold price was a staggering 24.6% higher. The average Sold Price to Original List Price differential has customarily hovered between 92% and 94%. List price reductions generally occur until the Sold Price to “Final” List Price is at a 96% spread. This past month was the first time that the average Sold Price to “Original” List Price was 96%. Buyers are accepting the increased valuations and in record time. Within the past month and a half, 3 of my listings sold over list price, in a matter of days, and subject to multiple bids.
The cost of money is at historic lows, propelling further sales. The Federal Reserve has taken interest rates to near zero, driving mortgage rates to under 2.5%, signaling they are likely to stay low thorough at least 2022 if not beyond. The stock market and consumer savings are at all-time highs.
Accordingly, this does not feel like a housing bubble. This is not the Great Recession of 2007 – 2009 when subprime lending led us into a recession. Housing’s fundamentals were strong at the outset of COVID. I posited in May that housing would lead the recovery with a V-shaped housing curve. It’s doing precisely that, supported by the strength of housing’s demographics and the lowest mortgage rates in history.