Image Source: Realtor Association of Sarasota Manatee
The real estate market in the Sarasota-Manatee area has been red hot for quite some time. However, recent developments indicate that rising interest rates are starting to put pressure on this sizzling market. As the Federal Reserve implemented its first interest rate hikes since 2018, the effects are beginning to be felt locally.
According to the monthly real estate statistics released by the Realtor Association of Sarasota and Manatee, April marked a significant shift in the market. Active inventory, which represents homes for sale, showed year-over-year positive growth for the first time since May 2019 in the North Port-Sarasota-Bradenton metro area.
"At the end of April, there were 1,969 active listings (properties) combined in both counties for both markets, a 14.3% increase from the same month last year," states the report. "Compared to last month, active inventory increased month-over-month by 23.5% when combined for the two counties."
At the same time, closed sales for both single-family homes and condos have declined. Closed sales across both counties decreased by 23.6% compared to the previous year. These trends were anticipated by local realtors, as rising interest rates make purchasing homes more expensive, reducing demand and slowing down price appreciation.
The Federal Reserve's aim is to curb inflation, which reached a 40-year high in the United States. April's inflation rate stood at 8.3%, with the Fed relying on the principle that higher interest rates will help slow down inflation. Although it appears to be working, it is also impacting the real estate market in the Sarasota-Manatee area.
Tony Veldkamp, the President of the Realtor Association of Sarasota Manatee, explained, "As we've been anticipating, it appears that the rising interest rates and inflation are beginning to put pressure on our local real estate market. While we're still seeing fewer pending and closed sales compared to last year, we are starting to see an increase in new listings and the amount of inventory of homes and condos for sale."
Despite the increase in homes available on the market, median home prices have not experienced a sharp drop. In April, the median home price in Sarasota County dipped slightly to $482,803, while Manatee County's median home price came in at $515,000. Both figures still represent significant year-over-year increases.
Real estate analysts typically avoid using average prices as they can be skewed by luxury homes, but the area's average real estate price at $722,776 experienced a 21.3% increase compared to the previous year.
Robert Goldman, a Realtor with Michael Saunders & Co., has been closely monitoring interest rates, inflation rates, and the yield on the 10-year U.S. Treasury note. He believes that rising interest rates are crucial to bringing balance to the growing home prices and cooling off the over-heated housing market.
However, he also predicts that inflation will persist for some time and that the road to stable prices will be slow and accompanied by falling stock prices, higher rates, and weakened consumer confidence. He does find some hope in currency markets, where a strong dollar may create a ceiling for mortgage rates, preventing them from rising too much further.
While Goldman doesn't anticipate sharp decreases in real estate prices in the near term, he does expect the rate of price appreciation to slow down. He wonders if this is the early stage of an adjustment towards a more balanced market and suggests that the next few months will provide valuable insights.
In conclusion, rising interest rates are putting pressure on the Sarasota-Manatee real estate market. Although the market is experiencing positive growth in active inventory, closed sales have declined. Median home prices remain relatively stable despite the changing market conditions. It will be interesting to observe how the market adjusts and whether it moves towards a more balanced state in the coming months.
