As the Federal Reserve implemented the first interest rate hikes in the United States since 2018 to combat the highest inflation seen in 40 years, the local real estate market in Sarasota-Manatee may be feeling the initial effects. The rising interest rates have begun to put pressure on the market, leading to changes in supply and demand dynamics.
Active Inventory Shows Growth
The Realtor Association of Sarasota and Manatee reported that active inventory, or the number of homes for sale, in the North Port-Sarasota-Bradenton metro area showed year-over-year positive growth in April for the first time since May 2019. At the end of April, there were 1,969 active listings in both counties, representing a 14.3% increase from the same month last year. Compared to the previous month, active inventory also saw a month-over-month increase of 23.5% for the combined counties.
Decline in Closed Sales
In addition to the increase in active inventory, there has been a decline in closed sales for both single-family homes and condos. This trend has been ongoing for several months, with closed sales across both counties declining by 23.6% compared to the previous year.
Tony Veldkamp, the 2022 RASM president and a senior advisor at SVN Commercial Advisory Group, noted that these statistics were anticipated by local Realtors. Rising interest rates make purchasing homes more expensive for buyers who require a mortgage, reducing demand and slowing down price appreciation.
Impact on Median Home Prices
Despite the increase in homes for sale, there has not been an immediate sharp drop in median home prices. In Sarasota County, the median home value dipped slightly from March but remained around $500,000 for a single-family residential property. In April, Sarasota County's median home value was $482,803, representing a 27.1% increase compared to the previous year. Similarly, in Manatee County, the median home price in April was $515,000, down from March but up 27.2% from a year ago.
It is worth noting that the area's average real estate price, at $722,776, was up 21.3% compared to the previous year. However, real estate analysts typically do not rely on average prices to determine market trends, as luxury homes can skew the data.
Expert Insights and Future Outlook
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 will bring some balance to home price growth and help cool off the overheated housing market. Although inflation is expected to persist for some time, Goldman believes that a strong dollar in currency markets may limit mortgage rates from increasing significantly.
While Goldman does not anticipate sharp decreases in real estate prices in the near term, he does expect a slower rate of price appreciation in the Sarasota-Manatee market. He suggests that the coming months will be crucial in determining whether the market is moving towards a more balanced state.
Conclusion
The Sarasota-Manatee real estate market is experiencing the effects of rising interest rates and inflation. The increase in active inventory and the decline in closed sales indicate changes in the supply-demand dynamics. Despite these changes, median home prices have not seen a significant drop. Experts anticipate a more balanced market with a slower pace of price appreciation in the foreseeable future. As the market continues to evolve, it will be interesting to see how the Sarasota-Manatee real estate market adapts to these new conditions.
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