Sarasota is a jewel along the Florida coast. The city is home to some 56,000 residents and counting, all of whom bask in the warm sunshine, enjoying breathtaking beaches, the rich cultural heritage and prevalent mid-century modern architectural aesthetic. Life in Sarasota has so much appeal; and places like it — ones that draw people eager to put down roots — are the locales real estate investors ought to look into.
The State of Sarasota Real Estate Market
Industry experts say Sarasota real estate is shaping up to be a seller’s market. All indicators point to an optimal environment for investors, property managers, and sellers, which is a departure from the trends of just a few years ago.
The 2008 Great Recession had a significant impact on real estate markets across the country. The crisis peaked in 2011, sending market figures on a sharp decline in 2012. Sarasota’s housing market experienced the brunt of the crisis. Case in point: prices for single-bedroom houses were almost half their present value five years ago.
Things have vastly improved since then. Experts say Sarasota is no longer in market recovery but is instead heading for stable and steady growth.
The county enjoys an average 3.2 percent year-over-year increase in median home sales. Residential property prices also climbed since 2012. The median price is now at $270,000, which is $8,000 higher from the previous year based on the data from various sources and $15,000 higher than the national median price. Zillow, an online listing and market evaluation website, predicts it will increase further by 0.8 percent in 2018.
A market past recovery. Increasing median prices. Bourgeoning sales. These make for an ideal selling climate as they produce profitable deals. But apart from these fundamentals, other factors are shaping the market landscape in favor of house sellers.
1. Equity Gains from Property Appreciation
Properties in Sarasota appreciated in the last five years. People who’ve held on to their properties or acquired titles during this period gained equity they can cash in — if they sell.
Equity = Home Value (fair market price) – Mortgage Balance
Equity is the difference between the value of your house and outstanding liabilities. In simpler terms, it is the amount you get after subtracting the remaining mortgage debt and other bills attached to the house from its fair market value price. Equity can increase in two ways:
- Reducing mortgage balance – Paying mortgage every month increases equity, slowly but surely. Increasing monthly payments will also build home equity faster.
- Real estate appreciation – As a house’s market value increases, so does its equity.
Mortgage payments are a given, but appreciation is not always a guarantee. Given the trend in Sarasota’s real estate market, experts say that 2018 is the ideal year to sell a residential property.
FortuneBuilders, a coaching institute for real estate investing, estimates that owners who bought properties five years ago gained as much as $65,000 thanks to a 7.6 percent appreciation rate. Trulia’s estimate is higher at $88,000 for houses bought five years prior.
2. ROI from Foreclosures and Distressed Properties
Real estate investors who took advantage of the real estate bust in 2011 and bought foreclosures can gain returns on their investments if they sell now.
Normally, an investor would buy a foreclosure or distressed property (houses with negative equity) and convert it into a rental to take advantage of the income stream. He or she could also flip or sell the property soon after buying it. An investor can get higher returns, however, if he or she will invest in repairs and renovations, and then sell the property for a higher price.
As of January 2018, the median sales price for foreclosures and distressed homes in Sarasota is $137,000. It may be 35 percent lower than the average value of non-distressed homes, but it can still produce a respectable return on investment.
3. A Strong Purchasing Power
The market may currently favor sellers, but buyers are not at an absolute disadvantage. Although housing prices are up, so is buyer purchasing power.
The real estate market’s rise mirrors the local economy’s growth. Economists feared another recession back in 2016. Yet, two years later, the Sarasota-Manatee region accomplished impressive feats:
- Unemployment dipped to 3.8 percent, the lowest annual rate since 2007.
- Various sectors, such as leisure and hospitality, construction, information, and professional and business services generated over 4,700 jobs in 2017 alone.
- The latest data from the Bureau of Labor Statistics shows Sarasota County had a 0.5 percent year-over-year weekly wage increase in 2017.
These economic factors contribute to a stronger purchasing power and consumer confidence, both of which add fuel to the real estate market. As a result, the housing market is currently affordable for house buyers and renters. Sellers aiming for big profits should make their move while this consumer attitude persists.
4. Population Growth Fuels Housing Demand
High housing demand is a natural result of population increase. This is what’s happening in Sarasota. The county has 407,000 permanent residents and welcomes 14 more per day. The job opportunities, high median wages, and cultural attractions draw migrants from across the country. Many live long-term, if not retire, here.
Sarasota is a favorite destination for the senior cohort. With the state’s warm climate, suburban neighborhoods, and thriving cultural and recreational hotspots, it’s unsurprising that U.S. News & World Report ranks it as the No. 1 Best Place to Retire in the US. As a result, retirees from other states are adding to the local Baby Boomers’ population. Collectively, they form a housing sub-market that has a strong potential to grow further in the next few years.
The fundamentals of a robust housing market that’s favorable to both buyers and sellers are in place in Sarasota. It begs the question: How long will the trends last?
There are indicators that the housing market will sustain its upward trajectory beyond 2018. Experts in economics, migration, and real estate are not worried about downtrends in the foreseeable future. But even without their projections, current statistics show an optimistic future for Sarasota’s housing market, especially for sellers.
The annual residential turnover rate is at 20 percent and many families spend an average of 3.5 years in their homes, says FortuneBuilders. And although Millennials are still hard at work to become homeowners in Sarasota, the current housing activity and the influx of middle-aged professionals and retirees is strong enough to sustain the current housing market.