Housing market in SW Florida finally turning a corner?

Budge Huskey

Among the most significant characteristics of the real estate industry in recent years has been the consistent and ongoing decline in new listings entering the market and corresponding available inventory for sale. On a national level, what was historically considered a balanced market (approximately six months of standing inventory) dropped to just over two months in early 2022. Even with the lowest level of closed sales nationally since 2008 last year with fewer buyers competing, available inventory nationally remained incredibly low.

In so many markets around the country, it is possible to drive by entire neighborhoods and not see a single “For Sale” sign. Quality homes coming on the market continue to receive numerous showings and even multiple offers. Brokers within these markets state they have far more buyers than available homes despite the challenges of higher mortgage rates.

The truth is two-fold. First, there appears to be a systemic shift in migration trends, leading American homeowners to remain in their residences for longer periods than before. There are simply fewer people moving each year and, therefore, fewer new listings. Second, there is speculation about the impact of higher mortgage rates on owners looking to find their next home but not wanting to exchange their historically low rate for one twice as high. There is merit to the premise, yet its true impact is uncertain – there are many owners with small mortgages or who own their homes free and clear.

Throughout much of Florida, including nearby markets such as Tampa and Orlando, standing months of inventory remain comparable to national levels and are moving in tandem. However, in Sarasota and Naples, we are witnessing something far different, which implies we have turned a corner. In both cities, the number of homes currently on the market has increased approximately 60% since January 2023 and between 300% to 500% over January 2022.

Months of inventory have risen to approximately six, indicating we are becoming balanced once again. Yet within those numbers, there is price stratification: moderately priced homes come in at around three months while multimillion-dollar residences top over one year. In essence, if no other home entered the market, the latter would take over one year to sell the current inventory, assuming consistent demand levels.

The reality is that markets such as Sarasota and Naples tend to be far more elective in nature with a high degree of second-home activity. Accordingly, they are subject to greater swings in both demand and supply and tend to overshoot in either direction. In addition, we may surmise that for the first time in three years, the upward pressure on prices may be subsiding.

For buyers who have been on the sidelines, there are simply more choices and opportunity to refinance sooner than later, based on expectations of declining rates in the second half of the year. For sellers, it is a dose of reality: it is no longer 2021 and the aspiration of obtaining more for one’s home than the neighbor who sold last year is increasingly unrealistic. In fact, we are witnessing far more price reductions early in the listing period to align more rapidly with true market values, heightening appeal among the expanding options.

Experts suggest that, across America, the housing stock is millions short of what is required to maintain homeownership rates with an expanding population. That is no doubt true, yet it appears markets such as Sarasota and Naples are now bucking the trend and may represent a welcome return to normalcy.

Budge Huskey is chief executive officer of Premier Sotheby’s International Realty.