Anyone with a pulse is well aware that these are unusual times, one of which is the shocking vibrancy of the housing market during the ongoing pandemic. Many, but not all, markets have seen a surge in demand that, combined with supply constraints, is producing a bit of a frenzy in terms of sales activity.
The state of Florida has seen its fair share of increased housing demand lately, and all of the major markets that Zonda surveys, except Naples/Fort Myers, have seen their annual starts pace increase year over year. The below chart shows the year-over-year starts percentage, plus a comparison of the current annual starts pace against the peak and long-term (20-year) average starts pace. What jumps off the page is how much better the Sarasota market is faring compared with the other major Florida markets. The current annual starts pace is now 93% of the peak observed way back in the boom year of 2005, and it is considerably higher than the long-term average starts pace. Starts are highly correlated with sales, of course, and our Zonda New Home Pending Sales Index ranks Sarasota 12th out of 50 metro U.S. markets with a year-over-year increase in net sales of 74%.
The increase in sales activity has put a dent in housing inventory, with new finished, vacant (FV) units at a meager 0.7 months of supply (MOS) and total new housing inventory at just 6 MOS. Equilibrium in this market is two to three MOS for FV and seven to eight MOS for total inventory. The resale market is also on fire and its inventory depleted as well, with a paltry 1.7 MOS of supply (normal is five to six) and a stunningly low 17 days median time to contract. Put another way, half of the homes listed in the MLS are selling within two weeks or less.
Usually, when markets get as hot as this, there’s a bust in the near future. This time around, however, things may be different, due to social, economic, and demographic trends.
Laura Cole, senior vice president of top-ranked Lakewood Ranch, notes that “a near perfect trifecta emerged in 2020, which netted us 2,149 new-home sales, an increase of 30% over 2019 and the best sales year on record at the Ranch. Lakewood Ranch has the advantage of being established and having critical mass, a distinctive multigenerational appeal, and an extensive palette of villages and homes to meet a wide array of home buyers.”
So, what is the trifecta?
- The state of Florida is even more appealing due to its “We Are Open” policy during the pandemic, which has resulted in a significant pulse of buyers from the Northeast, Midwest, and even California.
- Positive demographic and social trends, including baby boomers reaching age 65 at the rate of 10,000 a day, millennials hitting their peak earning years, and the work-from home movement. These trends dovetail nicely with those communities offering multigenerational housing offerings, which the Sarasota market has in abundance.
- Home builder investment in online technology to improve the home-buying process, which has netted many virtual sales from out-of-state buyers in addition to the more traditional, on-site manner of buying a home.
Laura Keller, senior vice president of marketing and sales at Babcock Ranch, the first solar-powered master-planned community in the U.S., sees the trifecta working to its advantage as well, saying “35% of our buyers in 2020 were from out of state, with the most coming from Illinois, New York, Michigan, and Massachusetts.” Just a short drive down I-75 from Sarasota in Charlotte County, Babcock Ranch harvested 540 sales in 2020, a stellar 121% increase over 2019. Buyers are almost evenly split between retirees and those working full or part time, almost 30% have children living at home, and there’s a multigenerational component at Babcock Ranch as well. Keller notes that the community’s "wide open spaces, including trails, parks, and lakes, and the commitment to sustainability, the environment, health and wellness, and technology” all are attributes that have buyers making the move.
So why is the Sarasota market (made up of Manatee, Sarasota, and Charlotte counties) the buyer’s choice in Florida? Cole remarks that “Sarasota is a quieter, kinder, and gentler version of Florida’s East Coast cities with a cultural foundation and first-rate beaches that attract buyers who are interested in year-round living and activities.”
Couldn’t have said it better.
