Will Our Local Housing Market Continue to Strengthen in the New Year?
The answer is a resounding yes. And we can say this for a number of reasons.
“Florida Infusion” was the headline in the January 6 edition of The Sarasota Herald-Tribune. The Florida Office of Economic Research predicts more that 171,000 people are expected to move to Florida in 2013. After that, net migration should reach about 250,000 annually—the equivalent of five cities the size of Sarasota. The increase in net migration is expected to ignite Florida’s growth machine and generate more jobs, construction and home sales.
There’s also greater optimism about increasing home values. After five years of homeowner equity declines, Americans’ combined home equity jumped nearly 20% last year according to the Federal Reserve. Equity is a key measure of wealth, often the largest single item on a family’s balance sheet. So, as values rise and equities return, fewer homeowners are underwater—all of which should bode well for increased consumer confidence.
Additionally, local housing starts are picking up. In Lakewood Ranch alone, new homebuilders sold some 380+ new single-family homes in 2012—not resale homes, but new homes. That speaks volumes about the increase in builder confidence.
At the end of November, according to the Sarasota Association of Realtors, the available inventory on Longboat Key, Lido Key, Siesta Key, and the mainland remains near the lowest level in a decade. Fewer listings mean more competition for what’s available for sale on the market, which in turn leads to higher prices.
As for mortgage rates, most experts agree that rates will go up, but not by much. Rates currently stand at about 3.5% for conforming loans of $417,000 or less. Economists predict rates will rise to 3.9% in the first quarter and possibly to 4.4% by the end of the year should the economy pick up as expected. These modest hikes should not be enough to put a damper on loan demand. In fact, a rate hike could actually fuel sales and prices by creating a “sense of urgency” among consumers who have been sitting on the home buying fence.