Once a quiet Gulf Coast city, the Sarasota metropolitan statistical area has evolved into one of the most sought-after beachside destinations in Florida. The expansive Sarasota market, stretching from the northern limits of Bradenton to the southern edges of North Port, has experienced an extraordinary surge in housing demand over the past decade.
From August 2013 to August 2023, the median home price rose by 148%, according to data from Redfin. That is much higher than the national average of 94% during that same period.
Unlike some bigger Florida cities like Miami, Tampa, Jacksonville or Orlando, the primary allure of this region isn’t solely attributed to a robust job market –although it is booming; the unemployment rate in the Sarasota area was 3.3% in August, lower than the U.S. average of 3.8%. Its Sarasota’s favorable climate, pristine beaches and slower pace of living that make it an ideal setting for those seeking the quintessential Florida lifestyle.
While the housing market is still very strong here, the turbulent economy hasn’t left Sarasota’s housing market completely unscathed. There is evidence that the market is cooling, primarily due to elevated median home prices and mortgage rates. To help you gain a better sense of what is happening, we’ve compiled the data you need from the U.S. News Housing Market Index.
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How the Sarasota Market Changed in 2022
Like much of the country, there is a gap in supply and demand for housing around Sarasota. The population of the Sarasota MSA in 2022 was estimated at 891,411 by the U.S. Census Bureau. The MSA’s population jumped nearly 24% since 2012. This rapid increase has caused growing pains, particularly with a lack of infrastructure and housing.
The Sarasota region is trying to keep pace with demand by maintaining steady delivery of new homes. As of August 2023, there were just over 1,100 new single-family home permits issued, a 31% increase year over year. New housing permits fell toward the end of 2022, but picked up in 2023 and have steadily risen. For the three-month period ending in August, permit activity was 24% higher than the same time period a year earlier, but below the single-family housing permit peak of 1,339 in in April 2022.
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Multifamily permits, which describe buildings with two or more housing units, tell a different story. There were around 385 multifamily permits issued in August 2023, a 4% drop year over year. Multifamily construction has remained strong since its low in November 2022; however, year-over-year activity has cooled slightly, down by nearly 6% year over year for the three-month period ending in August.
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Sarasota Housing Supply and Demand
As of August 2023, there was roughly 3 months of supply of housing, up about half a month year over year. This level of housing supply is above the national average of 2.1 months, but still below the six months that is considered a balanced market
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Housing supply is up from its low of 1.85 months in May and trending upward as more homes hit the market. There’s a chance the rise in single-family permits pulled could help increase supply in the coming months; new construction remains some of the most sought-after types of housing, says Brad Kayser, a real estate agent with Coldwell Banker in Sarasota.
“Buyers are focusing on new construction, fully renovated homes and waterfront properties,” Kayser says. “Homes that are priced right are still going under contract in 30-45 days. Sellers that are listing their homes at higher price points are looking at 60-90 days on the market with one to two price reductions.”
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Sarasota’s market is largely driven by retirees
and snowbirds. Sarasota County has one of the highest proportions of retired residents (aged 65 and older) in the nation, according to the World Health Organization. While there is a large influx of entrepreneurs, businesses and families moving there as well, its unique demographics lead to different demand drivers than other major metros, such as seasonality.
Looking at mortgage applications, the Mortgage Bankers Association reports its seasonally adjusted Purchase Index decreased 2% the week of Oct. 20, 2023, compared with the week prior, indicating a slight decrease in mortgage loan application volume. The unadjusted Purchase Index was 2% below the previous week, and down 22% year over year. It isn’t a huge surprise to see weakening demand for home purchasing right now with mortgage rates closing in on 8%.
Consumer sentiment in the U.S. was at 69.5 out of 100 in August, based on the Survey of Consumers from the University of Michigan. This is an increase of more than 11% from the same time one year ago.
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[Should You Lower the Price of Your Home?]
Median Home Price in Sarasota
Home prices in this area have skyrocketed since 2021, outpacing the national average. Prices have come down just over 7% since the peak of $490,000 in October 2022. However, the median home price in the Sarasota market has remained strong over the last year.
As of August 2023, the median price was $454,000, less than a 1% increase from the same month last year, according to Redfin. That’s above the national median home price of $420,000. A steady uptick in supply has led to homes sitting on the market longer. According to Redfin, on average, homes in Sarasota sell after 42 days on the market compared with 24 days last year. and fewer homes were being sold above the asking price as of September 2023.
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Arlene Buckmaster, a real estate agent with HouseMax Realty in Sarasota Springs, has noticed a shift toward overpricing. “Some sellers are unrealistic on pricing and were trying to get as much as they could for not a great product,” Buckmaster says. “Of course, real estate agents want to get top dollar for their customers, but after the pricing run of the pandemic, many are not realistic in what people are willing to pay for such product today.”
Two prominent factors at play in Sarasota home prices are the seasonal fluctuations in demand and the specific property types entering the market.
“Renovated homes prices are still soaring as well as beach homes for retirees, condos and three-bedroom, two-bathroom homes compared to other types of housing,” Buckmaster says. “North Port and Parrish are especially booming, given the large number of new construction homes in that area that are still affordable for families and first-time homebuyers.”
The median monthly rent in Sarasota is $1,359, well below the national average of $2,052.
[When Will Housing Prices Drop?]
Unemployment Trends in Sarasota
According to the U.S. Bureau of Labor Statistics, the unemployment rate in the greater Bradenton, North Port and Sarasota area has steadily increased since the start of 2023. In August, the unemployment rate was 3.3%, a 0.2% increase from the same month last year. However, it’s not a sign that the economy in this area is in huge trouble.
Its unemployment rate is still below the national average of 3.8%. The high number of retired residents means this region is less reliant on a robust job market to support its economy. Tourism and hospitality remain the biggest employment sectors of the area with this region seeing over 2.2 million visitors annually.
The low unemployment rates appear to be helping keep mortgage delinquencies and foreclosure activity down. Black Knight Inc. reports the rate of foreclosure activity in the Sarasota metro area was just 0.5% in August 2023, up 0.1% compared with the same time in 2022. It marks a continued downward trend in foreclosure activity in the area since mid-2018, with the exception of December 2021, when foreclosures dipped ever so slightly to 0.3%, then returned to 0.4% in January 2022.
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Builder Confidence in Sarasota Wanes
The National Home Builders Association and Wells Fargo Housing Market Index reported homebuilder sentiment in the Sarasota metro area was rated 49 out of 100 in September, a dramatic 11-point drop from June 2023, when builder sentiment was rated 60 out of 100. The index attributes a positive outlook to scores above 50, so the move just slightly into negative territory is the first sign that sentiment for new construction is waning.
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Construction for nonresidential buildings is down in the Sarasota area, rating 48.9 on the Architecture Billings Index from the American Institute of Architects — that’s down 4.7 points year over year.
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Sarasota Real Estate Market: Predictions
Given that the Sarasota market is nearing its peak homebuying season of winter, prices should hold steady or increase slightly toward the end of 2023. If an interest rate cut comes soon, there is a good chance more buyers will return to the market as affordability concerns ease for some buyers.
“The issues we will be keeping a close eye on in 2024 are interest rates and homeowners insurance,” Kayser says. “We are expecting mortgage rates to drop in the second quarter of 2024, which will give buyers more comfort in pulling the trigger on their home purchases.
“The insurance component is always a moving target in Florida, with companies pulling out and new ones entering the market regularly. The high cost of homeowners insurance is a deterrent for many. However, it is a small price to pay when living in a culturally vibrant area with beautiful beaches, golf courses, restaurants and plenty of opportunity to live the retirement lifestyle most people only dream of.”
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Sarasota Housing Market Forecast originally appeared on usnews.com
