Surge in Luxury Market Demand

Guest Correspondence

Sarasota Real Estate Market activity continued its growth in May, with sales, prices and pending sales increasing at a consistent pace. Existing single-family and condominium inventory for sale remains slight and demand does not appear to be easing, contrary to the traditionally late spring slowing seen in previous cycles.

While all price tiers are seeing similar activity, this month I narrowed my focus on the Sarasota Luxury Real Estate Market – the million-dollar and above category, where most of my transactions occur. Past years have shown that this segment of the market has much greater list-to-sale periods and wider gaps in list-to-sale prices, though trends have altered as is shown in the attached charts.

Over this last year, the number of days on market for properties listed over $1 million has fallen more than 40%. And because the number of days a property is listed has narrowed so much, most listings don’t experience periodic price reductions, resulting in a measurably improved sold to original list price ratio.

This tier of the market typically sees sale prices hovering in the range of 85% of original list price, however over these last few months this has grown to 97% at its highest in March, and 96% in April and May.

New listings of luxury properties have grown over prior year, however the pace is nearly equal to new pending sales and also closings each month, so as long as the demand remains stable, the seller’s market conditions will persist.

Also contributing to the supply and demand issue is the slowdown of construction of new luxury homes and condominiums in 2020. Add with current rising costs and delays in delivery of materials, it does not appear that new product will help to ease the inventory concerns in the near future.

What seems to be driving this supply decline? The data that I analyze reveals that it is not just the affluent buying additional properties, it appears more likely that seniors, baby-boomers and empty nesters decided to stay in place this last year rather than executing plans to relocate, upsize or downsize during the pandemic.

Also contributing to the soaring demand is the rise in wealth of the affluent buyers. The strength of the stock market, increased values of primary residences and reduction in personal spending on indulgences such as travel and luxury goods are enabling buyers to purchase higher priced properties.

Sarasota’s median sale price for properties over $1 million was $1,600,000 in May. By comparison, our nearest geographic competitor for affluent buyers is Naples, which had a median sale price of $3,725,000, and on the east coast the Palm Beach area saw median sales hit $4,699,000.

Cash transactions are key in today’s market. Sellers are less interested in mortgage contingencies when offers are coming in. To be competitive in the luxury market, buyers for the most part are extremely savvy and prepared to move their resources swiftly. All cash transactions in the $1 million+ tier were 50% of those closed in May. In May 2020, all cash sales were 35%.

As you consider your real estate goals for the year ahead, whether buying or selling, having a professional with a critical and analytical approach, an understanding of the realities, and able to set expectations based on pragmatic and practiced conclusions will ensure your goals are achieved.

With decades of experience managing hundreds of transactions, and experiencing the Sarasota Real Estate Market’s variability, my knowledge throughout the region can help. Whether looking to relocate to a new neighborhood, considering upsizing or downsizing, or adding to your real estate portfolio, I would be happy to discuss your next steps with you.

Michael Moulton is a certified residential specialist broker-associate with Michael Saunders and Company.

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