The year is coming to a close and it’s time to look back at what happened in 2013 in our local market.
Our recovery began a few years ago but the beginning of this year was when a lot more people were willing to participate in it and as a result we saw sales and prices surge. Sales have been increasing for the last few years but in the first half of the year there was an even bigger jump and with fewer properties available the purchase this combined to result in significant price gains.
The peak was May with the highest sales and the lowest level of inventory. The market stayed very strong through September even with a jump in interest rates but the pace was not one that could continue for long and it was clear earlier this year that at some point the lack of inventory would cause sales to slow and would have to start building up again to see further growth and to give us a more balanced and stable market. But despite that, we have already seen as many sales in 2013 through November as we did in 2012 through the end of the year. Here are the charts so you can see how this year went (so far):
Inventory did start to increase in September and then in October it moved back toward a more tolerable level. Sales also began a decline in October and price increases also began to slow to a level that is more sustainable.
Information for charts above was taken from PRO/Suncoast MLS from Jan 2007 thru May 2011 & from the MFRMLS for May 2011 thru November 2013. This information may or may not include all listed expired, withdrawn, pending or sold properties of one or more members of the My Florida Regional Multiple Listing Service.
What was behind these events?
Last year and early this year there were large investors buying up a lot of homes that were in foreclosure or already foreclosed upon and regular buyers were feeling more confident about purchasing since they were seeing prices starting to go up. This fueled a lot of the buying and during Spring there were a lot of buyers and not enough sellers which lead to multiple offers, properties sold above asking price and in a very short time and dramatic price increases.
The momentum of this carried into the summer and then the larger investors started to decrease their purchases and began to pull out of the market as the prices started to get to levels that created a situation where it made less sense (meaning less profitability) to keep buying as they had been.
For a while, ‘real’ buyers continued to increase and so that continued the momentum but eventually this shift changed enough to result in a slowing of the buying frenzy.
At the same time, price increases caused more sellers to decide that it was a good time to sell which resulted the beginning of a reversal in the inventory shortage. It also resulted in more sellers who had been ‘underwater’ on their loans to move back into positive territory.
Another factor that has had effects on the market that will continue to have effects into next year was the change in processing of foreclosures. They had been taking a very long time to complete and banks had also been only slowly releasing them onto the market to try to prevent a crash in prices. With prices increasing, inventory still low and new legislation passed to speed up the foreclosure process in Florida; banks are now seeing that they can move through more of the incomplete foreclosures with it making more financial sense to do so – and so there are more properties being completed as foreclosures and in a shorter time than before.
Due to this change there is less attention on helping people with short sales (you’ve probably noticed there aren’t nearly as many radio ads and billboards now) but banks are still willing to do short sales for people who need them and there are still a lot of people in the situation where they need this help, unfortunately they are being forgotten. Others in this situation have gotten caught up in the long process of the past few years thinking they still had lots of time left only to find out the hard way that the days of being able to stay in your home for years without paying on your mortgage are coming to an end.
The last change has to do with flood insurance. A law was passed in Washington D.C. last year that went into effect October 1st of this year that changes the way flood insurance rates are determined and in some cases has resulted in huge increases. It has also been unclear to a lot of people how this works and which properties are affected and so this uncertainty has caused some buyers to delay or change their plans. There is a good possibility that this law will either get delayed or have changes made to it because if it is left as it is there will be negative effects on the market. This makes it even more important to have an experienced Realtor to work with when buying or selling until we find out in the beginning of the new year whether this law will get delayed or changed.
Because of all this, sellers will be able to get a higher price but will have to be realistic about what they can get. Due to the surge in prices earlier this year, multiple competing offers from buyers due to low inventory, etc. – sellers were getting an unrealistic concept that prices would keep going up at that pace and that buyers would pay whatever sellers wanted. Many of those sellers are still trying to sell their homes or condos – unsuccessfully. It is even more important than ever to do what works which is to price the property a little above market value, have it show very well and market it correctly. Properties that don’t sell within a reasonable period of time fail in one of these 3 areas and it is important to know how the local market in that neighborhood or area is doing right now to make sure to take the correct actions for that market in those key areas of selling.
Buyers will also need to be aware that the days are gone where you can get people to drop their price a huge amount because a seller is desperate as that is much more rare now. There are some cases where you can get a deal but they are harder to find and you will find more competition for them now. So you need to be prepared – know what you want, have your financial preparations done so you can act quickly when you find what you want, and get enough info from your Realtor to know when something is a good value as well as any potential pitfalls to a specific property and whether or not those pitfalls are a major or minor issue.
You can’t be expected to know everything you need to know when buying or selling – that is what your Realtor is for. But it is still smart to be as educated as you can on the important issues and hopefully the above information has helped to begin that process for you.