Rising interest rates put pressure on real estate in Sarasota-Manatee

As the Federal Reserve imposed the first U.S. interest rate hikes since 2018 — one in March and a bigger one in May — to tackle the country’s highest inflation in 40 years , the sizzling local real estate market could feel the first effects.

The Sarasota and Manatee Association of Realtors noted in its monthly real estate statistics released Thursday that April marked the first time “active inventory” — homes for sale — in the North Port-Sarasota-Bradenton metro area showed positive year-over-year growth since May 2019.

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“At the end of April, there were 1,969 active listings (properties) combined in the two counties for both markets, a 14.3% increase over the same month last year,” according to the RASM report. “Compared to last month, active inventory increased month-over-month by 23.5% when combined for both counties.”

In addition, fewer homes for sale were closed in the single-family home and condominium markets, a trend that has been continuing for months.

In both counties, gated sales were down 23.6% from 12 months ago.

Tony Veldkamp, ​​chairman of RASM 2022 and senior adviser to the SVN Commercial Advisory Group, said in a press release that the statistics were anticipated by local relators.

Rising interest rates make buying homes more expensive for buyers who need mortgages, reducing demand and slowing price appreciation, economists say.

The Federal Reserve relies on this economic principle to curb inflation, which rose to an annual rate of 8.3% in April, down 0.2% from the March figure.

“As we anticipated, it looks like rising interest rates and inflation are starting to put pressure on our local real estate market,” Veldkamp said. “While we are still seeing fewer pending and closed sales compared to last year, we are starting to see an increase in new listings and the amount of inventory of homes and condos for sale.”

The increase in the number of homes for sale did not cause an immediate sharp drop in the median home price, according to April statistics.

The median home price in each county fell slightly from March while remaining around $500,000 for a single-family residential property.

Sarasota County’s median home value fell from $487,500 in March to $482,803 in April. However, this figure represented a 27.1% increase compared to last April 2021.

Manatee County’s median home price was $515,000 in April, up from $525,000 in March, but up 27.2% from a year ago.

Robert Goldman, a real estate agent at Michael Saunders & Co., has been tracking interest rates, inflation rates and the yield on 10-year U.S. Treasury bills for months as the housing market remained hot.

As of Thursday afternoon, the weekly average for a 30-year fixed rate mortgage was 5.3%, according to FreddieMac. This is the highest since June 2009.

Goldman said “only higher interest rates will bring some balance to house price growth and calm the overheated housing market.”

In his view, inflation will likely still be there “for a while”, with the declines being “a slow drip”.

“The road to stable prices is likely to be bumpy and slow, with falling stock prices, higher rates and weaker consumer confidence,” he said. He pointed to some bright spots in the currency markets where a strong dollar can “create a ceiling so that mortgage rates don’t go much higher.”

The Venice-area real estate agent does not expect property prices to experience sharp declines in the short term.

Instead, he expects home prices to continue to rise in the Sarasota-Manatee market, but not as quickly as they have recently.

“Are we at an early stage of price adjustment towards a slightly more balanced market? he said. “The next few months should be eye-opening.”

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