As high season winds down on the islands, it’s great to have another week when the islands are busy with families visiting for the Easter holidays. Some were here this week, some arrive tomorrow, plus local schools are off today and Monday.
Here in the office, it still is quiet. We are thankful for another closing this week, an inspection contingency ending soon on another listing, plus a couple of other listings without contingencies just awaiting closings.
Below are a couple of news items, followed by more details on the island real estate action since last Friday.
We continue to market for new listings. As of today, according to the Sanibel & Capti a Islands Multiple Listing Service, Sanibel has just 41 properties for sale (16 condos, 15 homes, and 10 lots), while Captiva has 14 (6 condos, 7 homes, 1 lot). Many prospective buyers are watching the market carefully, several have us on the lookout for a property that matches their needs. Next is an interesting article geared toward those waiting.
Waiting on the Housing Market to Crash? Don’t, Experts Say
Here’s How Today’s Market Is Different From the Great Recession Housing Bubble
Posted on April 6, 2022 by Jon Reed with NextAdvisor in partnership with TIME:
“Home prices are higher than they’ve ever been, and they show no signs of stopping. The median U.S. home listing price was $405,000 in March 2022, the first time it’s broken the $400,000 price threshold, according to date from Realtor.com. That is an increase of 26.5% over two years.
“Homebuyers might see similarities between what’s happening today and the 2006 housing market where home prices became increasingly unaffordable until the bubble burst, helping trigger the worldwide financial crisis we came to call the Great Recession.
“Stressed-out buyers might be thinking these high prices are a bubble just waiting to pop again. In fact, 77% of homebuyers believe there’s a bubble where they live, according to a recent Redfin survey.
“Today’s market differs significantly from what happened 15 years ago, when high home prices were instead driven by loose lending practices and rampant investor speculation in the market.
“Waiting for the market to crash might not yield the result buyers hope for, experts say. “There’s not really any room there to be a bubble right now. It’s not like people have borrowed too much and it’s not like homes are overvalued,” says Daryl Fairweather, chief economist at Redfin.
“There are a lot of reasons why it seems like we are in a bubble, but at its heart, the issue is simple; supply and demand are driving up prices. “It’s just that there aren’t enough homes for everybody that wants one,” says Fairweather.
Here’s what is different about today’s market, what’s behind the record-high prices, and what buyers can do to navigate the process.
“Things Have Changed Since 2006 – The current market and that of the mid-2000’s share some similarities. Namely, housing prices were up and often unaffordable for buyers. The causes are different, experts say.
“The previous bubble came after a period in which lenders were more lax about writing loans and more people were in the housing market as an investment rather than to buy a home to live in. “Mortgage underwriting was considerably more loose back in 2006,” says Robert Dietz, chief economist at the National Association of Home Builders. “It was easier to get a mortgage to speculate in the housing market. That is not the case today.”
“Different home loans, such as adjustable-rate mortgages with big “balloon payments” due at the end of the term, meant people got into homes thinking they could afford the payments, finding out later that their payments grew dramatically to unaffordable levels, Fairweather says. “There was a lot of financial engineering, there was a lot of predatory lending, there was a lot of bad borrowing on people not having a lot of equity, not having as much of a cushion, that led to the housing bubble,” she said.
“Those types of loans are far less common today, and there is more oversight of home lending in the wake of the crisis of the late 2000’s, experts say. Today most borrowers get 30-year fixed-rate mortgages, which don’t come with the risk of payments suddenly rising dramatically as rates increase, Fairweather said. “If you own a home, you’re still paying what you paid when you got your fixed-rate mortgage.”
“There Aren’t Enough Homes – There are two major ways homes enter the market: Somebody builds a new one or somebody sells an old one. Both of those pipelines are out of whack. “Today it’s really just about lack of supply,” Dietz says.
“Builders Are Struggling to Catch Up – The limited supply of new homes is due to factors both old and new, Dietz says. For the last decade, builders haven’t put up houses at the rate they needed in order to handle today’s demand, which he says has probably created a deficit of a least a million homes. At the same time, costs have gone up since the pandemic. Deitz blames the constraints in the market to what he calls the “five L’s”:
- Labor: Builders are having a hard time finding skilled workers, particularly in hot markets such as Texas.
- Lots: There’s about a year’s supply of lots available, when the market needs two to three years.
- Lending: Homebuilders, especially the smaller companies, face a tighter market for borrowing the money needed to build.
- Lumber & building materials: Lumber prices were about $350 per thousand board feet in January 2020. That’s about $1,300 now, Dietz says. On top of lumber, there are shortages and delays in things like garage doors and microwaves.
- Laws & regulations: Issues like zoning can limit how many homes can be built in a certain amount of space.
“The tight housing market means new construction is even more important for buyers trying to get a home. While new homes typically account for less than one in 10 sales, that figure is now about one in three, Deitz says. Supply chain issues also mean new homes take longer to build – from a typical time of about six and aa half months to now about eight months.
“When you add all those together, it’s just gotten a lot harder to build homes,” he says.
“Fewer People Are Selling – Existing homes make up most of the market, but the supply of those is down also. Some of that has to do with the affordability issues affecting buyers. A survey by Discover Home Loans found 79% of homeowners would rather renovate their homes than move.
“High home prices might seem to encourage people to sell their homes and cash in, but most of those people would have to buy another home and pay those high costs. “If they try to buy again, they’ll be facing a really tough market as a buyer,” Fairweather says. “The only people who are really in a good position to sell and buy again are people who are downsizing or moving to a more affordable area.”
“There Are More Buyers – The supply constraints mean there aren’t as many homes for people to compete for, but those open houses are also busier than ever. That’s because more people are deciding homeownership is right for them at the moment.
“There’s a lot of demand for homes right now,” Fairweather says. “A lot of people are looking.” Part of that is that millennials are entering their prime homebuying years, experts say. Many members of this big generation are in their 30’s, often married with children. “We are seeing a big push from millennials to buy a home,” Fairweather says. “That’s been years in the marking.”
“The pandemic has also made remote and hybrid work a possibility for many. That means you don’t have to live close to an office and you might need more space than you can find in an apartment. Remote work means owning a home is a possibility for more people, Fairweather says, adding to demand.
When Will the Housing Market Calm Down? It will likely take a while before the inventory of available homes matches up with demand. Experts surveyed by Zillow predicted it’ll be two years before monthly inventory returns to pre-pandemic norms. They estimated it could be 2024 or 2025 before the portion of first-time buyers again reaches the 45% seen in 2019.
“Rising mortgage rates – they’ve gone from near 3.3% at the start of the year to near 5% in just three months – will likely take some buyers out of the market and slow the rise in home prices. “It should weaken demand, but there’s so much demand it’s hard to say how much it will really impact things like sales and home prices,” Fairweather says.
“Higher mortgage rates might not directly lead to lower prices – supply and demand will still be the big factors – but it could make life a little easier for buyers, Dietz says. “The bidding wars are going to cool off.”
“The factors driving up prices aren’t likely to subside anytime soon, Dietz says. “I don’t think buyers should be betting on any really significant price declines. If anything, as interest rates move higher, the cost of buy a home is going to go up.”
What Can Homebuyers Do In this Market – As Redfin’s survey found, many buyers think the market is in a bubble right now, and they might be tempted to wait for it to burst, some economic cataclysm that suddenly makes a house affordable. Experts caution against hoping for that.
“I think you want to be strategic and you want to be patient,” Dietz says. “Patient is different from waiting for a crash. Buyers will have to look harder and widen their search, he says. There are ways to get creative: if you work is hybrid and you only have to go to an office two or three times a week, reconsider your commute and think about it on a weekly basis rather than as a daily burden. That means you could look farther away from work where housing is sometimes cheaper.
“You can also consider other options, Dietz says. One is to look at new construction if you haven’t already. Keep in mind there is a longer lag time than usual, but it could be easier than competing for scarce existing homes with the mob of other potential buyers (and investors and flippers with cash offers). There are also options other than the single-family home, such as townhouses.
“Any slowdown caused by higher mortgage rates will make the market a little easier for buyers who are patient, Fairweather says. “By the end of summer there should be more homes on the market as not as many buyers will be taking them off the market,” she says.
“The market could be in for a shift this year as it copes with higher mortgage rates, Fairweather says. You may want to slow down and consider your options. “I don’t think it’s wise to try to rush the market now because right now the market is adjusting,” she says.
Should Fourth of July Fireworks Return to Sanibel?
The below article from the latest Santiva Chronicle asks for opinions on this:
“Fireworks on the Fourth of July have been a part of the day’s festivities since nearly as far back as the country’s beginning. But the pandemic canceled that tradition and the return of fireworks this year on Sanibel is up in the air.
“In a hearty discussion among City Council members last week, many of them indicated it might be time to discontinue the 30-minute fireworks show on the Fourth. Fireworks are prohibited on the island, for good reason, with this one traditional exception.
“They are detonated at the end of Bailey Road, near San Carlos Bay. Concern was raised over the heavy metals and chemicals found in fireworks polluting the water. Plus, the loud booms scare wildlife. But our environmental experts have said they support the detonation location and see it as a trade-off for 30 minutes of human enjoyment as we celebrate the freedom of our country.
“Is it time to bring back the fireworks on Sanibel? Now is the time to voice your opinion. Council members will be discussing the fate of the island’s fireworks show in their May 3 meeting. Contact Sanibel City Council….”
Heavy Traffic Advisory
Sanibel Police Chief Bill Dalton issued a “Heavy Traffic Advisory” for this weekend, Saturday and Sunday, April 16 & 17, 2022. Heavy traffic is anticipated along Periwinkle Way to Tarpon Bay Rd due to several island events taking place.
Saturday – 6 to 10 p.m. – SCCF’s 9th Annual Beer in the Bushes Event, 1300 Periwinkle Way.
Sunday – 8 a.m. to 1 p.m. – Sanibel Farmer’s Market at City Hall, 800 Dunlop Rd.
Sunday – 9 a.m. & 11 a.m. – Easter Services at The Sanibel Community Church, 1740 Periwinkle Way. (There also is a 6:30 a.m. sunrise service on Causeway Island A.)
Sanibel & Captiva Islands Multiple Listing Service Activity April 8-15, 2022
3 new listings: Sanibel Arms West #H7 2/2 $889K, Nutmeg Village #211 2/2 $1.15M, Somerset #A301 3/2.5 $3.465M.
3 price changes: Pointe Santo #B44 2/2 now $1.4M, Gulfside Place #117 2/2 now $1.695M, White Pelican #124 2/2 now $1.789M.
1 new sale: Colonnades #10 1/1 listed at $449K.
4 closed sales: Blind Pass #D204 3/2 $815K (our listing), Cyprina Beach #8 2/2.5 $1.43M, Compass Point #192 3/2 $1.81M, Junonia #301 4/2 $2.45M.
3 new listings: 778 Cardium St 3/3 $849K, 1667 Sabal Sands Rd 3/3 $1.05M, 5075 Joewood Dr 4/4.5 $4.49M.
2 price changes: 1311 Sand Castle Rd 3/2 now $1.445M, 660 Anchor Dr 6/4 now $2.895M.
No new sales.
4 closed sales: 320 Palm Lake Dr 2/2 $900K, 3015 Singing Wind Dr 2/2 $975K, 3822 Coquina Dr 4/3.5 $1.6M, 2451 Blind Pass Ct 4/4.5 $2.901M.
No new listings.
2 price changes: 5642 Baltusrol Ct now $399.9K, 5648 Baltusrol Ct now $399.9K.
No new sales.
1 closed sale: 544 Lake Murex Cir $650K.
No new listings, price changes, or new sales.
2 closed sales: Tennis Villas #3128 1/1 $549K, Beach Villas #2633 2/2 $1.399M.
2 new listings: 1114 Schefflera Ct 4/3.5 $3.6M, 11529 Andy Rosse Ln 4/4 $4.495M.
No price changes.
2 new sales: 17201 Captiva Dr 5/4.5 listed at $5.65M, 15009 Binder Dr 4/5.5 listed at $7.5M.
No closed sales.
Nothing to report.
This representation is based in part on data supplied by the Sanibel & Captiva Islands Association of Realtors® Multiple Listing Service. Neither the association nor its MLS guarantees or is in any way responsible for its accuracy. Data maintained by the association or its MLS may not reflect all real estate activity in the market. The information provided represents the general real estate activity in the community and does not imply that SanibelSusan Realty Associates is participating or participated in these transactions.
Susan Andrews, aka SanibelSusan