By: Aaron Bosshardt
Many of you know, I try not to overreact to the ebbs and flows of the monthly numbers that our Gainesville Multiple Listing Service (GMLS) and Florida Realtors provide. Just this week we got the numbers for the first full quarter of 2018. The numbers are published separately by Houses and Condominiums. This is what the numbers releases to you the consumer will look like.
On the surface things look not so great. There have been many calls in the media by analysts to watch out for the next bubble. The number of sales is beginning to slow. The obvious reasons are lack of inventory, and mortgage rates hitting a new seven year high as the thirty year mortgage is close to 5%. Prices appear to be increasing still, but I believe this is a little deceptive and its fooling sellers and Realtors alike. When I asked Eddie Bell, a local appraiser, about the 22.2% increase in average price he said “Some Neighborhoods are pushing the numbers up and some are pulling them down.”
Speaking of appraisers, our single biggest concern right now closing deals is that appraisers are not able to justify market prices. When prices rise this quickly, the comparable sold data doesn’t support the market prices. Our message, if you need to buy home be careful, but you better be quick as lightning too. There are some deals. Buyers are hungry for turnkey properties. There are quite a few good homes that just need updating, these are the homes that aren’t selling. Right now, buyers have shown little appetite for these properties and this is where you might find some hidden gems.
Normally the difference between average and median price is used to track the influence of higher end homes on a market. What we are seeing now seems unique in that the gap is artificially closing because of the evaporation of the lower end market.
Sales below 200k are evaporating. Simultaneously you have a major expansion in our high end market with the number of sales doubling in our two highest price categories. This is creating what I believe is a falsely high indicator of price appreciation. Sellers and Realtors are eager to apply this headline numbers.
“I would keep in mind that the median housing value will wash out the really high end sales by establishing the midpoint of all sales in Q1. The part that concerns me most is that the median rose much faster than the average ( which is much more heavily influenced by the high end outliers). I think we are on the cusp of a reasonably priced housing problem in Alachua County.
The biggest disconnect I see is illustrated by the US Dept of Labor jobs reports when compared to the FL Realtors housing reports. Above is a graph of job growth that shows Gainesville has added 16,000 new jobs since 2012.”
Our message to anyone buying a home or condo in the Gainesville Area is to be measured and proceed with caution moving forward. A few of us feel like if we were Wall Street analysts we would be moving to a “Hold” from a “Buy” on our real estate market. Bear in mind that stance is when it comes to investing in residential real estate, and it’s an overly simplistic generalized explanation. Your situation depends on your goals, your tax consequences, and your Realtors opinion.
If you are buying a home to live in then you need to measure that decision against available alternatives. What’s on the market to buy and what could you rent instead. Of course our sister company Bosshardt Property Management, LLC can not find rental homes fast enough. They are at 99% occupancy managing mostly single family residences. So the struggle for home buyers is real in Gainesville. More and more buyers are looking to High Springs, Micanopy, Newberry, and Ocala as an alternative with a commute.
The new homes market is struggling even more so with a lack of supply. Primarily Builders cannot find enough lots, and are still facing unfavorable credit requirements. Not to mention the shortage they face with the availability of good quality tradesman.
Everything in the numbers looks ok. The number of cash sales is running about 24% of all sales. In the condo market is closer to 55% due to the lack of available credit in condominiums and townhomes. If I was looking for a good investment an investor might play in this sandbox knowing when financing returns, prices will rise.