The information in this post pertains to Longboat Key Condominium market ZIP code 34228 for the periods indicated. All data is from the My Florida Regional MLS.
Longboat Key Condo Sales
Condominium sales are slumping on Longboat Key. Sales were down 3.4% in 2016 compared to 2015. Existing condominiums sales (sales excluding the 26 new construction sales) were down 10.2%. 2016 also marked the 3rd consecutive year where sales were less than the prior year. This year looks to be worse than any of the past three, with sales through March down 21% compared to the same period in 2016. From an historical standpoint, the 66 sales recorded this season were the lowest since 2010.
The odd part is that condominium sales in other parts of the area are moving in the opposite direction. Downtown Sarasota and Siesta Key condo sales were up 29% and 32%, respectively, in the first quarter of 2017 compared to 2016. Across the entire county of Sarasota, first quarter condo sales were up 8.6% over 2016. Even single family home sales on Longboat Key are up 33% in the first quarter compared to 2016.
With a near fixed supply of condominiums (only about 130 units constructed since the year 2000), you wouldn’t expect big swings in sales. A small, single digit increase or decrease each year would seem normal. But now, we are heading into 4 years of declining sales, and this year is looking like a double digit drop.
Longboat Key Condominium Inventory is on the rise
Average inventory levels have increased over the past 2 seasons. Given the low levels of inventory in prior years, the increase was not all that unwelcome. The 2017 average seasonal inventory was about 295 listings. The 2015 and 2016 average seasonal levels were low, at just 214 and 223, respectively. However, as shown in the chart below, sales have not only continued to decline as inventory climbed, but the rate of sales decline has accelerated. Average inventory during the winter season in 2016 was slightly higher than 2015, yet existing condominium sales dropped over 10%. This year, inventory climbed by nearly a third from an average of 230 in 2016 to 302 in 2017. Yet, sales were still down 21% for the season.
This odd, inverse relationship between sales and inventory is the way things have worked over the past 15 years. During the build-up in inventory prior to the crash, sales started to slide. Sales hit the floor about the same time inventory peaked. Then as the recovery started, sales started to grow and inventory dropped.
Longboat Key Condominium Prices
The hidden piece to this puzzle is price. Prices have been rising since late 2011. This phenomenon of both prices and inventory rising is a sure sign prices have risen too fast. When prices increase too fast, sales start to slow. Also, as prices rise, more owners are encouraged to sell, so more homes come on the market. The combination of fewer sales and more listings causes inventory to rise. While painfully low levels of inventory can crimp sales, large quantities of inventory do not drive more sales, especially if the inventory is priced above the price the market will pay.
Consider the charts below. The charts compares sales and inventory by price point for the first quarter of 2012 and 2017. Note the differences across years at the 0-500k level. This bottom tier of pricing accounted for 56 of the 92 sales in the first quarter of 2012 (61% of all sales). The average inventory available for sale during those 3 months was 222 listings. For 2017, sales had dropped to just 31 and average inventory to just 117. Total inventory dropped from 375 to 304 or about 19%, but in the most popular price point on the Key, inventory was reduced almost 50% from 222 to 117. The 105 listing decrease is greater than the overall decrease in inventory.
This is more than just a shortage of lower priced units the market. Rather, it is huge chunks of inventory being priced out of the lowest range (i.e., the 2012 $475,000 condos moving to $525,000 range in 2017). You can see from the chart below this has been a gradual process since 2011.
The trouble, for now, anyway, is the budget for the pool of buyers has not increased as fast as this appreciation or much of the inventory that moved up in price was not worthy of the increase. This big shift in pricing has created a big bulge in inventory at the $500-1 million price range.
Also note these price point ranges are just arbitrary. Asking price has moved up inside and at the boundaries of these ranges. Just because a home might be priced under $500k doesn’t mean it will sell at $450,000 if the fair price is $400,000. Overall asking prices seem too high and will likely have to come down, at least in the under $1 million price points.
Finally, please read my article on the first quarter single family home update for Longboat Key. In particular take a look at the first chart which shows first quarter sales and inventory chart for the SFR market and note how it differs from the condo chart. The general movement of both sales and inventory is up. Additionally sales in the SFR market set a 10 year high this year for the first quarter.