The Sarasota Real Estate Market Has Bottomed!

Just kidding

It may have bottomed. It may have not. It is a common question asked to Realtors and other real estate professionals. The bottom line is that no one knows for sure. A lot of people are trying to time the bottom of the Sarasota real estate market but no one can tell you when it will happen.

Pessimism and Optimism

Everyone seems to have an opinion on the market. There is a pessimistic group of people out there who believe no matter what that home prices will continue to fall. These people tend to seek out bad real estate news to validate their beliefs. 

The other group of people are those who are optimistic. They believe everything is hunky dorey and that everything will just work out fine. They tend to ignore the bad news and listen loud and clear when they hear good real estate news.

Be careful who you listen to and do your own homework.

Timing the Market

Ask anyone who has tried to continually time a market and they will tell you how tough it is. Famed growth manager, Peter Lynch astutely noted:

I can’t recall ever once having seen the name of a market timer on Forbes‘ annual list of the richest people in the world. If it were truly possible to predict corrections, you’d think somebody would have made billions by doing it.

Warren Buffett said:

“We continue to make more money when snoring than when active.” He adds, “The only value of stock forecasters is to make fortune-tellers look good.”

Of course these guys are talking about the stock market but the same holds true for any market. It actually is probably easier to time a real estate market versus other markets.

Creating Wealth Through Real Estate

Real estate prices are getting cheap. I am not sure when this will happen but I believe a lot of people will look back on today's market and kick themselves for not either buying a home or investing in real estate. The housing market historically moves in cycles. We have been in the down cycle for about 5 years now and if history repeats itself it will not last forever. We will see consistent appreciation again.

Imagine buying five $100,000 rental properties. Let's assume you put 20% down and get a 15 year mortgage. To keep it simple lets just say that you have a break even cash flow every year. In 15 years when your mortgages are paid off you will have 5 rental properties producing a nice monthly income. Now assume that prices increased.  Look at the appreciation rates below:

• * 2% - $672,934
• * 3% - $778,983
• * 4% - $900,471
• * 5% - $1,039,464

Assuming there is appreciation after 15 years your portfolio of free and clear rental properties would be worth a nice chunk of change. At the very least if prices stayed the same for 15 years you would still have $500,000 worth of mortgage free rental homes.

Where is the Sarasota real estate market now?

The chart above shows the inventory levels(light green bars), sold (dark green bars)and pending (red line) properties in Sarasota county for the last 3 years. 

Over the last 3 years

* Inventories have dropped 48%

* Sold properties are up 54%

* Pending properties are up 73%

* 7.6 months of inventory

Even if you are pessimistic about the Sarasota real estate market you have to admit that the market is looking better and better every year.