Rising interest rates appear to be "putting pressure" on Sarasota-Manatee real estate market

As the Federal Reserve imposed the first interest rate hikes in the United States since 2018 — one in March and another, larger one in May — to fight the highest inflation seen in the country in 40 years, the sizzling local real estate market may be feeling the first effects.

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

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"At the end of April, there were 1,969 active listings (properties) combined in both counties for both markets, a 14.3% increase from 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 the two counties."

Also, fewer homes for sale closed in both the single-family and condo markets, a trend that's been ongoing for months.

Across both counties, closed sales declined 23.6% compared to 12 months ago.

Tony Veldkamp, 2022 RASM president and a senior advisor at SVN Commercial Advisory Group, said in a news release the statistics were anticipated by local Relators.

Rising interest rates make purchasing homes more expensive for buyers who require a mortgage, which reduces demand and slows price appreciation, economists say.

The Federal Reserve is relying on that economic principle to slow inflation, which was reported rising at an annual rate of 8.3% in April, down 0.2% from March's number.

“As we've been anticipating, it appears that the rising interest rates and inflation are beginning to put pressure on our local real estate market,” Veldkamp said. “While we're still seeing fewer pending and closed sales when 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 homes for sale has not caused an immediate sharp drop in median home price, according to the April statistics.

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

Sarasota County's median home value ticked down from March's $487,500 to $482,803 in April. Still, that figure represented a 27.1% increase from last April 2021.

Manatee County's median home price came in at $515,000 in April, down from $525,000 in March but up 27.2% from a year ago.

The area's average real estate price at $722,776 was up 21.3% compared to a year ago, but real estate analysts typically do not use average prices to determine market trends as luxury homes can skew the data.

Robert Goldman, a Realtor with Michael Saunders & Co., has been tracking the interest rates, inflation rates and yield on the 10-year U.S. Treasury note for months as the housing market remained red hot.

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

Goldman said "only rising interest rates will bring a degree of balance to home price growth and cool off the over-heated housing market."

In his opinion, inflation will likely still be around "for some time" with decreases being "a slow drip."

"The road to stable prices is apt to be slow in fits and starts, along with falling stock prices, higher rates, and weakened consumer confidence," he said. He did point to some bright spots in currency markets where a strong dollar may "create a ceiling for mortgage rates from going much higher."

The Venice-area Realtor does not expect real estate prices to see any sharp decreases in the near term.

Instead, he expects home prices to continue to rise in the Sarasota-Manatee market, just not as fast as it has recently done.

"Are we in an early stage of an adjustment in prices towards a marginally more balanced market?" he said. "The next few months should be telling."

This article originally appeared on Sarasota Herald-Tribune: Rising interest rates put pressure on Sarasota-Manatee real estate