Here’s a few paragraphs from an article in Barron’s this week. Can SD be far behind?
A Bitter Aftertaste
By ROBERT PLUNKET
WHEN REAL-ESTATE MARKETS sour, owners of luxury homes and condos sometimes cling to a comforting theory, at least in the slump’s early stages: Their properties are pretty much immune to a downturn, just as their own lives are immune to the daily economic tribulations of those sad and pitiful Janes and Joes forced to reside in those tacky $600,000 hovels out by the Interstate.
Alas, reality and theory don’t always coincide.
Consider Sarasota, Fla., a small city in which property values are king and which was one of the hottest of the hot spots in the U.S. real-estate bubble.
Hugging Southwest Florida’s Gulf Coast, with a sparkling downtown facing a gorgeous bay, 35 miles of white-sand beaches, a wealth of museums, opera, ballet and theater, plus a well-heeled population of sophisticated retirees and second- and third-home owners, Sarasota thought the ride would never end. Home prices jumped 150% from 2000 through 2005, according to the National Association of Realtors. Condos rose about 130% in the same span. And those figures, which also cover neighboring Bradenton and Venice, may understate the gains in Sarasota proper and its barrier islands, which boast a disproportionate share of the area’s to-die-for properties.
But now prices are in something approaching a free-fall. The current readings say they’re down 19% since the end of 2005 and 10% in the past year. Lots of residents who had considered selling their homes during the craziest of the craziness, but didn’t, are wringing their hands.
One question was paramount: Did they sell or didn’t they? Of the 79 properties on the sales list, 18 were offered “absolute,” meaning that the seller hadn’t set a reserve price and supposedly would accept any bid. But the median sales price these attracted was less than half of the original asking price. Ouch.
Thirty-seven properties were sold “subject to owner confirmation,” meaning they didn’t receive bids above their reserve price — the minimum that the seller had told the auctioneer beforehand would be acceptable — and thus maybe sold or maybe didn’t, depending on whether the seller would accept the low-ball bid.