What’s going on in real estate in covid-19 times? Real estate was deemed an essential activity in Florida, and real estate is still being bought and sold! Things have slowed down. Time will tell just how much because things that were in the pipeline prior to covid-19 progressed and most went to closing.
We did see significant numbers of sellers pull their homes off the market at the offset of the pandemic. However, there are still many people who have to move whether its for job transfers, divorce, moving to assisted living or decreasing real estate holdings. We entered this time with a very low housing inventory and there still continues to be more buyers than sellers. Thus far, we continue to see home prices rising.
The number of closings in March was similar to last year. However, in the past week closings for single-family homes are down 37% and for condominiums more than 50%. My sales personally are down 21% for the same period last year.
The real estate industry is adapting with new ways of doing business. This month I had my first closing using a remote (online) notary to execute the closing documents. Meetings are being held with Zoom videoconferencing and video home tours are increasing. Showings can still be conducted easily in vacant homes as well as owner occupied homes with precautions such as gloves and masks.
The data indicates that real estate will be the least affected and among the first market segments to rebound. Why? Unlike the last recession, this one is not caused by the real estate market. And since then, homeowners have been staying in their homes longer and have more equity in their homes. (See my prior Blogpost)
Want to Read more on the covid-19 real estate market –
Waiting for Price Cuts Due to the Pandemic? Keep Waiting
Fla. Home Showings Pick Up After Bottoming Out on April 7
by Michelle L. Anderson, MBA, January 29, 2020
The low housing inventory has been driving up home prices and creating a seller’s market. In December 2019, the inventory in Pinellas County dipped to a supply of 2.3 months – way short of a balanced market of 5.5 months. We are talking supply and demand here.
One reason for the low inventory is that homeowners are staying in their homes longer than they did previously. Reasons may include longer lifespans and changing lifestyles of the baby boomer generation, homeowners wanting to capitalize on a rising market or changes in consumer’s mentality following the past housing bust of 2007-2008. From 2001 – 2008, Americans held their homes for an average of only 6 years. According to an article in the Wall Street Journal*, “More homeowners staying put has helped cause housing inventory to dwindle to its lowest level in decades, which has also helped push up prices on homes for sale. Adjusted for population, the inventory of homes for sale is now near the lowest level in 37 years of record-keeping.”
The good news is that we may be seeing a shift. In 2018, the nationwide average was 13 years, which shifted down to 10 years in 2019*. In Florida, the rate is lower – 8 years. Florida homeowners likely hold homes for a shorter period because they are bought as 2nd homes, bought later in life, or are purchased by those who come from other states and later decide to return to their state of origin.
Conventional thought has been that a homeowner should hold their home on average at least 5 years to break even. This number fluctuates with the market. Currently in St. Pete, the average break-even point is at 3 years. From this perspective, I think it bodes well for the financial health of Americans that they are staying in their homes longer. If in homeowner doesn’t hold their home up to the break-even point, they may have actually been better off renting. To calculate break-even points by area, down-payment and home price, this online calculator can be used.
Housing Inventory Turnover
Another way to analyze housing inventory trends is to calculate the inventory turnover rate. This rate can be useful when comparing neighborhoods within an area and what the expectation for new homes coming on the market may be. It is a way to determine if a neighborhood’s residents tend to stay put.
The neighborhood turnover rate is the percentage of homes in a neighborhood that sell each year. The rate is calculated by dividing the total number of homes in a neighborhood by the total number of homes that sold in that year. I calculated the turnover rates for a few St. Pete Neighborhoods:
Central Oak Park – 12% (of 1,727 homes on North Streets)
Historic Kenwood – 8.3% (of 814 homes)
Historic Old Northeast – 8.3% (of 534 homes)
Broadwater – 21% (of 378 homes)
Old Southeast – 16% – of 247 homes
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*National Association of Realtors, How Long Do Homeowners Stay in Their Homes, Jan. 8, 2020
*Wall Street Journal, “People Are Staying in Their Homes Longer—a Big Reason for Slower Sales,” Nov. 3, 2019
Home RemodelingSARASOTA, Fla. – Dec. 12, 2017 – Home renovations as an investment for a future sale with hopes of recovering the improvement costs are a dicey prospect at best. Real estate agents and remodeling construction specialists caution against that assumption.
“Hardly anything will offer a net profit,” says Barry Grooms, Realtor, broker and co-owner of SaraBay Real Estate with his wife, Sherry. But some improvements “will help sell the property faster and will fetch a higher sales price.”
On the flip side, renovations for personal and lifestyle inclinations or remodeling an older residence after a purchase are commonplace and prudent. The popularity of HGTV’s portfolio of “reno” shows reflects public interest, but solid evidence comes from BuildFax. The data analytics firm has a new report showing residential remodeling outpacing new construction spending.
“Residential remodeling activity has increased by 30 percent since 2010,” BuildFax reported, though that began trending down in the Southeast during the last half of 2016.
Denny Yoder, president of Yoder Homes & Remodeling, is well acquainted with remodeling motivations. “The majority of our clients are improving their homes for personal lifestyle reasons,” he said. “About a third of our clients have just purchased the property or are converting it from a rental to a retirement home.
“While the concern for appropriate investment and not over improving is always important, we advise clients the more years they plan on keeping the property the less important this consideration is.”
While cosmetic and lifestyle enhancements are attractive and advantageous to homeowners, prospective buyers will take a different view should those renovations be unappealing.
The return on investment for an updated kitchen averages about 60 percent, a bathroom remodel around 68 percent and a master suite addition about 53 percent, Grooms said.
Michael Moulton, a broker-associate with Michael Saunders & Company, cites expensive new marble and/or wood floors as iffy. Those are “too much of a gamble that a new owner may want something other than what you install.” Plus, he said, “not all buyers would appreciate” expensive windows such as Pella and Anderson.
Basic infrastructure upgrades could prove valuable, though.
“The best improvements a home seller can make are replacing the roof, HVAC, electrical and plumbing,” Grooms said. “The reason for this is that most home buyers will have a professional inspection and most homes require homeowners insurance, and if the aforementioned items are not in good condition, it may increase carrying costs for the new buyer or an immediate out-of-pocket burden that is too much and break up a deal.”
Moulton emphasizes re-plumbing a house in neighborhoods where that is typically needed and replacing an aging roof.
That falls in line with the “Remodeling 2017 Cost vs. Value Report.” The website – – compares the average cost for 29 popular remodeling projects with the value those upgrades retain at resale in 99 U.S. markets, including the Sarasota-Bradenton-Venice region. Nationally, home maintenance projects, such as siding replacement, paid off best.
Curiously, every one of those projects undertaken in Southwest Florida, for example, paid back a higher return on investment than the national average. The highest differential came in at 27 percentage points – a garage door replacement – 104.1 percent here versus 69.3 percent nationwide.
“In general,” the report stated, “the hotter the market, the bigger the payback.”
This is the 30th anniversary of Remodeling Magazine’s first such survey, undertaken with the goal of providing an unbiased, third-party report on how much it costs for a professional to do a typical remodeling project as well as how much a real estate pro believes that project will increase a home’s value if it’s sold within a year of when the work was completed.
The methodology includes such factors as the cost of materials and labor in each market, subcontractor payments, taxes and additional considerations. The study compares the costs for the same hypothetical project in all 99 markets surveyed. Nationally, the 29 projects in this year’s survey paid an average of 64.3 cents on the dollar in resale value. The study broken down into 19 mid-range and 10 upscale projects.
Overall, the report found that newer and older trends continued. Improvements to the outside of a home produce higher returns on investment than interior projects. Curb appeal upgrades sell, be they to doors, windows or siding. Replacing those features proved better than a remodel, real estate pros said.
On the lifestyle front, Yoder cited bathroom remodels as “very common,” with hand-held and multiple shower heads being very popular. “Other popular requests in bathrooms are replacing bathtubs with walk-in showers and stand-alone tubs,” he said.
“Next in popularity are kitchen remodels followed by closet organization,” he added.
In several areas that Remodeling did not address, Grooms did. “Landscaping on average can return up to 150 percent of a return of investment,” he said. “Fencing may return up to 95 percent.”
The fence issue brings up an important matter. “The other area that I have observed that often helps a home sell faster and for more money is homes that are ‘pet friendly’,” Grooms said – which translates into wood, tile or laminate flooring, fenced yard or large yards. “More than 65 percent of homebuyers have pets, so making a home friendlier or decreasing the maintenance may help a buyer choose your home over one that is not!”
In the Sarasota market, Remodeling Magazine, published by Hanley Wood, reported only four projects with positive resale values. The installation of fiberglass attic insulation scored the best, with 124.4 percent rate of return. That is followed by replacing the entry door with a steel one (106.9 percent), installing a new garage door (104.1 percent), replacing the garage door with an upscale model (104 percent) and replacing the siding (100.9 percent).
Of the 2017 national averages, only attic insulation recouped more than the job cost, at 107.7 percent.
In upscale projects in SW Florida, a bathroom remodel (61.8 percent), a bathroom addition (64.1 percent), a master suite expansion (65.9 percent) and a major kitchen remodel (69.1 percent) scored the worst ROI (return on investment).
“Consumers often are surprised to see that some of the most common remodeling projects recoup the least costs,” the report said. The rate on investment for a mid-range bathroom addition scored the worst payback at only a 53.8 percent average across the country. “Not a single kitchen or bath project ranked higher than 17th out of the 29 projects,” Remodeling found.
The magazine’s research put quantitative figures on the value of curb appeal. Exterior projects had an average payback of 74.9 percent nationally, while interior projects returned 63.5 percent, the study said. Almost an identical percentage differential separated replacement and repair costs from remodeling improvement projects.
Plus, kitchen and bath upgrades require more costly skill and labor. “As a general rule,” the study said, “the simpler the job, the cheaper it is and the more likely it will have a high ROI.”
Here in hurricane country, a backup power generator holds a lot of appeal. The addition of that piece of equipment came in dead last among mid-range projects in Sarasota at 66.4 percent.
But the survey’s information was gathered before Irma knocked out electricity to thousands of households in September, and residents scrambled to purchase those units.
“Timing also figures here,” the study stated. Generator popularity surged after Superstorm Sandy struck, soaring some 20 percentage points. ROI has been slipping since then, but Hurricane Irma served as a reminder of the value of that equipment.
The remodeling and replacement industry continues to reach new heights. One only needs to check the large audiences for HGTV’s numerous programs that highlight home overhauls. “Fixer Upper” – HGTV’s highest-rated show ever – has made media darlings and design icons out of Chip and Joanna Gaines. Their Waco retail business has skyrocketed and their 40-acre farm made the Texas city a destination.
This year, with an average of more than 30,000 visitors a week, their Magnolia Market business, complete with grain silos, should draw about 1.6 million people, according to the Waco Convention and Visitors bureau.
Their “blockbuster” series ranked as one of the top two most-watched cable telecasts in Nielsen data that covered their season four finale this past summer. Two of HGTV’s other home renovation series, “Property Brothers” and “Flip or Flop,” have also fueled the network’s rise even as ratings for other cable television companies fell.
One common denominator of these shows is ripping out walls to unite kitchen, dining and living rooms. Moulton supports the open floor plan as a positive on home values.
Did you know? Duke Energy has an Energy Efficiency Program that allows homeowners to get rebates on improvements. A home assessment must be completed either online, via an in-home appointment or by phone. I completed the assessment online and am now getting new insulation put in my home with a $200 rebate from Duke Energy. The current insulation is only 6″ thick and does not come close to meeting the thickness standards. The total cost to me will be $462 and I will surely save on future electric bills.
After I completed the online assessment, Duke also sent me the pictured box of energy efficient items. The weatherstrip was easy to put around my door, and who can’t use light bulbs? To find out more, please visit Duke Energy’s website.
Here are some new Florida State laws that I find noteworthy:
SB 1400 allows property owners to trim or remove trees on their property without a permit as long as they have a letter from a certified arborist or landscape architect stating the tree is a danger.* This change should save homeowners time and money in the permit process.
Banning vegetable garden restrictions
Floridians, yes we can turn our front yards into vegetable gardens! A new law established in SB82 prevents local governments from prohibiting them. The issue has come up numerous times nationwide when local governments deemed that front yard vegetable gardens are not aesthetically attractive. In one instance, a Miami Shores couple had to uproot their vegetable garden. My review of the City of St. Petersburg’s ordinances leaves me unclear if there is anything that would prohibit them. This new law makes it clear. I know I have seen several front yard vegetable gardens in St. Pete, including my own neighborhood of Central Oak Park.
This article in the Tampa Bay Times elaborates on the subject. Homeowners associations may have their own rules. Also note that ordinances designed to allow access to the right-of-way and to allow clear road views may still apply.
HB 447 allows local governments to close a permit six years after its issuance as long as no apparent safety hazards exist. It also prevents local governments from penalizing property owners for an open permit that was applied for by a previous owner. This change goes into effect Oct. 1, 2019.
SB1552 establishes the Florida Red Tide Mitigation and Technology Development Initiative – a partnership between the state and Mote Marine Laboratory to develop technologies that can control and mitigate red tide and its impact. This state bill sets aside $3 million a year for the next six years to fund the project. In addition, more than $625 million in environmental funding will be used for things like Everglades restoration, completion of the project that will raise Tamiami Trail, springs restoration, beach restoration projects, a red tide/blue green algae task force and a septic-to-sewer cost-share program.
As of now, tests show no signs of red tide in the Gulf. Testing is reported on the Florida Fish & Wildlife’s website “Red Tide Status.” Scientists are forecasting a “dead zone” in the Gulf of Mexico this year due to high levels of rain. Read more about this dead zone here.
*Please consult with an arborist before cutting down trees.
Additional reference: Florida Realtors