I recently experienced the highs and lows of our housing economy in two days. I sold a home I’d made no major improvements to for double the price it was purchased for three years ago. The next day, I started house shopping with my daughter, who is looking for a two- or three-bedroom home under $350,000 close to her place of work in downtown Sarasota.
My daughter’s expectations are reasonable. She’s been watching the real estate market (the average sale price for a single-family home in Sarasota was almost $600,000 last October) and knows she’s not going to get a newly built home with luxury appointments in a choice location. But I was shocked when I tagged along as she house-hunted. The inventory of homes that aren’t complete teardowns or that don’t need tens of thousands of dollars in renovations seems nonexistent in her price range.
I thought about this when I called economist Sean Snaith at the Institute for Economic Forecasting at the University of Central Florida for his 2022 forecast. I told him that we’ve been seeing an unprecedented level of wealth come here since the pandemic began. I mentioned a brand-new downtown Sarasota condo project where prices for units were starting at $1.86 million. Snaith, who often appears in The New York Times and The Wall Street Journal, is famous for his one-liners. He laughed and said, “Oh, look at who’s trying to get all Naples-y here,” referring to the city south of us that is one of the wealthiest areas in the country.
But the point is that if you’re coming here with assets, the economy is going to feel great. Snaith grades the economy an A+ the first half of 2022 and an A- or B+ the second half. Despite the consequences of Covid-19 (and bad government lockdown policies, Snaith insists), which have resulted in labor shortages, inflation and supply chain disruption, Florida and Sarasota are in good shape.
Growth, employment and domestic tourism will remain strong, although the Omicron variant (Snaith says it’s really our “overreaction” to anything Covid) is inserting uncertainty over 2022 international tourism. Inflation is the wild card. Snaith thinks the Federal Reserve is going to have to act quickly to rein it in.
But what about the housing market? Should my daughter wait until prices come down? Snaith says it’s possible homes may become a little more affordable once all the pent-up demand due to Covid, the trillions in federal government spending and the shortage of goods and services ease.
But, he adds, the factor that drives our economy—our desirability as a destination for retiring baby boomers—remains. And desirable metro areas always attract people, which causes housing prices to rise. “The cost of living in core areas of the metro goes beyond the means of the average worker,” he says.
Anyway, he adds, “Sarasota was never a poor man’s paradise.” I disagree. As a college student working as a cocktail waitress in the 1970s, I was able to live an idyllic life in a two-bedroom apartment on Longboat Key. Later, as a first-year young married couple making about $55,000 in combined income, my husband and I were able to buy a great home two miles from downtown and two blocks from the bay. Those days are gone.
My daughter’s solution to becoming a homeowner is simple. “People have to live further and further out,” Snaith says.
He’s right, of course. We all know that. My daughter’s commute will be longer, she’ll pay more in gas, and she won’t be as close to family, friends and her usual activities. The year ahead may feel like an A+ to me, but it doesn’t to her.