The Rich Take a Hit As Well

Published: Monday, March 23, 2009 at 1:00 a.m.
Last Modified: Friday, March 20, 2009 at 11:42 a.m.
Southwest Florida's real estate market has always had something of a dual personality -- the high-end waterfront properties catering to the affluent, and the "normal" market inhabited by everyone else.

The high-end retreats of the islands have operated in their own universe sometimes, as it was thought money flooding in from the well-to-do around the country and the world would cushion the blow of any regional economic challenges.

Of course, now we are in the midst of a global financial crisis, with economies around the world sputtering and stock markets struggling. The real estate market, fed by a Wild West atmosphere of lawless lending and speculation during the boom years, got completely out of control and is largely responsible for sparking this disaster. The upper bracket of properties have not been immune -- they are in this mess with the rest of us.

So it may be natural to ask, with 2008 likely to go down as one of the worst economic years in modern history, did people still buy those million-dollar Sarasota mansions on the beach and bay? And how much of a hit did sellers have to take to move those homes?

Deborah Beacham, an agent with Michael Saunders & Co. specializing in high-end properties, recently put together a report looking at just that issue -- looking specifically at single-family homes (no condos) in 2008 that were listed at $1.5 million and up and had either a waterfront view or boating water. Beacham grouped sales by locale: Bird Key, Casey Key, Lido/St. Armands, Longboat Key, Mainland Waterfront, and Siesta Key.

Beacham found while the total volume of such sales was down 20 percent overall -- $218.3 million in 2008 compared to $271.4 million in 2007 -- that "many individual properties retained most of their value" in 2008 compared with 2007. That does not mean buyers were not getting a discount off the list prices. On average, most properties in that upper bracket sold for about 82 percent to 86 percent of their asking prices in 2008. But those figures are about the same as how similar properties performed in 2007.

Now, a few caveats are in order, the first being that nothing compares to what was going on during the boom. Beacham found that if you bought a high-end waterfront property during the height of the boom in 2005-06, you were unlikely to be in the black these days. But for those who bought such homes prior to the boom, their values were still holding steady enough today that they are in profitable territory.

The other caveat I'll add is that the bulk of the 2008 crash really began in earnest in September, and so a buyer who bought in March 2008 likely had a different set of calculations than one who did in November.

But that said, back to the numbers.

Beacham found that the number of sales was the same or higher in 2008 on Lido and Longboat, as well as for the mainland waterfront. Sales were slightly down on Siesta Key, dropping from 24 in 2007 to 21 in 2008. But overall, not bad.

One place where there was a noticeable collapse of sales was on Bird Key, where only 6 homes valued at $20 million sold in 2008, compared with 15 homes at $58 million on 2007. The lack of action on Bird Key may show that even rich buyers are focused intently on price just like everyone else these days -- as the average ratio of sales price versus list price was 90 percent on Bird Key, the highest of any area studied.

What is more, that 90 percent figure is exactly what it was on Bird Key for 2007 sales, too, suggesting that Bird Key sellers were sticking to their asking prices, Beacham's report found.

By contrast, every other area studied in the report -- ones that already had lower sales-list price ratios to begin with compared to Bird Key -- saw even further drops of between 1 to 3 percentage points in 2008 compared to 2007. This would seem to indicate those sellers were more willing to negotiate in 2008 as the market continued to fall. Siesta Key sellers, for example, settled for 83 percent of their asking prices in 2008, compared to 86 percent in 2007.

It is interesting as well that the Bird Key homes took longer to sell on average in 2008, 292 days, compared to 2007's average of 246 days. So basically Bird Key sellers stuck their guns, and buyers decided they would be better off elsewhere.

Even for the rich, it seems, it is definitely a buyers' market these days in Sarasota.


This story appeared in print on page D12, Sarasota Herald Tribune, March 23, 2009, by Aaron Kessler