Q4-22 Oct Market Outlook

Market Outlook October 2022 Sarasota & Manatee

1

Hurricanes and Housing Values Will hurricane Ian have a lasting negative impact on the Sarasota / Manatee housing market? How significant?

How long will it last? Short answer: little to no negative impact regionally. Yes, some neighborhoods in North Port and Eastern Venice experienced some effects due to post-Ian flooding, but as a region, we were spared.

And yes there are individual homes from Palmetto to Englewood that had damage from falling trees or similar that will take a value hit, but there are not enough of them to impact the regional values.

Does that mean prices will keep going up? Not necessarily. The weather is just one of many factors influencing values. Long-term the West Coast of Florida is more likely to be affected by national market pressures driven by inflation and macroeconomic factors than by the hurricane.

Our market, like the entire country, was already experiencing a market shift prior to the storm. We are no longer in a frenzied boom market nationally or locally, but we are still low on inventory and seeing consistent demand.

We are in a “Sellers” market. Just not the market we were in last year, so we need to stop comparing everything to 2021. Comparisons to 2018 or 2019 are just fine!

712 Palma Sola Blvd, Bradenton, FL 34209

2

Impact from Hurricane Ian Hurricane Ian was a terrible natural disaster. Lives were lost. Homes were damaged. Some people will most likely experience post traumatic stress disorder. Though tragic, we have to put things in perspective. The reality is that the number of people severely impacted is a small number. That doesn’t make it any less tragic, but if we don’t keep it in context we can all be pulled into the emotion. There are real estate patterns which can be identified and anticipated following a natural disaster. It doesn't matter whether it's a hurricane, an earthquake or a massive fire. Many patterns repeat themselves year after year, disaster after disaster.

Initial reactions are understandable, but demand recovers quickly Post-Hurricane emotions are high. People near and far are shell shocked by the images and loss of life. As a result it is totally expected that a percentage of buyers will initially back away from home searches or even cancel an existing contract. Memories fade quickly. The majority of buyers will reevaluate their priorities within 30 to 60 days and reestablish their search. Long-term demand will not be negatively impacted.

Only the Hardest hit areas will take longer and have more turnover Sanibel and Captiva Islands along with Ft. Myers Beach will take several years to rebuild. Real estate in those areas will be somewhat chaotic for the near future. The new and improved communities will appeal to a new set of buyers as the rebuilding efforts take shape over the coming years. Areas like Naples, Port Charlotte, Punta Gorda, Englewood and North Port will recover quickly. Many are already back to life as normal. The majority of resi-

dents will rebuild and remain. There will be some investment opportunities but as a whole the communities will look much the same within a year as they did before Ian. History is not a crystal ball, but it is a good indicator of future odds: 14 of the 15 Category 4 or 5 hurricanes to make land in Florida since 1900 have been at or south of Charlotte Harbor. Though not a solid predictor of the future, it may influence some buyer’s decisions.

It all boils down to Supply and Demand Long-term the West Coast of Florida is more likely to be affected by national market pressures driven by inflation and macro economic factors than from a hurricane. The near-term risk is this particular hurricane landed in the middle of a national real estate / asset market shift. As a result some pundits will erroneously blame the hurricane for value adjustments that most likely would have happened regardless of the storm.

More people want to move to Florida than almost anywhere in the US. All the factors above will impact short and long term demand causing possible short term volatility. Supply in much of West Florida will actually reduce over the coming weeks and months. If demand and supply reduce at a similar pace, home values remain stable.

But as long-term demand rebounds prices will most likely return to an upward trend as long as the macroeconomic environment does not falter. Long-term, home values on the West Coast of Florida are not as much at risk as is a widening gap in affordability. Increasing insurance costs combined with increasing values will price more and more average Americans (and Foreigners) out of the Florida market.

Nobody has a crystal ball to accurately say values will be higher or lower a year from now. There are simply too many moving variables locally, nationally and internationally. But we can state with a high degree of confidence

that similar hurricanes in the past have seen recovery followed by increasing values.

Premier Sotheby’s International Realty

3

The Economy THE BAD •

Inflation will be with us for the forseeable future.

•

Consumer Spending is stagnating as inflation erases gains.

•

Supply chain issues will continue, resulting in continued building cost increases.

•

Interest Rates along with higher home prices have reduced home buying power by 60+%.

•

The stock market declined significantly, impacting consumer confidence.

•

Rental rates are still increasing due to a massive national shortage of rental inventory.

•

Economists predict a slowing economy and possibly a moderate recession through 2023.

THE GOOD (FOR REAL ESTATE) •

Inflation should grow at a slower pace going forward.

•

Housing prices historically increase during inflationary times (just not as fast as inflation).

•

People invest in hard assets like real estate during difficult or volatile times.

•

Investors will expand their rental portfolios due to the huge demand for rentals and the belief that overall values should hold steady (market dependent).

•

Housing inventory is still at historically low levels, keeping price pressure up.

•

Baby Boomers are still retiring at unprecedented rates and still want to move to their dream home.

•

Millennials are entering their prime earning years and want a house for their growing families.

Premier Sotheby’s International Realty

4

Sarasota & Bradenton’s Finest Homes

3214 Casey Key Rd Casey Key

1081 Bayshore Dr—Englewood

7804 Grand Shores Dr Lakewood Ranch

5236 Siesta Cove Dr - Siesta Key

1081 Bayshore Dr, Englewood FL 34223

13662 Legends Walk Ter, Lakewood Ranch

Premier Sotheby’s International Realty

5

SUPPLY Single-Family Homes “For Sale” Sarasota & Manatee Counties - per Stellar MLS

Declined from March 2020 through March 2021 Historic lows for the prior 5 quarters Still only 70% of the typical inventory that we saw on Sept 30th 2019 Surprisingly, the biggest inventory gains have been in the UNDER $500,000 segment. This is the first time in years that we have seen such gains under $500,000. The primary driver is a combination of inflation and interest rate increases. Average Americans are impacted more by recessionary forces than those at higher price points. Even such, this segment is still vastly undersupplied with just a 1.9 month supply.

All segments are still undersupplied as evidenced by the months supply: Under $500,000

1.9 mo

$500,000 to $1 Mil

2.5 mo

$1 Mil to $2.5 Mil

3 mo

All combined = 2.3 months supply

Greater than $2.5 Mil 6.7 mo Premier Sotheby’s International Realty Data supplied is from the Stellar MLS is deemed but not guaranteed to be 100% accurate

6

DEMAND - Sold & Closed Single-Family Homes

By Quarter - All Prices

13,921 11,443

- 18%

11,434

0%

The two-county area making up Sarasota and Manatee counties saw a decline in new listings coming to market prior to hurricane Ian of 16% fewer new single family home listings year to date in 2022 versus 2021. At the same time we saw a decrease of 18% fewer homes sold and closed year to date.

And we evidenced a 61% increase in Days on the Market for homes sold in the third quarter versus prior quar-ters in this year.

Is this overly concerning? No. It’s all relative. Supply decreased at the same time that demand decreased, resulting in a similar supply / demand equation.

Overall the third quarter of 2022 was comparable in supply and demand to 2019, which was considered a “seller’s market.”

Premier Sotheby’s International Realty Data supplied is from the Stellar MLS is deemed but not guaranteed to be 100% accurate

7

DEMAND - Units Sold & Closed Single-Family Homes Year-to-Date Comparison Through 9/30 Under $500,000

$500K to $1 Mil

$1 Mil to $2.5 Mil

Above $2.5 Mil

Combined Totals

Sold & Closed

2019

9558

2020

9151

-4%

2021

9318

2%

2022

5657

-39%

2019

1438

2020

1744

21%

2021

3316

90%

2022

4474

35%

2019

387

2020

489

26%

2021

993

103%

2022

1012

2%

2019

60

2020

97

62%

2021

294

203%

2022

291

-1%

2019

11,443

2020

11,481

.03%

2021

13,921

21%

2022

11,434

-18%

Significant reduction due to undersupplied inventory combined with higher interest rates and higher average prices all reducing buying power for average buyers.

Strongest segment in terms of unit sales. Expected to continue growing if inventory can keep up with demand.

Significant growth not only year over year, but quarter over quarter.

Simply a strong segment.

Homes actively “for sale” over $2.5 Mil decreased by 12% while sales remained constant resulting in a significantly undersupply market segment today.

2022 is a strong year to date. Homes sold are down year over year, but still well ahead of pre-pandemic years.

The question is if Q4 will keep the pace?

Premier Sotheby’s International Realty Data supplied is from the Stellar MLS is deemed but not guaranteed to be 100% accurate

8

Average Sold Price Single-Family Homes Sarasota & Manatee Counties - per Stellar MLS

74% appreciation since Sept 2019

2019

2020

2021

2022

Our market in February and March of 2022 was irrational. Not only did Supply NOT increase in Q1, the start of traditional season, but it actually reduced even further than it had been in Q4 2021. Buyers competed frantically for the limited number of home offerings on the market. The result was irrational offers above actual market value and an elimination of contingencies.

The subsequent market slowdown began shortly after Easter as fears of growing inflation and a potential recession overshadowed people’s desire to buy in Florida or most anywhere else.

Average price reflected the slowdown, but did not take a substantial reduction because supply and demand remained in relative equation. The average price today is still 17.4% higher than it was one year ago.

Premier Sotheby’s International Realty Data supplied is from the Stellar MLS is deemed but not guaranteed to be 100% accurate

9

Sarasota & Bradenton’s most spectacular Condominiums

615 Riviera Dunes Way #604 Laguna at Riviera Dunes

5962 Midnight Pass Road #132 | Palm Bay Club

605 South Gulfstream Avenue #PH 18 Epoch 430 Kumquat Court #504 Villa Ballada

280 Golden Gate Point #400 Aqua

535 Sanctuary Drive #A603 Sanctuary

10

SUPPLY Condominiums & Townhomes “For Sale”

Declined from March 2020 through March 2021 Followed by historic lows for multiple quarters Still less than 1/3 of the typical inventory that we saw on June 30th 2019 Condominium inventory has improved but has continued to struggle keeping up with demand. As a result we are seeing a stronger Seller’s Market for Condos. New construction is still well behind demand. Inventory is expected to continue rising but more slowly than single family.

New listings to the market are down 31% for third quarter (Q3) vs second quarter (Q2). In the same timeframe, contracts accepted (pending) are down 29.2%. Lower supply is keeping step with lower demand resulting in a nearly unchanged supply / demand ratio with only 1.5 months combined supply.

The Condo market’s greatest inventory gains are in the under $500,000 segment. Higher interest rates combined with higher average prices resulted in a shrinking buyer pool and longer days on the market.

Premier Sotheby’s International Realty Data supplied is from the Stellar MLS is deemed but not guaranteed to be 100% accurate

11

DEMAND - Sold & Closed Condominiums & Townhomes

5967 3847

- 26%

4434 + 15%

Condominiums sold far fewer units year-to-date in 2022 than last year, but similar to Single-Family Homes the pace of sales far exceeds 2019. The first three quarters of 2019 would be a better benchmark gauge of market momentum because it was a Pre-Covid normal year. 2019 was a strong year with a more balanced market.

Closed sales in the $1 Million to $2.5 Million segment increased by 15% year over year. This is a strong segment for downtown and island resale condos. But the over $2.5 Million segment reduced the most, down 56%. This is attributable to a lack of luxury new construction projects completing. The under $500,000 segment pulled back 31%. Overall sales have slowed due to a lack of inventory , inflation and interest rate increases.

Premier Sotheby’s International Realty Data supplied is from the Stellar MLS is deemed but not guaranteed to be 100% accurate

12

DEMAND - Sold & Closed Condominiums & Townhomes Year-to-Date Comparison Through 9/30 Under $500,000

$500K to $1 Mil

$1 Mil to $2.5 Mil

Above $2.5 Mil

Combined Totals

Sold & Closed

2019

3305

2020

4012

21%

2021

4553

14%

2022

3154

-31%

2019

412

2020

615

49%

2021

938

53%

2022

855

-9%

2019

109

2020

202

85%

2021

304

51%

2022

350

15%

2019

21

2020

31

48%

2021

172

455%

2022

75

-56%

2019

3847

2020

4860

26%

2021

5967

23%

2022

4434

-26%

Dramatically undersupplied inventory combined with higher interest rates and higher average pries resulted in far fewer sales.

Solid activity and demand but not enough new construction options to keep up with demand at this price.

The condo market sweet spot.

Continued growth anticipated as new projects come to market.

The high-end luxury segment is driven by new projects This number will recover when the current construction projects are completed.

The combined total –26% decline in sold units is misleading because supply is still well below demand. This will improve as new projects come to market.

Demand is strong.

Premier Sotheby’s International Realty Data supplied is from the Stellar MLS is deemed but not guaranteed to be 100% accurate

13

Average Sold Price Condominiums & Townhomes

69% appreciation since Sept 2019

69% appreciation since Sept 30, 2019 Though we expect a reduction in the pace of resale condo price appreciation going forward, we still expect condos to appreciate because supply is not keeping up with demand.

We will see upward spikes in average prices as large currently under construction new projects come to completion and closure in 2023.

The condo market is still substantially undersupplied .

Premier Sotheby’s International Realty Data supplied is from the Stellar MLS is deemed but not guaranteed to be 100% accurate

14

Market Summary Sarasota & Bradenton Demand is slowing but is still strong. Supply has risen in the past two quarters, but still remains at 30% below pre-pandemic levels. Yet new listings to market have slowed as homeowners struggle with consumer confidence in the economy. Supply levels are not expected to go back to pre-pandemic levels anytime in the fore-

seeable future. The Pre-Hurricane Ian level of demand in Sarasota / Bradenton today is similar to that of 2019 which was a great year by normal standards.

Asking prices have adjusted down from their peak in late first quarter (Q1) 2022. Average sold prices have adjusted down minimally to a level comparable with forth quarter (Q4) 2021. Sellers who adjust their expectations will sell their homes and still reap the profits gained over the past several years, just not the unsustainable increases over the past few months.

Could we see further adjustments? Yes, but history tells us Americans want to live in beautiful locations like Sarasota / Bradenton. Supply vs Demand!

Premier Sotheby’s International Realty Data from Stellar MLS is deemed but not guaranteed to be 100% accurate.

15

Everyone deserves the extraordinary, because luxury is not about price — rather it’s about an experience. And when it comes to real estate, experience matters.

PREMIERSOTHEBYSREALTY.COM Premier Sotheby’s international Reality , Inc. All Rights Reserved. Sotheby’s International Realty is a registered trademark licensed to Sotheby’s International Realty Affiliates LLC. Each office is independently owned and operated. Equal Housing opportunity.

This material is based upon information from the Stellar MLS, which we consider to be reliable but not guaranteed to be accurate.

This offering is subject to errors, omissions, and changes without notice. If your property is listed with another real estate broker, please disregard. It is not our intention to solicit the offerings of other real estate brokers. This material and its trademarks may not be republished or redistributed without prior written permission from Premier Sotheby’s International Realty.

16