Status of Melbourne FL – Brevard County Real Estate
Current Status of the Brevard County Real Estate Market
Last updated 5/24/2021 with data through 5/20/2021.
We are living in a unique time. We are in the middle of a world-wide pandemic with no clear end in sight yet there has been a huge increase in the demand for homes. In many areas, including here in Brevard County, buyers are having a very difficult time purchasing a home because when a decent home hits the market, it immediately gets multiple offers. One likely cause of the current home buying frenzy is that mortgage rates are at record lows. Also, some reports suggest that with many more workers now working remotely, people are choosing to move to Florida for the mild winters and lack of state taxes. But how long can the housing market favor sellers in this way? Will we see an influx of new listings once the moratorium on Federally-backed mortgages ends? These are the big questions everyone is asking. Real estate reports provided to REALTORS® and the public show monthly statistics almost two months after the fact. That’s why we here at Florida Coast Realty Partners have created a system to track the trends in the Brevard County housing market in real-time so we can identify a shift in the local housing market as soon as it begins to happen. We update our findings every two weeks and that data is current.
Summary of Findings (For those who don’t want all the details)
Due to the pandemic and the related shutdown, in Brevard County both the number of homes/condos coming on the market (supply) and the number of homes/condos going under contract (demand) had decreased significantly between the end of February and the middle of April 2020. Subsequently, both supply and demand shifted back towards where they were, but then supply and demand settled into a new, surprising pattern. The number of sales has increased dramatically. On average, the number of single-family home sales is up 28% from the same period in 2019 (we are comparing to 2019 because of the unusual activity in 2020), and the number of 2021 condo sales is averaging 56% more than 2019 sales! But while the number of homes sold has been high, the number of homes being listed has been below average, thus creating a shortage of homes for sale. (Note: there was a significant increase in the number of listings in the last two weeks but it is too early to tell if this is a blip or a market shift.)
The incredibly strong sellers’ market has driven prices up. On average, home prices are currently up around 11% from where they were this time last year. Check back for bi-weekly updates. (Note that this data only represents Brevard County residential real estate).
All of the graphs below represent data from January 1st, 2019 to May 20th, 2021. Each calendar year is represented by a different color. It is important to graph this data year over year because real estate sales are traditionally cyclical with the greatest number of new home listings and sales occurring between late winter and early summer.
The first two graphs below show the number of single-family homes and condos that went under contract during each two week period of 2019, 2020 and 2021. The 2019 data (represented by the red line) has a seasonal pattern that is typical with real estate home sales. But as you can see in the graphs, the 2020 data (represented by the blue line) did not follow a similar pattern. Instead, in the beginning of March 2020 when home sales are typically still on the rise, you can see in graph #1a that single-family home sales had a distinct pattern of decline through the middle of April. This decline was followed by a distinct recovery from mid-April through June, which was then followed by a leveling off. The decline in March corresponds with when Florida issued restrictions due to Covid-19. As depicted in Graph #1b, this sharp decline and subsequent recovery was similar for condos.
What’s interesting is that while 2020 started off with sales a little higher than the beginning of 2019, after the March-April 2020 decline, sales rose to well above where they were in 2019. If fact for the second half of 2020 single-family home sales ranged from 30% to 40% higher than they were in the same periods of 2019. The condo graph is a bit more difficult to read because of the fluctuations caused by a relatively low number of total sales. However, the overall pattern suggests that 2020 condo sales were up from 2019 levels by between 15% and 30% throughout the second half of the year.
Now let’s look at what is happening in 2021 (represented by the green line). (Until July, we are going to compare the number of sales and listings in 2021 to 2019 rather than comparing to 2020 when there was a “crash” due to the onset of the pandemic.) At one point in 2021, single-family home sales were up over 35% from the same period in2019, and 2021 condo sales were averaging around 70% greater than 2019 sales! However, for the last couple of months the number of sales has fluctuated quite a bit for both single-family homes and condos. As you can see from the graphs, there was a significant decline in sales in March. This led me to wonder if the market was beginning to shift. However, sales are on the rise again; the number of single-family home sales for the last two weeks is up over 30% from the same period in 2019 and the number of condo sales is up a whopping 69%! We will definitely be watchful of what happens with these numbers over the next few weeks.
Note that there is an important distinction between the data presented here, which shows the number of homes “going under contract”; versus the statistic that you typically see reported which is the number of homes “sold”. There is normally a 4 to 8 week lag time between the time a house goes under contract and the time it closes and is marked as “sold”. Therefore, when tracking the real estate market in real-time, it is imperative to use the number of homes going under contract because if you track the number of homes sold you are pulling data this is lagging several weeks behind the behavior of home buyers.
The next two graphs show the trend in the number of single-family homes and condos that are newly listed. Both graphs #2a and #2b show that at the end of February 2020 more homes and condos were coming on the market than in the same period of 2019. However in 2020, corresponding with the beginning of the pandemic, the number of new listings started dropping after March 1st and continued that trend until the middle of April when it hit its low point at less than half of what it was pre-Covid, and less than half of what it was in April 2019. After the low point in April 2020 the number of new listings increased, but they remained a little below their 2019 levels throughout the remainder of the year.
Now looking at the 2021 data, as we did with the sales graphs, for now, we will compare 2021 data to 2019 which was a more “normal” year than 2020. You can see on both graphs that up until the past two weeks the slope of the 2021 lines were somewhat similar to the 2019 lines, but the 2021 lines were consistently lower. However, the graphs show that in the last two weeks there has been a significant increase in the number of new listings. The number of single-family home listings in this most recent period is up 18% from the two weeks prior and pretty much equals what it was in the same period of 2019.And the number of condo listings is up 35% from the prior two week period and is actually above the number of listings in the same period of 2019. It will be important to watch in the coming weeks to see if this increase in listings becomes a trend.
It’s important to understand the balance between the number of houses on the market (supply) and the number of houses being sold (demand). Typically, the way the market works is that when supply is up and demand is down, it is easy for buyers to get good deals; and conversely, when demand is up and supply is down, sellers benefit and prices typically rise. The second set of graphs above (new listings) depicts changes to supply, and demand is represented by the first set of graphs (new pending sales). To best determine how these changes have affected the overall balance of the market, we can look to another metric used in real estate – “Month’s Supply of Inventory” which I will abbreviate here as “MSI”. The MSI reflects the number of months it would take to sell all the current inventory of homes at the current rate of sale. The formula is Total # of Active Listings divided by the # of Sales. Typically, the number of sales used in the formula is a rolling average over the last 12 months. However, given that our current circumstances are unique and ever-changing, we are calculating the MSI on a bi-weekly basis using the actual number of sales in a 2 week period and then converting that bi-weekly supply of inventory into a monthly number by dividing it by 4.2 (the average number of weeks in a month) and multiplying by 2 (since it is a 2 week period).
It’s OK if you didn’t completely understand the previous paragraph because we’re going to give you the gist of it now. The lower the “month’s supply of inventory” (MSI) number the better the market is for sellers, and the higher the MSI number the better the market is for buyers. A “Seller’s Market” is commonly defined as when the MSI is at less than 6 months and a “Buyer’s Market” when the MSI is greater than 6 months. In the last few years, we have been in a strong Seller’s Market with the MSI being at approximately 2 to 3 months, but as you will see from the following graphs, 2020 proved to be a considerably stronger sellers’ market and 2021 is literally almost off the charts!
- Lower MSI is good for sellers
- Higher MSI is good for buyers
- “Seller’s Market” defined as MSI < 6 months
- “Buyer’s Market” defined as MSI > 6 months
The next two graphs depict the trends in the MSI for 2019, 2020 and 2021. The MSI graphs show increases to the MSI after the onset of the pandemic in March 2020 followed by a decrease beginning in mid-April. The single-family home graph shows that the MSI on May 20th, 2019 was 2.9. But now in May 2021 the MSI is at only 0.6. This means that if no one listed their home for the next month, but people kept buying homes at the current rate of sale, in less than 3 weeks there would be no homes left to buy! This represents an insane sellers’ market for single-family homes! And the market for condos isn’t much different with the current MSI at only 0.8 months.
As you might imagine, a very strong sellers’ market means that prices are likely to rise at a higher than normal–rate, –and they have. Typically, we would expect a 3-5% annual increase in home prices. But as depicted in Graph #4 below, home prices in 2021 are up on average a little over 11% from 2020. While that is high, it’s not as high as I would expect it to be based on the incredibly low inventory.
1) The final sales price on a home is not published until the sale actually closes, and since it typically takes 30 to 45 days after a contract is signed for the sale to close, any price changes we see in the graph, actually reflect what buyers were paying 4-6 weeks prior.
2) We have not displayed a graph for condos because the relatively low number of condo sales combined with the wide range of condo prices makes those prices difficult to interpret in the short-term.
As long as the current market remains extremely favorable to sellers, it is likely that the above-average price increases will continue for Brevard County real estate sales. But how long can this unprecedented sellers’ market continue? Graphs 2a and 2b show signs that there may be a shift towards more people selling their homes. But even if that continues, will the increase in the number of listings keep up with the increase in demand? We will continue to track the data to find out what’s happening as it happens. Stay tuned for bi-weekly updates.