Status of Melbourne FL – Brevard County Real Estate

Current Status of the Brevard County Real Estate Market

Last updated 9/15/2021 with data through 9/6/2021

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We are living in a unique time. For over a year now we have been a world-wide pandemic 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 whenever 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, the number of people moving to Florida is up and that trend is expected to continue for some time. Some reports suggest that this influx is due to the increase in remote workers; when given the option of living anywhere, people are choosing to move to Florida for the mild winters and the lack of state taxes. But how long can the housing market favor sellers in this way? Will we see an influx of new listings now that the moratorium on Federally-backed mortgages has recently ended? Is there any indication that the market may be shifting? These are the big questions people are 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 of Brevard 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 with current data.

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 with demand very high and new listings below average.

In the beginning of this year, the number of single-family home sales were up 33% from the same period in 2020 (pre-pandemic), and 2021 condo sales were averaging an incredible 60% more than 2020 sales. However, from the end of March to the end of May this year there was quite a bit of fluctuation in the number of sales. But now for the last 3 1/2 months sales seem to have leveled off with the number of sales a little below 2020 numbers but still above 2019 numbers.

But while the number of homes going under contract had been up, the number of homes being listed was below average from March 2020 to April 2021, thus creating an expanding shortage of homes for sale. Although it now appears that the number of homes and condos being listed is finally back to pre-pandemic levels, listings need to increase significantly more in order to make up for the current, on-going shortage of inventory.

The shifts that we are seeing in supply and demand may be an indication that the market is beginning to slowly turn toward being more balanced. But in the meantime, sales prices seem to finally be reflecting the extreme shortage of homes for sale. Between the beginning of June and the middle of August, the median sales price for single-family homes rose consistently and was on average a whopping 22.8% higher than it was in the same period of 2020. However, the median sales prices for the last four week period have fluctuated significantly. It is too soon to tell if these recent fluctuations are just a blip, or if the market is making a correction to the recent price spike. Read the full article below for more details and check back for bi-weekly updates to keep current on the status of the Brevard County/Melbourne area real estate market.

All of the graphs below represent data from January 1st, 2019 through September 9th, 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 depict 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 due to the restrictions and initial uncertainty that existed at the beginning of the Covid-19 pandemic, the 2020 data (represented by the blue line) did not follow the typical seasonal pattern. Instead, beginning in March 2020, when sales are typically still on the rise, graph #1a shows that single-family home sales declined drastically 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. 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 they were in the beginning of 2019, after the March-April 2020 decline, sales rose to well above 2019 levels. In fact for the second half of 2020 single-family home sales ranged from 30% to 40% higher than they were in the same period 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, on average 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). In the beginning of the year, the number of single-family home sales was up 33% from the same period in 2020, and condo sales were up 60%! However, between mid-March and early June the number of single-family homes going under contract fluctuated quite a bit, but has since leveled off. (In fact, the number of sales has been very consistent over the last 14 weeks.) You can see from Graph #1a that the number of new contracts for single-family homes has most recently been lower than 2020 numbers but higher than 2019 numbers. From Graph #1b we can see that for the most part condo sales have followed a similar pattern to single-family home sales except that condo sales tend to vary more from week to week.

Note that there is an important distinction between the data presented in Graph #1a and Graph #1b, 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 before the Covid-19 restrictions hit in March 2020, the number of homes and condos coming on the market was somewhat similar to the numbers 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 lowest 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 remained a little below their 2019 levels throughout the remainder of the year.  

Now looking at the 2021 data, you can see on both graphs #2a and #2b that the year started off with the number of new listings below previous years’ levels, but that has shifted in the last few months and now listings are more in line with what we saw in 2019. In the case of single-family homes, listings have remained consistently above 2020 levels since April 2021 and have been slighted above 2019 levels for the last 8 weeks. 

So we’ve looked at sales and listings, but to understand what that means for the overall Brevard County real estate market we need to do further analyses that look at that balance between supply and 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 called “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 in the period. 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 averaging around 2 to 3 months, but as you will see from graphs #3a and #3b below, 2020 proved to be a considerably stronger seller’s market; and 2021 is literally almost off the charts!

The MSI reflects the number of months it would take to sell all the current inventory of homes at the current rate of sale.

  • 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

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The next two graphs depict the trends in the MSI for 2019, 2020 and 2021. These 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 for the period ending September 9th, 2019 the MSI was 4.2, on September 9th, 2020 it was 1.1, and now in September 2021 the MSI is only 0.94. 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 a month there would be no homes left to buy! This indicates that we are still in an insane sellers’ market for single-family homes! The MSI for condos isn’t much different with the current MSI at only 1.6 months. However, while 1.6 is extremely low, it is double what the MSI was for condos earlier this year. Also, if you look closely at Graph #3a you’ll see that the MSI for single-family homes has been very gradually increasing since mid-June. (Although, it has held steady in the most recent 2 weeks.) Before a material change can occur to the MSI, sales either need to drop considerably more, and/or listings need to increase significantly.

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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. In a balanced market, we would expect around a 3-5% annual increase in home prices. However, as depicted in Graph #4 below, single-family home prices really spiked this year between the beginning of June and the middle of August. For the two week period ending August 12th, median home prices in 2021 were a whopping 27.6% higher than what they were in the same period of 2020. But as the graph shows, in the following two week period, from August 12th to August 26th, the median sales price dropped significantly, and then made a partial recovery in the most recent two week period. In the most recent two week period, the median sales price for single-family homes is 22.2% higher than it was at the same time last year. It’s still unclear what these price fluctuations of the last 4 weeks means for prices going forward. We’ll need to watch the median sales prices closely in the coming weeks.

Notes:
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.

My overall take on the current data is that while the market for single-family homes has finally leveled off, we won’t really see a turn to a more balanced market until listings increase significantly or new home builds start catching up to demand. The federal moratorium on foreclosures just ended on July 31st, so possibly we will see some foreclosures hitting the market and increasing the inventory. But I think it is unlikely there will be a flood of foreclosures. 

Check back every two weeks to keep up-to-date on the status of the Brevard County housing market and feel free to contact us with any questions.