Two bold headlines from the March 30 edition of the Sarasota Herald-Tribune tell the story: "Manatee House Sale Cracks a Barrier at $5.5 Million" and "Metropolitan Site Sells for $40 Million." The first refers to the record price paid for a Manatee County home, an 8,500-square-foot waterfront residence in northwest Bradenton. The second refers to the sale of the 2.89-acre Metropolitan condominium site in downtown Sarasota. Kolter Property Company paid over $13 million per acre for the property at Gulf Stream Avenue and U.S. 41.
It's impossible to go to a dinner party or run into neighbors at the farmer's market without sinking into a frantic conversation about the runaway real estate market and the startling headlines it's generating. Can you believe how much that dump sold for? Are we too late to get ours? Did we sell too quickly? Will we ever be able to afford to buy another house? If values went up 36 percent last month alone, how come our house hasn't quadrupled in price? When is it going to end-and will it end badly, like the dot-com bust?
Everyone has a favorite anecdote: the neighbor who put out a handmade "For Sale By Owner" sign and one week later got two offers, the second $100,000 higher than the first; the $250,000 Whitfield Estates cottage that became the target of a bidding war a week after it went on the market; the Stickney Point Road condo development that sold out two hours after the sales office opened; the hopeful buyers camped out in order to be first in line to snare hard-to-find moderately priced units in a Palmer Ranch apartment complex going condo.
Every month, the sales figures catapult higher. In February alone, the average sale price of existing homes in Sarasota-Bradenton climbed 41 percent-$289,000 versus $204,800 over February 2004-the biggest percentage increase in the state. Then it shot even further into the stratosphere in March: "$300,000" screamed the giant Herald-Tribune headline-actually $305,400, an all-time high and a 36-percent increase over March 2004. No one was surprised when, in mid-May, the National Association of Realtors announced that Manatee County had the nation's No. 1 first-quarter increase in the median price of a single-family home: $275,100, a 45.6 percent jump from a year ago. (Sarasota County placed No. 2, with a 36 percent jump to $326,300.)
It's not just happening in the "good" waterfront neighborhoods-every neighborhood is feeling the frenzy. In North Port, a year ago considered a haven of affordable housing, the median sale price of existing homes in March rose to $208,000. North Port communities like Heron Creek Golf & Country Club are now marketing "estate" homes for over $1 million.
And if you think we're being shaken up by a soaring real estate market of historic proportions, you ain't seen nothing yet, experts say. Economist Hank Fishkind estimates our two-county population will reach almost 688,000 in 2006, an increase of 83,000 people in just five years. "This area's growth rate will take off like a rocket in 2007," with wave after wave of retiring Northern baby boomers, urban planning expert Bob Gibbs confidently predicted at the Sarasota Downtown Partnership annual retail forum last winter. "You're about to enter a boom to end all booms." Judy Schomaker, president of the Sarasota Association of Realtors and an agent with RE/MAX, agrees. As aging baby boomers continue to seek warmer climes, she says, "We have 10 more very active years, here and all around Florida."
These runaway real estate values make it tough to move within the market. You may feel rich when you sell your house, but wait until you have to replace it-and face a mega-jump in property taxes. An older four-bedroom, three-bath house in the sizzling West of Trail area taxed at $243,000 (the value ascertained by the Sarasota County property appraiser's office), had a tax bill of about $4,100 in 2004, after the $25,000 homestead exemption. If it sold for the $1 million the owners have been told they could get, the new owners would pay property taxes of nearly $18,000. People just aren't moving, as evidenced by the drop in listings: Despite the area's growth, there were 846 new residential listings in February 2005 versus 906 in February 2004, according to the Sarasota Association of Realtors.
And the dizzying pace of new development and changing neighborhoods has raised philosophical issues about the nature of community. Familiar touchstones are gone. Open farmland is disappearing. The value of one's home is calculated with dollar signs, rather than as the place where family and friends gather to celebrate holidays and life cycles. (A certain builder has been banned from a friend's get-togethers, because every time he visits their West of the Trail neighborhood he looks their beloved house over carefully and says, "definitely a tear-down." Another friend's husband wants to cash out of the home they've owned for 15 years. He sees a value that's tripled; she sees precious memories.)
Still, despite the hand-wringing, there's little doubt the community is becoming a more exciting place to live; just check out the lively sidewalks and restaurants in downtown Sarasota or on St. Armands Circle any Friday evening. You can buy the most hard-to-come-by cheeses now at local specialty markets and serve them on the most exclusive housewares. By contrast, Elliot Rose, Sarasota-based executive vice president of Florida operations for Coldwell Banker, knows what it's like to live in a community in decline. For 17 years he worked in the real estate industry in Buffalo, N.Y., a community with an outward migration of people fleeing to the Sunbelt and taking their buying power with it. "It wasn't the land of opportunity," he says. "People were leaving; they didn't say, 'I want to go move to Buffalo.'"
Rose compares Sarasota to Fort Lauderdale over the past few years. "For so many years, Fort Lauderdale was remembered as the summer break, Where the Boys Are community with lots of old-style 1950s-era motels," he says. "It was widely regarded as an area that hadn't fulfilled its destiny. If you go to Fort Lauderdale today, Las Olas is one of the hottest places in the country; they're tearing down complexes built in the '70s and putting up successful mixed-use projects. The place is abuzz with growth. You can't help but look at Sarasota the same way; both domestic and international interest is just as phenomenal and you can see that same amount of frenzy, except on a smaller scale because Sarasota is smaller."
Rose calls what's happening today "a perfect storm." He explains: "You've got confidence in real estate, plus the baby boomers coming into their inheritances, and more people who want to be in their ultimate destination who are doing it sooner because there seems to be this urgency that didn't exist before."
The good news is that there is enough wealth drawn to Sarasota and Manatee to support the market for some years to come; the bad news is the critical affordability issue and the "us-and-them" society it's creating. Those who believe a community should be composed of all walks of life are concerned. When people cannot afford to live where they work, the consequences affect everybody; just try to travel traffic-choked I-75 between Fort Myers and Naples to get a peek at what many believe could be our future. New Lakewood Ranch resident John Rhodes, a site relocation expert who advises big companies such as Corning, New York Life Insurance Company and Johnson & Johnson, says, "People won't travel large distances to work a service job. In the I-75 area where I live, we've done a good job of upgrading, converting and expanding service, but we can't get the people to work here. Almost every store has a 'For Hire' sign on the door."
Just a few years ago, if you told someone you were considering a move to Immokalee, they'd react with incredulity. But that's just what's happening in Collier County, where Naples real estate is the highest-priced in Florida (in March, the median sale price there was $430,800). Rose likens it to Aspen, Colo., where all the service workers live 30 miles away. "It's forcing more affordable development in a more easterly direction," he says.
Even young professionals are feeling squeezed out. Cheryl Gordon, managing partner of the law firm of Abel Band, says one new associate "looked and looked and looked and was finally able to find an affordable condo in the University Parkway area, but she had to decide that day or it would be gone. Already in three months it's gone up $60,000 in equity." Abel Band this year boosted its starting salary to be more competitive with those in Tampa, in large part because of the cost of living. "You'd think $75,000 [which they pay now] would be enough to afford a home, but it's not," Gordon says.
So what happens to a city when everybody's rich? David Brain, an associate professor of sociology at New College of Florida, says the obvious problem is "You start to have trouble getting help-immediate difficulty with help in the tourist industry, but also teachers, police officers. Where are people going to go who have to work for a living? We're already at a point at New College where our young assistant professors can't afford to buy a house here." (The average starting salary for a New College assistant professor is $46,778.)
The dearth of affordable (or attainable, or workforce, or whatever you want to call it) housing puts a crimp in any serious economic development efforts. Kathy Baylis, president of the Economic Development Corporation of Sarasota County, says the subject arises every time the EDC talks with a company considering relocation to our area. "They express concern and we express that we're also concerned about it, and we talk about the community land trust and other things the community is trying to do to address the issue.
"I haven't had a company that flat out says, 'We're not moving' because of it," she says. "And I hate to speculate, but I'm sure there are probably some for whom it was a consideration, even though they didn't necessarily tell us."
The other trouble with rich people buying up the city, says Brain, is that "Sometimes rich people aren't here very much. This is their third or fourth home and that means this is a community they're not particularly committed to. They tend not to vote and not to be interested in taxing themselves to support local initiatives like schools."
When Brain moved here in 1991, he paid less than $100,000 for his house. In today's market, he says, "Sometimes I think, 'Good heavens, I could cash out and buy that sailboat I've always wanted to buy and sail around the world.'" And leave Sarasota.
Is the rapid spike in prices, as alarmists keep prophesying, an over-inflated bubble that soon will burst? Absolutely not, insists Sarasota real estate doyenne Michael Saunders. "If we look at it with a broader historical perspective, we can calm down and say, 'This is not a frenzy.' It's part of solid growth, it's sustainable," she says. The essence of what made Sarasota so attractive as far back as the John Ringling era, she says, remains-a commitment to culture, a clean environment. "The soul of Sarasota still exists."
Saunders reminds us that decades ago the community made the determination "we would not be a sleepy village, that we would have height and density to our downtown core. Before New Urbanism was on anyone's lips, we were an urban downtown community." That trend can only escalate. "Sarasota will reflect the times," she says. "We will become in our core more urban."
Saunders praises the newcomers with "fresh eyes" who see the potential in areas we disregarded; the Rosemary District, with its thriving new boutiques all started by transplanted boomers, is a perfect example.
"What we are experiencing now seems intoxicating; it shows the community we built over the years is now paying dividends," she says. And Saunders says even the escalating prices aren't so shocking. "It depends on who's looking. If we have people from California, they think it's absolutely a bargain; if it's someone from Buffalo, they have sticker shock."
Schomaker of the Sarasota Association of Realtors also advises everyone to calm down. "I've lived here nine years, and ever since I've lived here it's been the only topic of conversation," she says. "And it's not just here-it's driving our whole national economy." Are we too late? Is real estate still a good investment? "Unbelievably so," she says. Homes sold through the Multiple Listing Service in 2004 appreciated by 29 percent.
"Sarasota has been found," says Schomaker. "It's such a beautiful place to live, it has so much to offer with its little-town feel. That's the charm we have to keep."
Should we expand Save Our Homes?
When State Sen. Mike Haridopolos (R-Melbourne) moved from a home he had purchased for $70,000 in 1996 to a $250,000 home in 2003, his tax bill jumped 350 percent. That's thanks to Save Our Homes, a measure passed during the roaring real estate market of the 1980s, when residents were facing big annual jumps in their tax bills. For those whose Florida home is a primary residence, Save Our Homes caps property tax increases by 3 percent or the cost of living, whichever is less. When the home is sold, it is re-assessed at full market value. The measure has allowed many Floridians to stay in their homes by keeping their taxes low, but in today's overheated market, it's also discouraging them from moving.
"My taxes went from $1,000 to $3,500," says Haridopolos. Now he and State Rep. Carl Domino (R-Jupiter) want to make Save Our Homes portable. The proposal, which would require voter approval of a constitutional amendment, would allow homeowners to apply the gap between taxable value and market value and move to another house. For example, a homeowner whose $200,000 home has doubled in value would be able to deduct the $200,000 appreciation from the purchase price of the new home, paying property taxes on the revised value. Homeowners could not use the law to pay lower taxes in their new home.
Domino says the bill would be a further inducement for buyers to become Florida residents; Haridopolos says it would result in more buyers purchasing more expensive homes and adding to the tax base. "Right now people aren't moving, so governments aren't realizing any revenue," says the senator.
Much like the original Save Our Homes bill, the new proposal has drawn criticism from county governments and the Florida Association of Realtors, who say it would result in lost revenues. "We don't want to see local governments not have the revenue to pay for police, firefighters and other services they need," says FAR's John Sebree.
Both supporters and detractors can point to California's Proposition 13, created in 1978 in response to a runaway market. It caps annual property tax increases at 2 percent for all homes from the date of purchase. It also transfers a homeowner's old tax base to a new purchase so long as the new home costs less than the selling price of the old home.
The law is working, argues Rick Holly, chief appraiser for Santa Barbara County. "Before, properties were re-assessed annually, and during the boom time people were being taxed more than they could afford," says Holly. He points out that county tax rolls continue to rise 8 to 9 percent annually. But others say California has lost enormous amounts of desperately needed revenue because of the bill, constraining budgets and services.
Nevada now has a 3-percent cap on property taxes, a response to tax bills that were rising by as much as 50 percent in a year. Scott Adams, director of business development for the city of Las Vegas (and a former Fort Lauderdale and Jacksonville planner), says it hasn't been a problem. "There's so much new construction and development here that our tax rolls have gone up substantially," he says. "If growth slowed down, the cap would probably have an impact." -Nanci Theoret