‘IS THE WORST OVER FOR SOUTH FLORIDA HOUSING MARKET?’June 24, 2009
In The Miami Herald today, there was an interesting and relevant article by Monica Hatcher, that I would like to share with you regarding market conditions in Miami.
Is the South Florida housing market finally touching bottom? The answer, of course, can only be seen in the rearview mirror, but analysts agree that the most terrifying part of the downward slide is behind us.
The current overstock of developer-held condos still vastly exceeds that of the 1980s, Dabby said. In the greater downtown Miami area alone, developers will still have roughly 10,000 unsold units on their hands by the end of this year.
New monthly figures from the Florida Association of Realtors show sales of existing homes and condos continued to post gains in May, the ninth consecutive month-to-month increase and a strong step in the right direction. Although sale prices are still way down from last year’s numbers, monthly declines appear to be stabilizing.
”If you look at the yardstick of housing sales, which is a typical yardstick, we are in the recovery stage and we’re in the bottoming phases on pricing,” said Coral Gables-based real estate analyst David Dabby.
The market remains mired in a swamp of foreclosures and short-sales, however, and as long as there are still a sizable number of these distressed sales, it will continue to depress prices. As job losses mount and more homeowners enter foreclosure, such properties could continue to pour into the market.
Still, distressed sales are driving market activity.
Sales of single-family homes were up by 76 percent in Miami-Dade County and 47 percent in Broward County, compared to May of last year. Condo sales also rose by 36 percent and 25 percent in Miami-Dade and Broward, respectively.
As many as 60 percent of those sales, according to recent research from the Dabby Group Advisors, were foreclosures or short-sales that are sold for less than the mortgage owed against them. In some areas, like Homestead, the percentage of distressed sales is as high as 80 percent.
During the last market crash of the mid-1980s, distressed property sales accounted for no more than 15 percent of sales.
But now the low prices are spurring buying, which in turn is eroding the huge supply of homes and condos offered for sale.
The number of single family homes for sale in May fell from a year ago by 33 percent in Miami-Dade and 36 percent in Broward. The number of condos for sale dropped by 20 percent in Miami-Dade and 26 percent in Broward.
On the pricing front, median sale prices for single-family homes in May were down significantly from a year ago, dropping 39 percent in Miami-Dade to $194,700 and 36 percent in Broward to $190,000. The Miami-Dade median condo price slid 50 percent to $140,300 and 42 percent in Broward to $80,400.
The median price is the point at which half the homes sold for more and half for less.
Month-to-month figures, which are important to follow as market dynamics change, show pricing was essentially flat for homes and condos in Broward between April and May. In Miami-Dade, the median price actually rose by 10 percent for homes and 5 percent for condos.
A slowing of price declines and median prices that fluctuate only slightly from month to month is a sign that a bottom may be approaching.
The price of a Broward condo, for instance, has bounced between $85,000 and about $80,000 for the last five months. Similarly, the median home price has jumped between $219,000 and $190,000.
In Miami-Dade, Jenny Huertas, a real estate agent with Bal Harbour-based Condo Vultures, said more home buyers who can get financing are paying full list price for bank-owned properties in an effort to outbid investors with lots of cash.
”I have an investor from New York who wants to buy ugly houses and fix them up and sell them to first-time home buyers, but every time he gets outbid,” Huertas said.
Consequently, these cash-laden investors are being pushed to the condo market where they can bully-down prices because average buyers are having a tough time getting condo loans.
When prices will start appreciating again is anybody’s guess. ”Just because you reach the bottom, doesn’t mean you are going to turn around and come right back immediately,” said Andrea Heuson, a University of Miami finance professor who studies the real estate market.
If history is any gauge, home prices should come back sooner than condos. Until prices peaked in 2006, single-family home prices had fallen only one other time in the past 50 years. They dipped slightly after the real estate boom of the 1980s, but recovered in about a year.
Condos, on the other hand, have been an entirely different story. After the similarly overbuilt condo market crashed in 1984, the average price of a condo in Miami-Dade fell 47 percent and didn’t recover its peak price of $86,479 until 14 years later, according to research from the Dabby Group.
It took even longer in Broward, though for different reasons. Condos there were mainly in retirement communities and there was less demand.
Immersed in the Real Estate market 24/7, I am personally feeling and experiencing an uptick in the market. I am seeing properties in Miami Beach starting to go under contract daily. It appears that we may have hit the bottom! In my opinion, we may be scraping the bottom for a while longer before we see prices begin rising again but, the worst may be behind us. Stay tuned for more news to come…