South Florida Real Estate Statistics and the Market's Bottom

What is the market bottom? When will we reach it ?

These are very popular words today. I hear it every day from investors, sellers, trouble-mortgage holders. While there is some common sense in putting some common sense in what seems a never-ending trend, there is not in reality a point in time that we could later on represent as the day when real estate values stopped dropping.

I have found in my daily exposure to real estate transactions that trends vary  according to specific regions, locations, and type of properties. In what has become one of my specialties: finding properties in South Florida for out-of-town buyers and foreign investors, the tendency has accelerated lately.  These buyers usually concentrate on the most touristic areas and focus on the beach, attractions and entertainment centers

As more of the better located properties sell at discounted prices, the new units that enter the market are not enough in quantity  to replenish this unique inventory.  No new properties are presently built on South Florida's beaches and adjacent areas. Therefore, it makes sense that the turning point is inevitably coming, when there will be a balance between demand and offer which stabilize.

And I have lately started to feel a certain latency compared to the last few years' turmoil. Will I extend this to other areas which are less familiar? It's obvious that foreclosures and short sales volume is still increasing in less demanded area.  They will keep the pressure on the prices in those areas. In the premium areas, however, after most developers with  unsold properties on their hands, and under pressure from bank and lenders, have finally come to term with taking their losses and accept substantially lower offers, there has been a sensible reaction and sales are happening in numbers that we had not seen in many months. Troubled resale and "underwater" properties that had been on the block for a long time, had finally started to move, once the banks have somehow adjusted their "short-sales" procedures. 

This feeling of  "things starting to change" have prompted me into giving a quick look at some basic statistics in the areas I cover.

In the figures below, I am comparing the active inventory of homes and condos in the most important areas of South Florida. It's the easiest approach to a first look. In most locations, I notice a reduction in the listings of up to 5 and even 10%. And that's in less than two months.

This tendency is general in all locations analyzed. Is this the bottom of the market? A continuous reduction in the listings would eventually mean a stabilization. Prices have continued to deteriorate, during the first semester of 2009. This has evidently brought back to the market lots of sideliners. Depending on which area, prices are back to their 2003-2004 levels.

I have even run across prices that I hadn't seen 2001-2002. Will we reach the 2000 price level? I don't think so. But it would be reasonable to assume that prices will reach the normal levels that they would have reached if the distortions of the mortgage craziness hadn't occurred, and if the real estate "bubble" wouldn't have been a factor in inflating real estate values. I would take the 2000 prices and adjust them by a 3 or 4% yearly inflation factor and we could talk about 30 to 40% total factor on the 2000 values to reach the prices where the market will eventually bottom.

I am not an economist; just a common sense, practical, thinker. What I mean is that prices should go back to what they would have been if this nightmare wouldn't have happened. Does it make sense? I hope so. Because I believe that the "affordability" is what will have the last word. The price cannot be what a buyer cannot afford. It must fall in the ranges that Fannie Mae's rules had traditionally established. 28% of your gross income can be safely dedicated to pay for your PITI (mortgage principal and interests, insurance, and taxes). That only will prevent foreclosures, insolvency and bankruptcy.

I just use the MLS statistical tools and they reflect what I have been feeling for some time now. The best properties are being sold; the most attractive opportunities are being grabbed. Of course, incredible offers and bargains are around every corner, but there are getting scarcer to find and this definitely not going to last forever.

The inventory of homes for sale is an important factor, and it is true that almost no new construction has been added to this inventory in the last two or three years, except for the condominium buildings being completed. Affluence of out-of-town buyers and investors has been slowly eroding this inventory and it will continue.

Foreclosures and short sales are supposed to increase in the immediate future, due to the end of some banks "moratorium" on foreclosures. Unemployment is still eroding homeowners overall solvency.

However, the above comparison is significant. I don't think it is too adventurous to claim that we are very close to the market's bottom.

The information below is classified by city, active listings as of March 19, 2009 followed by those at the date of May 15, 2009.

Analyzing Active South Florida MLS listings "FOR SALE"

(Separated Data for Condominiums and Single Family Homes)

Aventura Condos - 1864, 1769

Bal Harbour Condos - 270, 283

Brickell Area Condos - 810, 714

Hallandale Beach Condos - 1320, 1260

Hollywood Condos - 1477, 1608

Fort Lauderdale Condos - 2903, 2918

North Bay Village Condos - 304, 303

Pembroke Pines Condos - 1096, 971

Sunny Isles Condos - 1495, 1401

Surfside Condos - 189, 172

Weston Condos - 331, 309

West Palm Beach Condos - 2732, 2510

Aventura Homes - 54, 47

Coconut Grove Homes - 156, 156

Coconut Creek Homes - 231, 172

Coral Gables Homes - 607, 555

Coral Spring Homes - 720, 568

Hallandale Beach Homes - 124, 114

Hollywood Homes - 1377, 1288

Fort Lauderdale Homes - 1902, 1733

Miami Beach Homes - 492, 469

Pembroke Pines Homes - 837, 854

Surfside Homes - 70 , 73

West Palm Beach Homes - 1841, 1665

Weston Homes - 545 , 487

Can we draw some conclusions? I might be too early. But early decision always make sense when investing and beating the crowds. I will keep an eye on these statistics to confirm or discuss their validity in the near future.

Henry B. Nathan is a Realtor in South Florida.
Please visit my office at Sunny Isles.
I invite you to also visit my website with one of the top real estate database. Great Search Tools will make your search enjoyable and successful.
http://www.condo-southflorida.com

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