South Florida Housing Market, 1st Quarter 2013

Crazy.

Really – if you don't have a lot of time, you don't need to read any further. For a bit more of an analysis, stay a little.

At least in the Tri-County region – encompassing the coastal area from Jupiter to Homestead, excluding the Florida Keys – it feels, as a colleague said during a viewing this week, "like 2005 all over again".

Not a fond memory, indeed.

What is happening is uncommonly tight inventory with rising prices:

     20.6% decrease in available single family homes
     8.9% decrease in inventory (absorption of available homes in months)

     18.9% increase in median list prices
     25.7% increase in sold homes
     24.8% increase in median selling prices
     18.6% increase in median selling prices per sf 

     (all changes year-over-year for single family homes)

What are the main reasons behind the low inventory?

• Underwater sellers: certainly they are not putting their houses up if they don't have to. With recent price increases, they hope the market will come to them. And the WSJ estimates 22 percent of home owners with a mortgage owe more than their home is worth
• Lack of equity: many home owners rely on the equity from their home to make a down payment on their next property. With fewer owners seeing equity in their houses, they may not have enough money to move up
• Investors: many of them do not flip – that market is pretty much cleared out for now – but renovate and rent out
• Banks slowing down foreclosures: with tighter rules in the foreclosure process, banks are moving at a slower pace in foreclosing. They also lean more towards short sales and loan modifications
• Builders are building less: Housing starts were at record lows from 2009 through 2011 so there’s less inventory being added to the market. A rebound in the new-home market has only recently started to occur. 

So why is this development not really good?

• South Florida needs a new housing bubble like a sharp pencil in the neck
• Unreasonable price increases attract speculators (vs. users)
• An overheated market seriously hampers the region's attraction to "hard" buyers (those who live and work here)
• Lack of inventory discourages "casual buyers" (vacationers, snow-birds, second home buyers), which are also vital for Florida real estate
• The fallout of the last crisis is still lingering, and the economy is not ready to handle the next debacle
• Sellers may not resist "greed is good", and start racing to the top again
• Contrary to the overall belief, real estate agents make less money and close less transactions in overheated than in normal healthy markets

But I suppose asking for cool heads to prevail is about as efficient as offering the fox in the hen-house a marzipan egg.

What is your opinion – are you selling or buying sooner, later, or not at all now?
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Photo: Train wreck at Gare de L'Ouest, Paris, 1895. Source: wikimedia