MiamiRealEstateKing

Inventory in Miami-Dade Down for 14th Consecutive Month

In real estate on November 17, 2009 at 10:16 pm

As the market continues to bounce off a rough bottom, inventory in Miami-Dade continues to drop.

For the fourteenth consecutive month, inventory of real estate available for sale in our county dropped to 25,622 units in October, 2009 from the high of 41,230 back at the peak in September, 2008 (when the bottom fell off all markets – real estate and financials). This is almost a 38% drop in inventory levels from less than a year and a half ago.

Miami-Dade County Real Estate Inventory

Market Activity for past 15 months - All property types

By the same token, Closed Sales county wide grew by just above 34% in the same period while Pending Sales (under contract), grew by a whopping 102% from the peak in inventory in September of 2008.

The result of this activity has been to substantially reduce the Months of Inventory available for sale (the time it takes to move the existing inventory) and rapidly increase the Absorption Rate of the existing inventory (the rate at which properties are selling every month) throughout the county.

Based on Closed Sales, we have come from 36.6 Months of Inventory with an Absorption Rate of 2.7 units in September of 2008 to 17 Months of Inventory and 5.9 units in October, 2009. This represents a major improvement county-wide.

However, it must be noted that a great majority of the inventory reduction helping all numbers are (among other things), the following facts:

1) Canceled and Expired listings.

2) New Foreclosures not yet hitting the market (though thousands are expected to hit us during the third quarters of 2010 and 2011 due to reseting of ARMs, Option ARMs and other products, creating a new wave).

3) New inventory built during the boom still being offered for rent or being sold on lease-option deals by developers struggling to make ends meet.

Of course, when FNMA (Fannie Mae) begins to rent out to delinquent borrowers who lose their homes to foreclosure the foreclosed properties back to these homeowners rather than evict them, the glut of already available inventory will be greatly noticed. Right now, these once-homeowners are being forced out of their homes and into vacant rentals. When these homeowners become tenants in their own homes, this will leave the thousands of vacant units completely stranded.

But, I digress.  I want to focus my attention in this issue on the numbers affecting the condominiums in the areas of Miami Beach (33139 & 33140), and Downtown-Brickell (33131). We can notice a very jagged Q3’08 followed by an even worse January, 2009. However, notice in the chart below that our inventory levels in this particular area,  peaked in February, 2009 at 4069 units as compared to 3394 units available for sale in October, 2009. Nearly a 17% drop in the level of available condominiums for sale in just 9 months.

Market Inventory of Condominiums

Miami Beach and Brickell/Downtown areas - Condo/Townhomes

This obviously also helped create marked improvements in the Months of Inventory and Turnover Ratios. With a 10% improvement in Closed Sales between February, 2009 and October, 2009, it is the Pending Sales numbers that continues to mark the pace with a 47.7% increase between the 151 Pending units found in February and the 223 units Under Contract in October.

This has improved the area’s Months of Inventory Based on Pending Sales from almost 27 months just 9 months ago to just over 15 months in October or a 44% decrease in the time it takes to get the inventory sold. This is supported by the more than doubling of the Absorption Rate in the same 9-month period from 3.7 units to 6.6 units.

Date 2/09 3/09 4/09 5/09 6/09 7/09 8/09 9/09 10/09
For Sale 4069 4062 3891 3853 3724 3672 3556 3479 3394
New Listing 571 596 528 576 476 445 478 499 488
Sold 120 127 131 160 183 142 153 153 132
Pended 151 201 223 224 211 197 236 245 223
Months of Inventory based on Closed Sales 33.9 32.0 29.7 24.1 20.3 25.9 23.2 22.7 25.7
Months of Inventory based on Pended Sales 26.9 20.2 17.4 17.2 17.6 18.6 15.1 14.2 15.2
Absorption Rate based on Closed Sales 2.9 3.1 3.4 4.2 4.9 3.9 4.3 4.4 3.9
Absorption Rate based on Pended Sales 3.7 4.9 5.7 5.8 5.7 5.4 6.6 7.0 6.6
Avg. Active Price 748 745 741 727 724 711 710 710 709
Avg. Sld Price 373 429 357 549 401 416 433 477 385
Avg. Sq. Ft. Price 309 361 344 432 363 373 334 389 339
Sold/List Diff. % 90 89 91 85 88 91 88 89 90
Days on Market 131 128 101 151 117 135 122 138 148
Median Price 254 280 248 275 252 242 250 290 283
*All reports are published Nov. 2009, based on data available at the end of Oct. 2009.
This representation is based in whole or in part on data supplied by Realtor Association of Greater Miami and the Beaches, Reltor Association of Miami-Dade County, Realtor Association of Greater Fort Lauderdale and Northwestern Dade Association of Realtors. Neither the Board or its MLS guarantees or is in any way responsible for its accuracy. Data maintained by the Board or its MLS may not reflect all real estate activity in the market.

Here is where it gets interesting. Did you notice the Median Price of condominiums during the same period? Can you see what is happening to prices? Yes. That’s right.  They’re starting to edge up from $254,000 in February bouncing off the bottom to show four consecutive months of price increases to the current high of $283,000 in October, 2009.

Although the Fed has continued to support the current interest rates at the expense of a weak dollar, foreign nationals are finally noticing Miami, Miami Beach, Downtown and Brickel once more.

Remember though that, a 1% increase in interest rates will roughly eat up about $10,000 in purchasing power from buyers. This means that buyers on the fence looking for prices to bottom out…may be shooting themselves in the foot if they get caught waiting for that ever-illusive bottom while suddenly finding that the Fed, will no longer support low interest rates but begin to raise it once more in order to avoid inflationary or other pressures.

Sellers should also note that, Days on Market continues to be erratic at best, bouncing between 131 days in February to 148 days today.  Sellers must remember that each 30-day period their property does not sell represents another mortgage, property tax, insurance, maintenance and utility payment, eating away at their bottom line.

Pricing today is more important than ever. Pricing in today’s market accounts for about 80% of the marketing effort your professional agent is able to apply in your favor. Buyers know that today’s market is muddied with difficult Short Sale and REO negotiations, multiple-offer situations, legal issues encountered in many properties, difficult lenders and even when buying cash, city issues that can stop a sale.

Smart buyers today waste no time in hiring a qualified professional to help them navigate these turbulent waters. The professionals representing them know the market (as many buyers do because of the amount of information available online today), and these professionals show buyers ‘bargains’ (or in the case of many – steals), before they show any overpriced listing.

If you are a seller looking to get what you paid for your property, you may be in this for the long haul. In fact, you may soon join the ranks of the frustrated sellers that ended up in the Canceled or Expired properties list.

Another risk to sellers is that the rosy picture of improved Median Prices, greater Absorption Rates and shorter Months of Inventory and Days on Market may turn really ugly, real quick if (or when, rather), the number of foreclosures begins to materialize again (as many experts predict for 2010/2011), distressed homeowners become tenants of their own homes leaving other properties vacant and interest rates begin to rise, further eroding the ability for new buyers to obtain financing or force the few that can, to buy cash.

Cash buyers however, are not likely to pay top-dollar for your property. They expect a discount for the added assurance that the transaction will close on their end (barring other issues), and your property condition.

Remember as well, we are at a Price War and Beauty Contest never seen before. Sellers best listen to the advise of experts on staging, Feng Shui, and even home programming on cable if they want to ensure a sale in this market.

Buyers, whether foreign or domestic, must understand that a shift in Fed policy could gravely affect your ability to buy, making it imperative to decide to buy today and even have some frosting with the cake when tax time comes along and you are also able to receive your credit.

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