OMG…Have You Seen Current Inventory Levels in Miami and the Beaches?!

In real estate on December 19, 2009 at 2:27 pm

Inventory levels in Miami-Dade county and the Eastern corridor of Downtown-Biscayne-Brickell (mostly 33131) and the Beaches (33139 and 33140), were both slightly lower in November as compared to October, 2009 thanks to great improvements in Pending and Closed sales. Yet, they were down by 35% and 20% respectively as compared to a year ago (November, 2008).

Miami Beach                                 County-wide

The picture over the last six years shows mixed messages as shown in the quarterly graphs below

Although it appears that we are at similar levels for new listings, pending sales and closed sales as we were back in November, 2003, the truth is another.

Taking a closer look reveals that although sales are up 44% from for the quarter ended in November, 2009 as compared to November, 2008, they are still 21% down as compared to this quarter six years ago before around the beginning of the boom period that ensued.

Last two quarters ended in:

In addition, based on Closed Sales, Months of Inventory (the time it takes to move existing inventory), is up 119% between Nov. 09 and Nov. 08 quarter-ends (in reality, they are 3-month ending periods). However, there was an improvement between the last two 3-month ending periods of 1.7% and 43.5% year-over-year.

Aug 09 Nov 09% Change Nov 08 Nov 09% Change Nov 03 Nov 09% Change

Months of Inventory (Closed Sales) 23.2 22.8 -1.7% 40.4 22.8 -43.6%10.4 22.8 119.2%

This improvement is a direct result of better Absorption Rates (the rate per month at which properties are being purchased), in recent quarters, though still much slower than the quarter ended in November, 2003 as compared to our last quarter in November, 2009 (down by 54%).

Aug 09 Nov 09 %Change Nov 08 Nov 09 %Change Nov 03 Nov 09 %Change

Absorption Rate (Closed Sales) 4.3 4.4 2.3% 2.5 4.47 6% 9.6 4.4 -54.2%

In a big way, there is still much inventory to assimilate. A key to being able to do this is an improved economy, fueled by improved job numbers, lower unemployment, which typically leads to stronger consumer confidence.

The balance however remains lop-sided because, although the unemployment numbers showed great improvements, we still need job gains and not job losses before consumer confidence returns.

Yet, even with an improved employment picture – a larger deficit, increased inventory of foreclosed properties competing at fire-sale prices with other properties being offered for sale, a lingering threat of a nuclear Iran and possibly North Korea, two war-fronts to fight and a dollar loosing its place as the standard around the world – it is easy to see we are not out of hot water – not by a longshot.

With recent news that projects like GaansevortSouthBeach and Icon Brickell are in imminent trouble with their lenders, there is little doubt that 2010 and 2011 may actually prove to be critical years.

Sellers will need to weight the possibility that, selling today – albeit at much lower prices than sought, may actually proof to be an intelligent choice when considering the possibility of continued price reductions in order to compete with troubled property sales.

Buyers on the other hand, have never seen a time when dollar-cost-averaging concepts may play such a role in real estate investing as it will in the next 2-5 years.

As T. Harv Eker says: Don’t wait to buy real estate – Buy real estate and wait. Even if buying at a time that may prove not to be the exact bottom, I believe we will test the bottom during the bouncy months ahead. Buying today, and at any number of intervals in the months and years ahead may help hedge against losses.

In the end, real estate has historically performed well and prices/values will recover over time and yet, it is now that finally one can finally begin to buy real estate and enjoy a positive cash flow. Over time, this will yield great results for investors as they reap the rewards of months and months of positive cash flows and later enjoy potentially massive capital appreciation. The best formula for wealth accumulation.

End-user buyers who only intend to purchase their homestead residence also stand a chance to greatly gain over time. With tax credits and deductions still possible, buying real estate today and holding it for at least 5 years or more may proove to be a wise move – second to not buying more now, while interest rates continue to be below 5% and prices are this low.


Your comments welcomed…

  1. […]…In the end, real estate has historically performed well and prices/values will recover over time and yet, it is now that finally one can finally begin to buy real estate and enjoy a positive cash flow. Over time, this will yield great … […]

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