Prices of Miami Real Estate. What's next?
Miami real estate prices went down. Then during the last year they've gone up. Now, will it go up or down?
In recent months it has been reported how prices of Miami real estate have increased by between 15 and 20% when compared to the same period last year (as per a Douglas Elliman report by 20.9 percent for coastal properties in the second quarter of 2012 and an average of 17.7 percent when considering all of Miami homes and condos). The firming of prices is due to the sharp drop of inventory. The reason inventory dropped was because of a reduction in distressed sales due to banks problems related to the robo-signing scandal. This happened in late 2010 when it was alleged that banks were not following proper procedures when foreclosing on properties and they had to freeze foreclosures, review and modify practices. Distressed sales represented a larger proportion of sales in the past (60% last year vs. around 40% this year) and with that part of the inventory reduced it is sellers that have owned prior to the bubble forming, those that bought distressed properties recently or the ones that can take a loss that have been selling. Now, what most experts predict is that banks will start reducing the shadow inventory (properties they have in their books but have not foreclosed) again and that could put a dent on price increases. I cannot say for a fact that it will not happen but I anticipate, all other variables staying equal, that it will not have a big impact in South Florida real estate prices going down.
My observations come from hitting the road and they are:
When you visit management offices at condo association you see that owners in default of condo dues are substantially reduced. Usually owners that don't pay their mortgage also don't pay their condo fees. Some associations have even been able to reduce the condo fees as the non-payables have decreased.
Although there have been fewer foreclosures, banks have become better at processing short-sales. Thereby eliminating part of the inventory that needed to be foreclosed.
For the properties that are out there still in the process of being foreclosed there is sufficient pent-up demand to absorb what comes out to the market. My bigger concern is the impact that the projects that are being sold today will have in two years' time over prices.
I recognize that most are requiring 30 to 70% deposits from buyers before completion but it is still a large number of units that should come to the marketplace by 2014, 2015.