South Florida home prices will continue to fall
South Florida home prices not expected to rise soon.
Home prices in Miami-Dade County will continue sliding through 2010 and won't bottom out until 2011, according to a new report by Moody's Economy.com. Broward County will fare a bit better, it predicts, with prices hitting bottom in the latter part of 2010.
The forecast by the Pennsylvania-based economic research firm ranks among the most pessimistic assessments to date of South Florida's beleaguered housing market. The survey, ''Housing in Crisis,'' predicts when home prices will stabilize in various metropolitan areas across the country and then eventually rise again.
The report calls Southeast Florida, stretching from Port St. Lucie to Miami for the purpose of the study, ''perhaps the worst housing market in the nation.'' It says prices have fallen sharply already but, unlike many other overheated markets, prices are still too high and the number of homes for sale still too large. The result, it says, is that values are poised to decline even more.
Local observers were quick to take issue with the conclusion that prices in Miami-Dade County will keep declining for two more years, arguing that predicting a bottom is always tricky business and pointing out that sales of existing homes are picking up in the region.
Craig Studnicky, president of International Sales Group in Aventura, said he sold 25 condo units in January -- roughly double what he was doing six months ago. ''I don't think prices are going to go up, but customers are telling me they think we are pretty close to bottom,'' said Studnicky, adding that low mortgage rates are pulling some buyers off the fence.
However, the report concluded that for prices to stabilize three things must happen: "affordability will have been restored, payrolls will have stopped contracting, and excess inventory [of homes for sale] will have been worked off."
The survey, which was released Monday, predicts that price stabilization will come in Miami-Dade in the second quarter of 2011, after a 66 percent drop from a housing price peak at the beginning of 2007. Broward home prices are predicted to stabilize in the fourth quarter of 2010, after a 64 percent fall from a second quarter 2006 peak.
Those declines are far more than the predicted national housing price fall-off, which Moody's Economy.com pegs at 36 percent.
But real estate analyst David Dabby said the South Florida market is already finding a floor. "Absent a depression, a market bottom is forming in prices because we are getting closer to 2002 pricing," he said. That's the year when the boom started to take off.
A local housing recovery will likely play out on a project-by-project, neighborhood-by-neighborhood basis, rather than uniformly across the metro area.
And the recovery may also vary according to housing type, said Coral Gables-based economist J. Antonio Villamil. "I think single-family home prices will bottom out sometime in 2009," said Villamil. "But for multifamily, yes, it could be another two or three years given the high level of inventory."
The report ranked Miami-Dade sixth nationally for peak-to-trough declines in prices; Broward ranked ninth. The Naples-Marco Island area ranked first on the list, which was dominated by Florida and California metro areas.
The report, whose lead writer was Moody's Economy.com chief economist Mark Zandi, blames irresponsible lending to unqualified borrowers, along with speculation on the part of home builders and investors, as the primary reasons why prices and new home construction were pushed to such lofty and unsustainable levels in South Florida.
It says the foreclosure crisis plaguing South Florida is exacerbating the housing downturn in two important ways:
• House price declines prompt some homeowners to default, which further depresses prices.
• Foreclosures add more homes for sale to an already over-saturated market.
"Risks to this dour outlook are weighted firmly to the downside," the report warns.
Providing a glimmer of optimism, however, the report says South Florida's long-term prospects are positive: "Ultimately, the area's strong ties to Latin America and stalwart economic and demographic fundamentals will stabilize its economy and allow its housing market to return to form."
Miami Herald - Matthew Haggman - February 11, 2009
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