Are property prices poised to head South this winter?

Property prices around the country have had quite the rally since the Fed decided to drop interest rates to stimulate the economy back in 2009.  After seven years of asset price reflation aka “the recovery”, there are a variety of factors that may send property prices downward.  Today we will look at the decline in sales volume, which is usually means that price drops are not far behind.

Prices of houses and condo properties

During the month of October, the average house price in the South Florida market dropped slightly to $430,856.  That represents a 6% decline from June, which is the point where we believe this market peaked in sales price and volume.  As for condos, the average price has already declined to 237,889 in October which represents a drop of 10% since June.  Also worth noting is that the average sale price of condo properties has declined for six months in a row.

Sales prices of South Florida houses and condos

House transactions by type

Our next chart has a breakdown of house sales by transaction type.  There were a total of 3,552 closed sales in October, which is a noticeable drop from the 4,923 deals that closed in June.  What is troubling about this chart is the sharp decline in traditonal (arm’s length) transactions.  These sales are usually what will keep prices up, while distressed sales drag the averages down. Here are the numbers by transaction type:

  • 3,132 traditional sales in October, a decline of 27% since June
  • 295 foreclosure sales in October, a decline of 37% since June
  • 125 short sales in October, a decline of 25% since June

Short sales foreclosures in houses

Condo transactions by type

There were 3,225 condo sales that closed during the month of October, down from 4,180 in June.  That is a 23% drop in deal volume and this is just listed condo properties and does not include the thousands of pre-construction condos that are available and new ones under construction and ready to flood the market.  Once again, notice that large drop in traditional sales. Here is a breakdown of the closed sales by transaction type:

  • 2,882 traditional sales in October, a decline of 22% since June
  • 292 foreclosure sales in October, a decline of 32% since June
  • 51 short sales in October, a decline of 32% since June

condo short sales foreclosures south florida

Total sales volume for the area

Here is a snapshot of the total sales volume for Miami-Dade, Broward and Palm Beach County Florida.  The reason we believe this is a set up for price declines is that this chart does not include November where rates started to climb substantially.   If deal volume was dropping before rates climbed, what will happen if rates normalize?  Existing inventory will have longer days on market and will be followed by price declines.

Houses and condo sales in South Florida

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