Make sure you do your homework if you are considering any real estate investments at this point in the cycle. The market has shifted and most real estate agents either don’t know, or just don’t want you to know. That’s why it is important for your to conduct your own due diligence rather than leaving it to your agent. Here are a few tips:
- Make sure you obtain 2 or 3 good comparable sales from the neighborhood you are looking in. They should be closed within the last 60 or 90 days preferably and have similar characteristics to the property you want to buy. Asking prices are less important, closed sales really are all that matter.
- Notice the actual days on market. If your agent doesn’t want to print out or email the accurate property history, check out Zillow.
- Obtain an insurance quote for windstorm, flood (if required) and a homeowners policy and make sure you understand the deductible in relation to the replacement cost of the property.
- Make sure you obtain a mortgage pre-approval. Are you self-employed or working in the gig economy? Here are some helpful tips from Bankrate.
- Estimate your property taxes based on the purchase price, not what the current owner is paying.
- Don’t expect to flip your property. When you reach the end of the cycle as we are now, your holding period could be several years. Some buyers in older beach area condo buildings may never get their money out if they bought in the last few years.
- Are you fleeing a high-tax state because of the recent cap on state and local tax (SALT) deductions? There’s a good chance that your real estate agent is not an accountant, so make sure you consult a tax professional fully-understand the tax implications.
Now for some charts…
Do your homework – transaction volume on houses and condos
This chart shows the dramatic decline in deal volume recently. The total number of single-family home sales in South Florida dropped 48% in January from the market peak in June 2018. There were 2,502 closed sales in January, compared to 4,788 last June.
The condo market transaction volume looks just as bad. Sales volume declined 40% in January from the peak in June 2018.
Combined – House and Condo Transactions in South Florida
Here is a chart that shows the trend in total residential transactions in South Florida. This chart begins in January 2012 and this January’s 5,113 closed sales is the lowest since we started charting six years ago. The total in January 2012 was 5,453 closed sales and that is after the housing crash/financial crisis.
Understand the foreclosure market
South Florida is still dealing with plenty of foreclosures from the last crisis, along with new filings. Make sure your agent researches the number of existing foreclosures in your neighborhood, or number of condo units in your building that have pending foreclosures cases. Here we are in 2019 and it looks like filings are gathering steam again.