The latest data has been released on the single-family and condo inventories for South Florida. The data includes MLS records for Miami, Fort Lauderdale and Palm Beach, Florida. The recent trend has been a gradual drop in available properties for sale. The decline in inventories has resulted in some temporary pricing strength that has actually been an issue for appraisals. Local real estate agents have been complaining that appraisers have not been making adjustments along with the recent uptrend in prices. Maybe it is because the appraisers understand that this is just a temporary situation until the banks start releasing their inventory onto the market, competing with private sellers and taking prices down across the South Florida market. The first chart is the total available residential inventory for the tri-county area:
The total available inventory (single-family and condominiums) was over 50,000 properties throughout most of 2010. Remember that banks removed their inventory from the market and stopped foreclosures in October 2010. After that point in the chart, you will see the gradual decline in available properties in South Florida. As of May 2012, available inventory stands at only 28,719 properties (nearly cut in half since Sept 2010 before the robo-signer halt).
Next, we will take a look at the single-family home inventory:
As a standalone graphic, this doesn’t appear to be that drastic of a drop. The data shows an inventory of 19,060 homes available in January 2010, peaking at 20,264 in September 2010. After that, there has been a steady drop in houses available for sale with inventories currently at only 13,464 in May 2012. The percentage drop in available inventory currently is at about 34% off the September 2010 high.
Last but not least, lets illustrate the condominium and townhome inventory in South Florida:
Wow, now this is interesting. Inventories began 2010 at 31,308, peaked at 31,526 available condo/townhome units in August 2010, and have dropped steadily from that point on. As of May 2012, there are only 15,255 available units available for sale. That is over a 52% drop in available units for sale!
What the South Florida residential property market is experiencing goes back to the basic economics lesson of supply and demand. Without competing distressed properties on the market, the near term result will be less available inventory and a gradual (yet temporary) firming of prices. What I have illustrated is the visible inventory and what is more concerning is the shadow inventory.
The shadow inventory has not yet made it to the market. Since October of 2010, the banks have removed their REO properties and basically halted the foreclosure process on millions of homes nationwide. This category of properties can be defined as properties that are seriously delinquent, already foreclosed on and sitting vacant in your neighborhood, or homes that are in a negative equity position and their owners have been reluctant to sell because they basically cannot afford to “get out”. Regardless of whether these properties make their way onto the market as a short-sale or REO, they will usually sell at 20% discount to properties marketed by private sellers. When they finally sell, it leaves neighboring homeowners at a disadvantage and usually creates a new group of people who are then left in a negative equity position. This new group of underwater homeowners then has to determine their ability to ride out the storm by making their mortgage payments or modifying their loan, short-selling their home, or even walking away in a “strategic default” or what is know referred to as “jingle mail” because the property owner simply puts the keys in the mail and sends them back to the bank.
In summary, it may be several years until the South Florida housing market stabilizes and begins a true recovery. This temporary market condition of prices firming provides an eye-grabbing headline for the local newspaper, but don’t be surprised if you see the data turn negative again in the next few months.