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Fort Lauderdale housing market charts & analysis with inventory, prices & distressed property sales:

If you pick up the local paper today, you will think it is 2005 all over again.  This is music to your local real estate agent’s ears:  Seller’s market returning!  Yesterday I even saw that “housing market has bottomed” was trending on Twitter.  Before you run out and overpay for a house (again), please drop your checkbook back on the counter and read the next few paragraphs.  Hopefully that will calm your housing euphoria and paint a clearer picture of  the currently depleted South Florida housing market inventory, temporary lack of REO and distressed sales, and how this relates to the current market.

After several months dismal jobs reports, it is now obvious that we will not be experiencing an economic recovery (or housing recovery) anytime soon.  The Fed is running out of bullets after QE1, QE2, Operation Twist, and even the hopes of QE3 already baked into the markets.  There is a saying in the stock market “Sell in May and go away.”  As far as the South Florida housing market is concerned, if you were lucky enough to sell in May, you should stay away for quite awhile.  FHA has admitted that loans originated in 2008 and 2009 are going delinquent at a faster clip. Even buyers who purchased a property in 2010 with minimal down payment are currently in a negative equity situation, or they will soon be underwater on their mortgage.   Current data shows that over 46% percent of South Florida mortgages are “underwater”, and that is with the artificially inflated prices.  Just wait until we get another 20% drop in prices and we will talk about being well over half of all mortgages floating in a negative equity territory. Once this news starts spreading through local neighborhoods, the chatter about strategic defaults begins to get louder.

On a daily basis, I am asked to complete broker price opinions (BPO’s) in Fort Lauderdale, Florida for a variety of financial institutions.  I prepare detailed property valuations and provide market insight for asset managers who need to have an accurate assessment of current conditions.  Allied Realty Group wants our clients to understand market fluctuations and trends so they make make  informed decisions whether they are buying or selling property.  I have assembled recent data from the South Florida Multiple Listing Service which should provide a good market snapshot.  First up is a chart of the active single-family housing inventory:

My data begins in January 2010, when there were nearly 6,000 single-family homes for sale in the greater Fort Lauderdale market (essentially Broward County listed properties in the MLS system).  The amount of listed properties grew to almost 6,500 in September of 2010.  In October 2010, all of the major lenders stopped foreclosing and put their REO properties on hold due to the robo-signing scandal, where foreclosure documents were signed without proper review.  Millions of cases nationwide were halted until the they were finally settled in March.  In the chart above, you will notice that was the peak in inventories with a steady decline in housing inventory from September 2010 forward to the present.  As of June 2012, available inventory stands at approximately 3,071 single family homes for sale.  That is less than half of the inventory that was available when the banks were just getting warmed-up and hitting their stride in disposing their REO inventory.

Next, let’s take a look at what percentage of property sales are distressed (either bank-owned REO or short sale) residential properties:

From the chart above, you will see that the percentage of closed transactions that were distressed properties hit a high of 36% of all single-family home sales in February 2010.  With the exception of February 2011 where distressed sales were at 34% of all closed single family home sales, that percentage has steadily declined to a low level of  only 15% for April, May and June 2012.  Do you think this is good news for the South Florida real estate market?  Well, not exactly.  With all of the failed mortgage modifications, foreclosure defense / foreclosure postponement, we are in no better condition than in 2008 when this slow moving train wreck started.  In June, the percentage of distressed condo sales spiked by 5% after bouncing along the bottom, so an uptick in single family distressed sales should be right around the corner.  Once that train leaves the station, it will be in motion for awhile.

Let’s display a chart showing the average selling price of single family homes in the Greater Fort Lauderdale area and the break in the trend for 2012:

For the first half of 2012, the price trend appeared to be in a positive upswing, but that trend finally snapped in June.  It will take another month or two to confirm the next leg down, but something tells me we will be getting there sooner than later.  What I find interesting is that even with supply restricted, we finally saw a break in the average sale price uptrend.

On the surface, people may think the market was finally turning the corner.  The fact of the matter is that the largest financial institutions estimate the national “shadow inventory” of foreclosed homes yet to be released into the housing market is above of 6 million homes and as high as 9 million.  Standard & Poor’s just released a research report estimating the national shadow inventory at a 46-month supply.   The numbers vary by institution, but you can bet that well over 1.5 million distressed sales will be tossed into the national real estate market annually for at least the next 4 years, with a heavier dose dispensed in the former high-flying markets like California, Nevada and you get you guessed it……..Florida!  As you will see from this last chart from Realtytrac, foreclosure starts in Florida have increased over 80% over 2011.  It is not a matter of “if” foreclosures will start hitting the market, but “when”.

The Allied Realty Group residential team serves as the exclusive broker for a variety of financial institutions in the management and sale of distressed single family and multi-family properties.  Our team will inspect, repair, market and dispose of REO properties in a manner that mitigates bank losses.

Allied Realty Group’s REO assignment territory is Broward County, Florida and we complete broker price opinions (BPO’s) for banks on a daily basis. All of our residential brokerage clients appreciate our extensive market insight since we are actively visiting properties and preparing comprehensive valuations for asset managers.