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Residential rundown: Single-family home market in Greater Fort Lauderdale / Broward County, FL
As we move through the end of summer, it appears that although the residential inventory remains at multi-year lows in South Florida, there may be a new pattern developing where more properties are being listed for sale. Today we will zero-in on the single-family home market in Broward County and our first chart is the inventory of houses currently listed for sale. It looks as if the temporary price stability brought some new sellers out to test the market. In June there were 4,225 houses listed for sale in this market and that number increased to 4,297 in July. You will notice from the chart that this is the third consecutive month of inventory increases after a fairly steady downtrend over the past few years since foreclosures were halted.
Next, let’s see the impact of even the slightest increase of supply to the market. This goes back to the simple laws of supply and demand, so take a look at the last few months in this chart:
The average selling price of a single-family home in Broward County reached $351,439 in June and dropped to $336,134 in July. Although this is just shy of a 5% drop in average sale price, it very well can be attributed to a few things:
- Additional housing supply finally hitting the the market. (Even though it is a very slight increase).
- Gradual rise in interest rates in the past few months. (Notice the rate increase from June to July)
Interest rates are in a solid uptrend. The 10-year bond (red line) is rising and our chart shows the direct impact on the 15 and 30-year mortgage rates. This trend will put a cap on residential real estate price increases going forward and will put downward pressure on prices as it decreases purchasing power. In our next chart, we breakdown the types of transactions that have been making it to the closing table:
It looks like the traditional transactions still make-up the majority of single-family closings, but do you see the uptick in short-sales? That shows that the banks are making an effort to get these deals done. The breakdown of closings for July is as follows:
- 1,036 traditional transactions in the single-family market (70.2% of all closings)
- 153 bank-owned REO transactions in the single-family market (10.4% of all closings)
- 286 short sale transactions in the single-family market (19.4% of all closings)
When we group the REO and short sale transactions together, there were 439 distressed sales in July, up slightly from 410 in June. Any increase is welcomed, because it will take some time to chip away at this overhang of houses in foreclosure throughout Broward County. At the lasted count on August 1, 2013, the number of single-family homes in some stage of foreclosure in Broward County stood at 44,356. Please remember that this figure does not include condos and townhomes. That would add more than 15,000 additional foreclosures to the shadow inventory.
If the banks and courts took a break from filing and processing new foreclosures in July, the 2013 average monthly filings number is still almost double the 2012 monthly filings. In 2012, there was an average of 953 new foreclosure filings each month in the single-family home sector in Broward and the 2013 average is 1,768 per month. The chart below shows the monthly filings and you will see the “vacation” in July.
Let’s take a look at the July drop in new filings, compared to the monthly distressed sales. Even with the sharp decline in July, the new foreclosure filings still outnumber the distressed sales. In order to dispose of the over 44,000 existing foreclosures, this trend will need to reverse. The decrease of filings in July will most likely be short-lived and the August filings will probably snap right back to the trend line or higher. It will be fairly easy to determine when the housing market has a chance to improve. At some point, the purple line needs to be lower than the green line for an extended period, otherwise we are just adding to the shadow inventory and prolonging this mess for even longer than we have already!
And finally, if the purple line in the chart above (new foreclosure filings) stays below the green line (distressed sales) for an extended period, we will have a chance to lower the massive overhang of existing foreclosures (in red, chart below). This final chart puts the available inventory / shadow inventory imbalance into perspective.