Archive for the 'Real Estate Market Data' Category

Dog Days for New Listings Drawing to a Close

posted on January 2nd, 2012 filed under: Real Estate Market Data

The November-December period is low season for new real estate listings in Miami, Miami Beach and Coral Gables.  January through April is high season.

If you’ve been thinking that no new listings of homes for sale have hit the market lately, that’s probably because you’re right.  But cheer up.  The new year will bring a significant number of new properties to market as surely as day follows night.

New Listings -- Single-Family -- Coral Gables -- January 2008 to November 2011

May you find the home you’re looking for in 2012 (and have the good sense to use REF Real Estate to get the best advice on buying real estate in Miami or Coral Gables, and a hefty commission rebate).

posted by // Comments Off on Dog Days for New Listings Drawing to a Close

Miami: Affordability and Risk

posted on November 18th, 2011 filed under: Financial Responsibility, Real Estate Market Data

The boom and bust have played out in the charts posted here (with appropriate dire warnings) over time.  Here’s another view, this time based on the monthly median single-family home price for the Miami metro area, tracked by the Florida Association of Realtors.

Miami Real Estate -- Median Price -- Single-Family Homes (Jan 1994 to Sept 2011)

It looks like prices are roughly back where they belong.  Basically, the show is over.  And it’s tempting not to try to put too fine a point on it.  But don’t let the boom and bust cloud your judgment.  Before the boom, the notion of a decline in home prices was consigned to insignificant seasonal wiggles within a gradual upward trend.  The idea of even a 10% decline in prices would have shaken people to the core.  Now that we have lived through a >50% decline, there is a temptation to glibly brush off another 10% or so.  Yet if you’re only putting 10% down, a 10% decline wipes out your equity.

So we really do still need to care about the risk-reward balance.

On the reward side, interest rates are at record lows:

30-Year Fixed Interest Rate (Freddie Mac)

The combination of nearer-to-normal prices and record-low interest rates makes the cost of borrowing as low as it has been since the beginning of the median price series in 1994.  Consider the product of multiplying the median home price by the prevailing interest rate on the 30-year fixed mortgage. (Multiplying price by interest rate is not the same as the annual mortgage payment, but it’s a fair index of borrowing cost.)

Miami Real Estate -- Median Price x Interest Rate (Jan 1994 to Sept 2011)

That’s a beautiful chart for anyone who sat out the boom and wants to buy for the long haul.

So where’s the risk?  Primarily, in the uncertainty about when, or how fast, the punch bowl of low interest rates will be taken away.  Low rates fueled the boom, and rising rates helped prick the bubble and bring on the bust.  (“When the tide goes out, you find out who’s been swimming naked.”)

True, the risk of ruin from rising rates is much lower when buying near historically normal prices.  For one thing, rates are not supposed to rise unless the economy does better, and wage gains could then offset rising rates (as in the 1970s, when inflation ran hot but wage gains did too, and home prices actually rose smartly even as the 30-year mortgage rose from 8% to 16%).

But extraordinary measures have been taken.  A vast sum of money has been printed.  The Federal Reserve has reportedly surpassed China to become the single largest owner of U.S. Treasury debt.  If (or as some would say, when) inflation runs hot, rates could go up even as wages remain under pressure from economic weakness, foreign competition, etc.  Higher rates without higher wages could put new downward pressure on prices.

If you’re thinking of buying real estate in Miami (South Beach, Brickell, Coral Gables, Coconut Grove, Pinecrest, etc.), the low rates make it temptingly affordable.  Just know the risk when you reach for that reward.

posted by // Comments Off on Miami: Affordability and Risk

Home Construction on the Slow Road to Recovery

posted on October 24th, 2011 filed under: Real Estate Market Data

It told you there was a boom, it warned you of the bust, and now it’s telling you that this is one slooooow recovery.

Housing Starts -- Chart -- Jan 1990 to Sept 2011

The little uptick in the data for September 2011 is as much dark cloud as silver lining.  All of the gain came from construction of multifamily (5 or more units) buildings.  Nevertheless, the data set overall appears to show a durable bottom in place.

Another positive note is that the NAHB/Wells Fargo Housing Market Index (commonly known as the homebuilder sentiment index) jumped to 18 from 14.  Like housing starts data, HMI told you there was a boom and warned you of the bust.  A reading of 18 is still quite negative (below 50 is considered pessimistic), but it’s a significant step back from the edge.  The low back in spring 2009 was in the single digits.

Slowly better is better than worse.

posted by // Comments Off on Home Construction on the Slow Road to Recovery

Almost Back to Normal Months’ Supply of Homes for Sale in Coral Gables

posted on October 16th, 2011 filed under: Financial Responsibility, Real Estate Market Data

The vast oversupply of homes for sale in Coral Gables has almost been worked off, even in the luxury segment of the market.  340 homes are currently for sale, and 40 sold last month, which works out to 8.5 months of supply.  This is a fundamental barometer for the real estate market.  Six to eight months’ supply is generally regarded as indicating a roughly equal balance of power between buyers and sellers.

Months Supply of Homes for Sale -- Coral Gables Real Estate -- Oct 2011 (Table)

Sales of luxury homes in Coral Gables continue to shows signs of life.  It’s normal for higher-priced homes to sell more slowly, but for a while, they were hardly selling at all.

Months Supply of Homes for Sale -- Coral Gables -- Oct 2011 (Chart, Graph)

Real estate in Miami and Coral Gables remains vulnerable to further price declines on several measures: historical valuations, the price-to-income ratio, and the cost of owning versus renting.  But those measures are decreasingly troublesome, and combined with the normalization of the months’ supply measure, suggest dissipating risk for buyers.

posted by // Comments Off on Almost Back to Normal Months’ Supply of Homes for Sale in Coral Gables

FHFA House Price Index — Prices Still Falling in Miami and New York

posted on September 23rd, 2011 filed under: Financial Responsibility, Real Estate Market Data

According to the FHFA House Price Index, real estate prices are still falling in Miami and New York.

Keep your eye on the long-term trend line, which we warned long ago was our destiny.  At the time, that implied a potential 50% price decline for home values in Miami.  (Did any other real estate broker warn you about that?)

FHFA House Price Index -- Miami MSA -- 1Q1976 to 2Q2011 (NSA) -- with trend line

Home prices in New York have even further to go.  The New York real estate market remains one of the most overpriced in the country relative to income.

FHFA House Price Index -- New York MSA -- 1Q1976 to 2Q2011 (NSA) -- with trend line

At some point, property prices in Miami and New York could start moving sideways rather than down, and work off the remaining overvaluation as a function of time rather than price.  On the other hand, it’s also possible that prices overshoot to the downside — i.e., go below the long-term trend line before floating back up to it.  In any event, you should assume that the long-term trend is our ultimate destination.

Note: FHFA stands for the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, the government-sponsored entities that buy up most of the mortgages issued in the United States.  The FHFA House Price Index tracks repeat sales or refinancings of the same properties over time.

posted by // Comments Off on FHFA House Price Index — Prices Still Falling in Miami and New York

Mortgage Rates Testing 2010 Low

posted on September 4th, 2011 filed under: Financial Responsibility, Real Estate Market Data, Real Estate News

The rate on the 30-year fixed mortgage averaged 4.27% last month (August 2011), according to Freddie Mac.  That’s just 4 basis points above the low of 4.23% set in October 2010.

Mortgage Rates -- 30-Year Fixed -- August 2005 to August 2011

Whether you’re getting a good deal on a home in Coral Gables, Miami or Miami Beach depends on a lot of other factors (including the quality of advice you get from a real estate agent).  But one thing you can’t complain about is the rate you’re going to pay on your mortgage.

posted by // Comments Off on Mortgage Rates Testing 2010 Low

Months’ Supply of Homes Continues to Decline in Coral Gables

posted on August 21st, 2011 filed under: Real Estate Market Data

The months’ supply of homes for sale in Coral Gables, Florida has continued to decline toward relatively normal levels.  Excess inventory from the real estate bubble has been completely or nearly worked off in most price ranges.

Months Supply of Homes for Sale -- Coral Gables -- Aug. 2011 (Chart, Graph)

The aggregate months’ supply number of 8.3 is still a bit on the high side, but low enough to represent a roughly even balance between buyers and sellers.

Months Supply of Homes for Sale -- Coral Gables Real Estate -- Aug 2011 (Table)

The luxury-home segment in Coral Gables continues to be extremely oversupplied, although there was a spate of closings in July, which makes the current 28.2 months’ supply look good by recent comparison, if still historically bad.  As the chart below illustrates, there is no clear trend toward year-over-year improvement in luxury home sales.

Months Supply of Homes for Sale -- Luxury Homes -- Coral Gables -- Jan 2009 to July 2011 (Chart, Graph)

posted by // Comments Off on Months’ Supply of Homes Continues to Decline in Coral Gables

Large Homes in Coral Gables 33134: Historical Price Per Square Foot

posted on July 29th, 2011 filed under: Real Estate Market Data

The price per square foot of large homes in Coral Gables exhibits a rise and fall like the rest of the Miami market.

The charts below depict sales of houses between 3,500 and 6,000 square feet, in zip code 33134 (the northern part of Coral Gables, in the vicinity of Miracle Mile and the Biltmore Hotel), from January 1995 to June 2011.

Price Per Square Foot -- Coral Gables Real Estate -- Zip Code 33134 -- Homes 3500SF-6000SF -- 1995-2011 -- By Date

During the bubble, prices went ballistic, but sales dried up — one of the classic signs of a top in the real estate market.  Now that prices have receded to a range in line with the 2002-2004 period, sales have come back.

When the bubble began in about 2000, the norm of annual mid-single-digit price increases gave way to the mania of annual price increases ranging from 15% to 25%.  The 2002-2004 price range was excessive at the time, but with nearly a decade to work off that excess, the same prices may be defensible here in 2011.  In other words, trendline single-digit appreciation has more or less caught up with the boom-and-bust trajectory of Coral Gables home prices.  Of course, mean-reverting asset prices sometimes overshoot to the downside, so there’s no guarantee against further declines.

Displaying the sales in a one-by-one series rather than by date makes it easier to see the trajectory of prices in times of increased sales activity, like the recent post-bubble period.

Price Per Square Foot -- Coral Gables Real Estate -- Zip Code 33134 -- Homes 3500SF-6000SF -- 1995-2011 -- By Sale

posted by // Comments Off on Large Homes in Coral Gables 33134: Historical Price Per Square Foot

The Premium for New Construction in Coral Gables Real Estate

posted on July 14th, 2011 filed under: Properties in Focus, Real Estate Market Data

As noted previously, big old houses in Coral Gables have been selling for about $200 per square foot.  What about big new houses?

One of those will cost you quite a bit more, if recent sales are any indication.  The luxury home at 3716 Durango Street sold for about $375/sf, and the luxury home at 2000 North Greenway Drive (which has a golf-course view) sold for about $425/sf.

3716 Durango St.

3716 Durango St.

A premium for new construction may be worth paying to avoid the delay and disruption of renovations.  But are new homes really worth $200 per square foot more than existing homes?  That’s almost the cost of building from the ground up.

posted by // Comments Off on The Premium for New Construction in Coral Gables Real Estate

FHFA House Price Index Suggests Risk of Further Price Declines in Miami and New York

posted on June 28th, 2011 filed under: Financial Responsibility, Real Estate Market Data, Real Estate News

Mean Reversion

A theory suggesting that prices and returns eventually move back towards the mean or average.

www.investopedia.com

Today’s release of the S&P Case-Shiller Home Price Index was a mixed bag.  A modest rise nationally, but a modest decline locally here in Miami.  With no big news, let’s pull the camera back and look at another data set from a long-term perspective.

The FHFA House Price Index reflects transactions involving Fannie Mae and Freddie Mac.  This is not the luxury market, but it’s a reliable indicator of overall market conditions.  It went up during the boom, and it’s been coming down during the bust.

The FHFA index suggests risk that prices will fall further here in Miami.

FHFA House Price Index -- Miami MSA -- 1Q1976 to 1Q2011 (NSA) -- with trend line

If prices are to revert to their long-term trend line (in red) — and don’t bet they won’t — then Miami real estate remains about 25% overvalued.  The overvaluation needs to be worked off as a function of price and time.  Prices can get back to the long-term trend line by falling fast, going sideways while the long-term trend line catches up, or more likely, some combination of falling prices and passage of time.

Same story in New York, except the overvaluation there may be even greater than in Miami at this point.  (Remember the NAHB-Wells Fargo data that peg New York as the most overpriced market in the nation, based on the ratio of median home price to median income.)

FHFA House Price Index -- New York MSA -- 1Q1976 to 1Q2011 (NSA) -- with trend line

posted by // Comments Off on FHFA House Price Index Suggests Risk of Further Price Declines in Miami and New York