Archive for the 'Real Estate Market Data' Category

Rentals May Have Peaked for Miami and Coral Gables Single-Family Real Estate

posted on September 17th, 2010 filed under: Financial Responsibility, Real Estate Market Data

At the top of the market, you were a putz if you didn’t own a home — and preferably more than one.  Renters were losers.

Well, the worm certainly turned, eh?

In Miami and Coral Gables, renting a home shot up in popularity as it dawned on people that it’s better to pay half the cost of ownership and skip the massive capital losses.  Why buy a depreciating asset with borrowed money, especially when you can rent it for half the cost?  Certainly the advice you got here was to rent, not buy.

Alas, home ownership is a relentless lure, and the stabilization in home prices in Miami and Coral Gables appears to have turned the tide from real estate rentals back toward real estate sales.  This is true across the board for single-family homes: in Coral Gables as well as Miami-Dade County, and for larger homes (4 bedrooms or more) as well as the entire market.

Rented Versus Sold Single-Family Homes Coral Gables and Miami

The number of rentals appears to have peaked in 2009, as the pace in 2010 is running behind the pace of last year’s high.

Rentals Closed -- Single-Family Homes -- Miami and Coral GablesIn Coral Gables, rentals went from barely more than 10% of real estate transactions to nearly 50% of real estate transactions.  Considering that real estate agents make about 90% less on rentals than sales, you can assume a lot of people found themselves with essentially no income.

Rentals Versus Sales Closed -- Single-Family Homes -- Coral GablesSame story in Miami as a whole:

Rentals Versus Sales Closed -- Single-Family Homes -- MiamiData are from MLS and therefore do not account for sales outside MLS.

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Months’ Supply of Homes in Coral Gables (Part 2) — Luxury Still in a Rut

posted on September 3rd, 2010 filed under: Real Estate Market Data

As the preceding post explained, the months’ supply of homes for sale is an important market barometer.  But the data for the market as a whole may not be all that revealing about the market segment relevant to you.

Vast oversupply continues to plague the market for luxury homes in Coral Gables.  The disparity between the tremendous oversupply in the luxury segment and the merely big oversupply in the broader market has been noted here for quite a while.  Luxury-home prices in Coral Gables have already fallen sharply, yet the continuing extreme oversupply points to significant further price declines.

There are currently 177 single-family homes listed for sale above $1.5 million in Coral Gables.  The number sold in the past month: 6.  That’s about a 30-month supply.

For Miami-Dade County as a whole, there are 864 homes for sale above $1.5 million.  The number sold last month: 21.  A 41-month supply.

The months’ supply normally runs higher in the luxury-home segment than in the broader real estate market.  But if the norm in the broader market is 6 to 8 months’ supply, the norm in the luxury-home segment is about 10 to 12 months.  It is still very much a buyer’s market.

Forecast: a steady downpour of falling prices in the luxury-home market in Coral Gables and Miami.

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Months’ Supply of Homes in Coral Gables (Part 1) — Going Steady

posted on September 3rd, 2010 filed under: Real Estate Market Data

An important measure of supply and demand is the months’ supply of homes on the market — i.e., the number of homes currently for sale divided by the number that sold over the past month.

Months' SupplyThink of it as the number of months it would take to sell off all the homes currently on the market, if sales continued at their current pace.  (Of course, that never actually happens, because new listings are always showing up to replace the ones that are sold.)

The months’ supply figure is an important barometer of supply and demand.  A supply of 6 to 8 months’ worth of homes on the market is generally associated with an even balance of power in the real estate market, so neither buyers nor sellers have the upper hand.  Going much above that range makes it a buyer’s market (more homes than buyers = too much supply = falling prices), and going below that range makes it a seller’s market (more buyers than homes = too much demand = rising prices).

Coral Gables Real Estate Photos -- Country Club Prado 2

For the real estate market in Coral Gables, the months’ supply of single-family homes now stands at about 14.  That’s rather high, but it got up to about 40 or 50 at one point — perhaps unprecedented, although the collapse of the 1920s bubble might have yielded similar figures.  In contrast, at the peak in 2005-06 the months’ supply dwindled to about 3.

For the real estate market in Miami-Dade County, the months’ supply of single-family homes stands at about 11.5.  As with Coral Gables, that figure is way down from its peak, but still indicative of a buyer’s market.

And although the months’ supply of homes for sale in Coral Gables and greater Miami is way down from its peak, most of the decline occurred back in the middle of 2009.  Little further progress has been made toward working off the excess inventory over the course of this year.  The months’ supply has been holding fairly steady.  And by traditional standards, the number remains high, which should continue to exert downward pressure on prices.

Not that you should pass up the home of your dreams if it comes along.  Even if you can squeeze another 10% or 15% out of the market collapse, the house you really want is not likely to be on the market at that point.  So if you’re in it for the long haul and find the right home at a price commensurate with its historical value, buying is defensible.  On the other hand, don’t feel pressured to act precipitously.  The market is not cheap relative to the fundamentals: incomes, historical values, rents and today’s topic, supply.  And we are not going back to easy lending anytime soon.  The chance of a surge in prices appears remote.

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Home Sales Data Pushing New Lows

posted on August 26th, 2010 filed under: Real Estate Market Data

The federal government’s $8,000 homebuyer handout created a wave of sales.  But for every wave, there’s a trough.  What goes up must come down, eh?

[youtube]http://www.youtube.com/watch?v=kK62tfoCmuQ[/youtube]

The National Association of Realtors reported that sales of existing homes hit a new low for this downturn.  The evaporation of sales activity is a predictable result of the $8,000 government handout for homebuyers that is in the process of expiring.  Contracts were to be signed by April 30 and closings were to occur by June 30.  The latter deadline was extended to September 30, but there probably aren’t many handout-generated deals left in the pipeline at this point.

U.S. Existing Home Sales -- July 2006 to July 2010

New-home sales appear set to plumb new depths as well.  These sales are registered at the time of contract signings, not closings, so they tend to peak in the spring or early summer so people can close and move during the summer.  With July’s numbers just a smidge above the absolute low for the downturn, new lows will likely be plumbed over the coming months.  Could see a number in the teens before it’s over.

U.S. New Home Sales -- Jan. 2000 to July 2010

Here’s the full data series going back to the beginning of record-keeping in 1963.

U.S. New Home Sales -- Jan. 1963 to July 2010

Real estate in Miami and Coral Gables has generally followed the national pattern, and indeed the Florida Association of Realtors reports that there were 593 single-family home sales in the Miami metro area in July, down from a handout-goosed 727 in May.  But 593 is still more than double the measly 244 house sales at the cycle low for Miami in February 2009.  So the Miami and Coral Gables markets may be holding up a bit better than the nation as a whole during this post-handout trough.

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10-Year Treasury Yield Collapses, Mortgage Rates Follow

posted on August 21st, 2010 filed under: Financial Responsibility, Real Estate Market Data, Real Estate News

As noted previously (see Mortgage Rates May Drop Again, May 6, 2010), the rate on a 30-year fixed mortgage is closely related to the yield on the 10-year U.S. Treasury note.  When the yield on the 10-year rises, mortgage rates go up, and vice versa.

Lately, it’s been all about the vice versa.  The 10-year yield has collapsed on renewed fears of economic weakness, deflation, and impotence trumping stimulus.  The yield is now back to where it was in spring 2009 when the stock market bottomed amid widespread despair.

U.S. 10-Year Treasury Yield (Aug. 2005 to Aug. 2010)Source: Yahoo! Finance

That’s good news if you want a mortgage to buy a home in Miami or Coral Gables, because the rate on a 30-year conventional mortgage is hitting its own new lows in the 4.5% range.  Of course, the question is whether home prices in Miami and Coral Gables will fall further if the bond market is right about the severity of renewed economic weakness.  It doesn’t make sense to buy a depreciating asset with borrowed money, no matter how cheap the financing.

Mortgage Rates -- 30-Year Fixed -- Aug. 2005 to July 2010

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May 2010 S&P Case-Shiller Index Ticks Up in Miami and New York

posted on August 18th, 2010 filed under: Real Estate Market Data

The Standard & Poor’s Case-Shiller Home Price Index registered its first monthly advance in over half a year for the Miami metro area that includes Coral Gables.  After drifting lower for a while, the index for the three-month period ending May 2010 ticked up, recovering a few months of the gradual slide in real estate prices.

These data are not seasonally adjusted and probably reflect some of the usual spring-summer strength, but the seasonally adjusted version of the S&P Case-Shiller Home Price Index also ticked up.

S&P Case-Shiller Home Price Index -- Miami -- May 2010 (NSA)Source: Standard & Poor’s

The S&P Case- Shiller Home Price Index is also segmented into price tiers.  At first blush, the high-tier segment would seem to be much more relevant to real estate values in Coral Gables and other luxury-home submarkets in Miami.  But the threshold for the high tier in Miami, as the S&P Case-Shiller Index defines it, is only $257,319.  As a result, the overall pattern is pretty much the same, with the scale of the boom and bust somewhat more attenuated — perhaps because mortgage fraud and the Wall Street mortgage-securitization scheme had the biggest impact at the lower end where the only way to buy is to borrow.

S&P Case-Shiller Home Price Index -- Miami -- High Tier -- May 2010Source: Standard & Poor’s

The same patterns are on display in the S&P Case-Shiller Home Price Index for the New York metro area.

S&P Case-Shiller Home Price Index -- New York -- May 2010 (NSA)Source: Standard & Poor’s

Again, the high-tier index takes the same general shape, with the amplitude of the boom and bust a bit more moderate than for the overall index.  The high tier in New York is defined as above $433,673.

S&P Case-Shiller Home Price Index -- New York -- High Tier -- May 2010Source: Standard & Poor’s

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Homebuilder Sentiment Falls Further

posted on July 25th, 2010 filed under: Real Estate Market Data

This month’s reading for the Housing Market Index maintained by the National Association of Home Builders and Wells Fargo: a tantalizingly weak 14.

Last month’s post on homebuilder sentiment reserved judgment on whether the big drop in sentiment from 22 in May to 17 in June suggested another big leg down for housing.  That decline was big, but could have been a temporary, knee-jerk reaction to the end of the $8,000 government handout program.  When times got really bad in fall 2008 to spring 2009, the index collapsed from 14 to 9 and bounced around in the single digits.

The HMI has now broken below 15, but only barely.  Meanwhile, homebuilder stocks have rebounded with the broader stock market.

HGX Homebuilder Stocks Index -- Chart -- July 2008 to July 2010

Source:  Yahoo! Finance

If real estate sales stabilize and the stock market holds up, the sentiment index should avoid another meltdown.

If you’re in the market for a home in Miami or Coral Gables, the HMI may not be directly relevant.  So far, real estate sales in Miami and Coral Gables have bucked the national trend and held up well despite the expiration of the $8,000 tax credit.  But consider it a canary in the coal mine.  If it breaks down further from here, the housing sector and the broader economy might be undergoing another leg down.  And Miami and Coral Gables are not likely to gain solid footing as long as the rest of the nation is on its heels.

Update 07/26/10:

Today’s new home sales report for the month of June shows a rebound from May’s record-low plunge.  The number is still horrible — about the second-lowest on record — but at the higher end of economists’ estimates.  The last three months:

April  422,000

May  267,000

June 330,000

Note : Data for new home sales actually measure contract signings, not closings.

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Housing and Economy Weaken Together (Again), Threatening Real Estate Values Miami and Coral Gables

posted on July 16th, 2010 filed under: Financial Responsibility, Real Estate Market Data, Real Estate News

Neither a borrower nor a lender be;

For loan oft loses both itself and friend

– Shakespeare, Hamlet, Act I, Scene III

Evidence has mounted in recent months of a second leg down in housing and a possible double-dip recession in the broader economy.

The problem, ultimately, is that there is really no way out for a people who have gorged themselves on debt.  Once you’ve reached the point where you can no longer spend today another dollar that you planned to get tomorrow, it takes a long time to wring out all the excess borrowing.

[youtube]http://www.youtube.com/watch?v=NJ6xBaZ92uA[/youtube]

Debt is like hydraulic power.  Banks and other lenders take one dollar and lend it 9 times over, or in the case of some failed Wall Street institutions, 30 times over.  Government agencies (Fannie Mae, Freddie Mac) and yield-hungry investors who take the loans off the institutions’ books absorb the flow of debt and thus free up the lenders to create more.  Eventually, a peak is reached as the most speculative drop of borrowed money is pushed through the system.  As borrowing begins to recede, asset values fall, and borrowers, lenders and investors vanish.

Real estate can make you rich.  There is nothing more beautiful than paying 5 times your income for a house with almost no money down, and seeing its value go up 10% a year.  That’s like getting a 50% raise — with 10% annual compounding on top of it.

But real estate can also make you poor.  There is nothing more destructive of your wealth than buying a depreciating asset with borrowed money.

So where are we in this cycle?  Previous posts have explained that real estate prices usually fall for about 4 years from the time they really begin declining to the time they reach an ultimate low.  In Miami and Coral Gables, real estate prices did not begin declining until about the beginning of 2007, which suggested that the enthusiasm of the past year was premature.

And this is not a typical downturn.  Real estate was far more overvalued and overbuilt than in typical cycles.  In the broader economy, we are arguably in a depression masked by extreme government intervention.

The government and the financial-realty complex turned a firehose of money on the decline in real estate values, and the most we can say is that prices stopped collapsing.  There is less pressure in that firehose now, and not only have prices failed to rise, they have begun to weaken again.

Risk remains.

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S&P Case-Shiller Home Price Index Drifts Lower in Miami

posted on July 2nd, 2010 filed under: Real Estate Market Data

The S&P Case-Shiller Home Price Index, which tracks repeat sales of the same homes, continues to drift lower for the Miami metro area.  The chart below is based on the non-seasonally-adjusted data set.  Ordinarily, seasonally adjusted numbers might be more desirable, but these are not ordinary times.  Show me the money.

S&P Case-Shiller Home Price Index -- Miami -- Apr. 2010 (NSA)

The weakness in the Case-Shiller Index contrasts with relative strength in median price data.  The divergence is probably a result of the shifting mix of homes sold.  We’re moving from correction in the low-priced market segment toward correction in the higher-priced market segment.  Liquidation of bad subprime loans has passed its peak and is receding.  Liquidation of bad Alt-A, Option ARM and prime loans is just getting underway.  (See prior post showing reset schedule.)

As a result, the mix of homes sold may be shifting from the low end toward the high end, giving a boost to the median price (i.e., the price at which the same number of houses sold for more as for less).  Indices that track repeat sales of the same homes, however, show continued weakness as the prices of higher-end and luxury homes fall.

Anecdotally, there have been some very significant sales and price reductions suggesting that property values are indeed falling at the higher end in Miami and Coral Gables.

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New York Market Check: Sales Flat, Median Prices Up for Existing Homes in May Compared to April

posted on June 25th, 2010 filed under: Real Estate Market Data

The New York Association of Realtors reports that sales were basically flat (282 versus 284) for Westchester County, New York in May compared to April.  But the median price jumped from $590,000 to $610,000.

As with the Miami existing-homes data, the rise in the median price could have resulted from a shift in the mix of homes sold.  Look for confirmation from indices that track same-home sales (FHFA, S&P Case-Shiller) before concluding that home values are appreciating.  As noted previously, the Case-Shiller index has indicated weakness for many months.  The recently released FHFA index shows prices in decline as well (more on that in an upcoming post).

And of course, the New York market remains monstrously overpriced relative to incomes (see posts from February 2010 and March 2009).

Buyer beware.

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