Signs of Market Bottom - Real Or False - Emerge In South Florida

For the first time in more than a year, the number of residences for resale in South Florida increased on a week-over-week basis, following a 35 percent decrease in the previous 11 months.

The surprise rise in resale inventory of single-family houses, townhouses, and condominium units in Miami-Dade, Broward, and Palm Beach counties comes at a time when the leading national housing price indicator - the S&P/Case-Shiller Home Price Index - posted an increase in Miami for the third consecutive month.

As of September 2009, 3,321 properties reduced by an average discount of 38 percent. A year earlier in September 2008, there were 4,456 properties reduced by 33 percent. Compare that to September 2007, when there were 3,713 properties beng monitored that had been reduced by an average of 20 percent.

In the "real estate bottom" camp, proponents rationalize that South Florida inventory has slipped from 108,000 residences available for resale in November 2008 down to 70,000 single-family houses, townhouses, and condos as of Oct. 26, 2009. Pending sales during that period have increased from 9,300 in November 2008 to 18,200 in October 2009, according to research conducted using Florida Association of Realtors data.

More than 900 condo units in Greater Downtown Miami - the epicenter of Florida's housing bust - were sold by developers in the third quarter of 2009, up from less than 250 developer unit sales in the second quarter.

Less than 8,500 developer units remain in Greater Downtown Miami with 36 percent controlled by the industry leader the Related Group and 21 percent by the Starwood Capital Group, which acquired the condo construction loan portfolio of the failed Corus Bank from the Federal Deposit Insurance Corp.

Additionally, proponents point to the 15 bulk deals that have closed since July 2008 for 900 units at a price of more than $200 million. One of the bulk buyers is attempting - with some success - to retrade some of its newly acquired product for nearly $300 per square foot more than the amount paid in September.

Proponents who are convinced that another deep drop in pricing is inevitable point out that the number of bank-owned properties in South Florida has increased at a much slower pace than what is being filed on the foreclosure front.

For example, South Florida is on track in 2009 to realize nearly 29,000 property repossessions, which would be a nine percent year-over-year increase compared to 2008 when lenders repossessed 26,240 properties. In 2007, lenders repossessed 10,087 properties in South Florida.

Bolstering the argument that the current market is at a plateau is a new survey that projects that housing prices in the Greater Miami metropolitan area will tumble an additional 30 percent. Fiserv, a financial information and analysis firm, projects an additional 11 percent drop in housing prices nationwide will occur in the next year.

"Both arguments are based on fact but open to interpretation," Zalewski said. "We are seeing a great divide emerge in the South Florida real estate market based strictly on location and functionality. Residential property submarkets are experiencing dramatically different conditions depending upon whether they are located east or west of Interstate 95, which separates South Florida's coastal and suburban communities. Second-home buyers, who represent a significant chunk of today's all-cash purchasers, prefer coastal South Florida so the majority of the transaction activity is occurring in the speculator rich areas located near the water.

"The one point that both camps can agree on is that price appreciation is unlikely to occur in South Florida in 2010."