Interest Rate Roundup

Tuesday, November 28, 2006

Home sales in my neck of the woods

Lots of you gentle readers don't live in Florida. You could probably care less about what's going on in our housing market. That's cool -- I'm not offended! But since I live here, I thought I'd summarize what I'm seeing in the latest October sales figures, just released by the Florida Association of Realtors ...

First, as the FAR points out, the year-over-year change in Southeast Florida doesn’t look too bad in October because we had Hurricane Wilma a year ago. That led to a 44% YOY decline in sales in Fort Lauderdale in October 2005 vs. October 2004, for example, with like declines in Miami and West Palm Beach. The STATE saw only a 5% drop that same month (10/2005). Clearly, you could say the hurricane had an impact on closings.

This past month, sales in Fort Lauderdale, Miami, and West Palm Beach actually rose or declined just slightly from 10/2005 levels. But the STATE saw a much bigger 22% drop (using single family homes), with declines spread geographically throughout north and central Florida. So it seems to me that the broad trend remains weak, once you strip out the hurricane impact.

Second, the pricing data doesn’t look so good across the state, or in our area. Median single-family home prices dropped 12% year-over-year, for instance, in the West Palm Beach-Boca Raton metro area, with declines popping up also in Fort Lauderdale (-5%) and Miami (-3%). Again, this may be skewed by the hurricane to some degree. But in the case of prices, these numbers are also consistent with what we’ve seen in recent months – first, a deceleration in the rate of price increases, and now actual declines.

So what about inventory? Well, there’s a website run by the real estate brokerage firm Illustrated Properties. It shows the number of properties for sale in its database. The link is here: You can see that inventory took a pretty big dive from September – down 9.6%.

But the key question is this: Are we really working through inventory? Or are sellers just giving up and pulling their listings to wait out the holidays, then re-list in time for the proverbial spring selling season. I’d be more encouraged on that front if sales shot up along with the decline in inventory. Since they didn’t, it may just be a seasonal thing.

If you’re an optimist, you could say things aren’t getting much worse. If you’re a pessimist, you could say: “Sure, but the numbers still stink.” I’ll go back to what I’ve been saying for a long time: Real estate downturns are long, drawn-out affairs measured in quarters and years, not weeks and months. We have tons of inventory to work through. To stem the slow bleed in prices, we’ll need that to come down substantially. That, in turn, will require even lower interest rates, the restoration of buyer confidence and ongoing strength in the employment market.

Can the stars align just right for the housing market? We’ll see. But my expectation is that 2007 will prove to be another weak year for sales and prices, and we’ll likely see mortgage delinquencies and foreclosures continue to rise.


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