Fortunately, there are a few websites that grab data off the Realtors’® proprietary database of homes for sale, the Multiple Listing Service (MLS). My favorite site to track movements in MLS listings is Housingtracker.net, which tracks total MLS listings in the Miami MSA (Dade, Broward, and South Palm Beach Counties). Using this data, we can see what’s been happening to inventories in the Miami MSA since April 2005:
While this record increase is alarming, it only tells part of the story. This inventory only includes existing homes listed with a Realtor®. It does not include For Sale By Owner (FSBO) homes, homes that will soon be added to the market through foreclosure proceedings, and new construction.
Nationally, the inventory of the unsold new homes inventory is at a 15-year high. Likewise, South Florida must be near a record high with 20,000 new condos soon to hit the market in Dade County alone.
So, we can see that the supply of available homes is ballooning to record levels. Anyone who took Economics 101 learned that increases in supply causes prices to drop. Yet, as expected, Realtors® are telling their potential customer to buy now even though prices are rapidly dropping. Would you use a stockbroker who encouraged you to “buy now” when the value of a particular stock in the midst of a freefall?
Yet, Terrabella Realty employs the-buy-now-while-prices-are-dropping argument flawlessly:
“At the beginning of 2006, however, the national real estate market began to turn due to rising interest rates and a drastic slowdown in home value appreciation. Former hot market areas like Miami and Ft. Lauderdale were especially hard hit by this turn, and as a result the South Florida real estate market is in a heavy period of transition. Overdevelopment and an influx of too many quick-flip real estate investors have left the major markets of South Florida with too much inventory, and South Florida real estate sellers now have to compete to find buyers in a way that most have never seen before in this area.”
“South Florida real estate buyers are having the best time they’ve had in years especially those who are purchasing primary residences and even some vacation home buyers. Interest rates are good, the selection is phenomenal, and all that property inventory means sellers are now competing for you to be their buyer instead of the other way around. With so many options, you’re bound to find the perfect dream home in some of the best areas of Miami, Ft. Lauderdale, and Palm Beach. If you’re a buyer who’s looking to call South Florida home, then the time is right to buy on primary residences and any vacation investment properties!”
Bizarre logic, but I guess it must be working for them.
As a consumer considering the market, how should you use the inventory numbers to predict when it is a good time to buy? In my opinion, potential buyers should wait until inventories drop significantly before buying – hopefully consecutive inventory decreases over four months.
Of course, inventory levels should not be the only gauge to determine a good buying opportunity. In upcoming posts, I will provide other important factors one can use to predict the direction of the market. I will also periodically update the chart to show movements in the inventory levels.
Stumble It!
5 comments:
Have you seen all of the new condo developments still popping up everywhere!?! It's insane! Who is going to buy these high rise condos and townhouses? Especially the ones located in West Broward.
As a renter I just hope that the bubble does burst so I can buy a house next year. But, I will keep checking back to this blog to see when I should buy. Thanks for the info!
I am a renter too, and am so frustrated by the lack of news. Thank you for starting this website. I hope I can get the true facts. Sellers are still in denial, have you seen the ridiculous prices in Coral Springs etc. I guess the lack of news means the Sellers are believing the crap the realtors are shoveling out.
Have you noticed that EWM has not published the figures for June yet? They usually have the previous months sales figures posted by the 15th. I'll be they are buckling under pressure to stop disclosing. Same this happened with the Ft Lauderdale Realtor association of Greater Ft Lauderdale.
Yes, I have noticed the EWM has stopped updating their trends. I fully expected that to happen and I will suprised if they provide any updates going forward.
Realtors witholding data will soon become a huge problem as the bubble continues to deflate. Check out this article about the Naples Area Board of Realtors decided to withold their sales data:
http://www.heraldtribune.com/article/20070626/REALESTATE/70626001
Still, I have always taken Realtor-supplied data with a grain of salt. This is especially true of the sales data.
The MLS records any home that receives sales contract as a "sale" even though it may never go to closing. In other words, if a buyer fails to secure financing, which happens all the time now that credit markets have tightened, the Realtors will still show the failed transaction as a "sale." Ultimately, sales data nearly always ends up inflated.
I too only looked at EWM and the FAR numbers as indicating trends. Recent news makes it risky to rely on the data provided not just by realtors, but also appraisers and loan officers. I can only think that the Realtors strong arm tactics to lock down the news can only backfire. When I do buy, if I am forced to deal with a realtor, he or she will work for their commission.
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