Survey: Drop in housing starts bringing price-inventory balance
By April M. Havens
Although residential inventory remains high, a slowing of new construction has helped to slowly push the home sales market toward a balance in which prices begin to match inventories, local professionals and market reports say.
The most significant finding of Metrostudy's third quarter report is twofold, according to Brad Hunter, director of the South Florida division of Metrostudy, a national housing industry research group.
"There are signs that certain aspects of the market are improving and some are not," he said. "The number of finished vacant homes is falling, but the other side of that is that the reason the number is falling is because they are getting rented."
People who bought property in 2005 and are now renting out those properties, Mr. Hunter said, are losing money. "There will be an increased number of foreclosures in 2008,"
Miami-Dade County single-family home starts — counted once foundation is poured, Mr. Hunter said — fell from 923 units in the second quarter to 392 in the third, fewest in at least a decade, the report said. Metrostudy counts starts, he said, by sending a crew of 60 to drive 22,000 miles, evaluating every street of every subdivision every 90 days.
Finished vacant inventory of single-family homes increased from 1,436 units to 2,142, according to the third-quarter statistics. "What happened in Miami-Dade is there was a surge in completions of townhomes," Mr. Hunter said, explaining the townhomes in the count are unattached single-family residences.
"The townhome inventory doubled in a three-month period. If it weren't for the townhomes, the level of inventory would have stayed about the same."
Beth Butler, chief operating officer for Esslinger Wooten Maxwell Realtors, said she has seen a build-up of "nice, good-sized, three- and four-bedroom" townhomes in Homestead.
Ms. Butler said while more townhomes are available today, she thinks that's just a small factor in the overall market.
"Certainly, we're coming into the market where we have a lot of things delivering, especially in Homestead and West Dade," she said. "A lot of single-family houses are reaching completion in our markets where they are still building single-family homes."
Additionally, many more condominiums will be finished within six months, she said. "I think overall everybody knows we're into this surplus inventory and expect that there will be lot more coming, more condos, more townhouses, more single-family houses."
According to Metrostudy, under-construction units fell for the ninth consecutive quarter, falling 51.9% from 2,514 to 1,208 units from the second to third quarter. This correlates closely with the group of townhomes that were under construction in the second quarter and completed in the third, Mr. Hunter said. Total inventory, including units under construction, finished vacant units and model homes, fell from 4,049 to 3,464 units, according to Metrostudy.
There were 3,679 vacant developed lots, lots on which construction has not started but roads and infrastructure are in place, in Miami-Dade County at the end of the third quarter, the study found. This represented a small decline from the second quarter's 3,705.
The results of this study lead Mr. Hunter to think "the next six months are going to be a challenging time for builders" in the county. "It's going to be a boon for home shoppers if they are looking to buy a house; they are going to see terrific deals, and there will be some great values to be had."
Mr. Hunter suggests potential buyers talk directly with builders "because they will be ready to bend over backwards to sell a house."
Mike Pappas, CEO of The Keyes Co., has seen builders give huge incentives and upgrades in the new home market.
"If you are going to buy, you could get $50,000 from a builder on a mid-sized home," he said. "Behind every gray cloud, there is a silver lining.
"I think it's a great opportunity to buy in South Florida," Mr. Pappas said. "The inventory is at the highest level it has been in a decade or two. I think the properties are prices at the most competitive prices we've seen in the last 5 years."
The Florida Association of Realtors reported September sales of homes in the Miami area totaled 360, compared to 769 in the same month in 2006. The sales decline also carried a slight drop in the average sale price from $372,300 to $371,700.
Mr. Pappas predicted October sale prices will show a marked decline from September levels, giving a more accurate reflection of the true market.
Overall, Mr. Hunter said, the "bottom line is Miami-Dade County is a strong county. Once we get past this excessive inventory we'll have a stronger market." The county's residential market, he predicts, won't be entirely through it until 2008.
Ms. Butler said she's seen a marked improvement in buyer activity over the past two weeks, but the county's slowest market area is still Brickell. "There is not a lot of activity in those condos because the prices are still high whereas we've seen them come down in other areas," she said.
"Most movement has been in the more expensive properties in really good neighborhoods," Ms. Butler said. "In places like Miami Beach, Key Biscayne and Pinecrest, people with the means know it's a great time to buy."
Mr. Pappas said some sellers are finally adjusting their asking prices to reflect the current market. "I think we're starting to see the market adjust to the real market; real buyers are buying, and real sellers are selling, and they rest just aren't," he said.
Negative factors including a tightening credit market, traditionally slower fourth and first quarter sales, and high inventory are "making the market look a little more dramatic than it probably is," Mr. Pappas said.
"The market is cleansing itself and squeezing out the excesses, and there are a lot of pent-up buyers waiting who won't be able to wait much longer."