There is no question that the red hot south Florida real estate market is seeing signs of cooling, but the idea that there is a bubble in the market is exaggerated. The bubble talk has been created to a large degree by the media with irresponsible reporting and lack of in depth research. There have been numerous articles written that may only use one or two sources to gather information, and the rest is pure speculation from a reporter with zero knowledge of the real estate market. Most of these reporters have probably never been involved in any type of real estate transaction in their lives. There are many factors that need to be considered before making any kind of speculative opinions on the South Florida real estate market.
A recent article in the Miami Herald said existing home sales plunged in South Florida as the real estate market continued to shift from go-go to so-so. Nowhere in the article did it mention that we had experienced a major hurricane in October that brought all business to a stand still for nearly a month. Many real estate transactions that were set to close were delayed for weeks or months and some probably did not happen at all. If there is a gap like that in the real estate cycle for close to a month, the affects do not show up until a few months down the road, which would be roughly the month of January. So it is no wonder real estate sales were down for that month. Reporters and editors should be held somewhat accountable for the sensational articles that that they produce without taking all factors into account. It is easy to publish an article bashing the real estate market, but it is not so easy to undo the damage they cause. Some articles compare the MLS active and closed sales statistics from the month of January 2004 to the month of January 2005. That makes it very easy for the reporter to create a large disparity in the number of condos or homes sold or on the market in 2004 compared to the numbers sold for the same month in 2005. Once again, this boils down to irresponsible reporting.
Another factor not being taken into account is the recent trend of developer run resale programs. These resale programs take place when a condo project is sold out and under construction and the developer begins to resell the condo units that had been pre sold one or two years earlier. These resales are not public record until they close and thus are not factored in to the overall numbers of South Florida real estate that has been sold. Due to the fact that these types of resale programs are relatively new (within the last two years or so) most of these sales have not been recorded in the public record. Developer condo resale programs are a very good thing for a couple of reasons. One, it weeds out investors that would otherwise have to wait until closing to sell their condo and cause a flood of units on the market. Two, and probably more important, is that pricing is controlled to a large degree. You won�t see any fire sales in a developer controlled resale program, thus creating a more stable real estate market place. That is a good thing for everyone.
It would be unreasonable to think the South Florida real estate market can maintain the rate of appreciation it has seen over the last two years. A more realistic view is that instead of seeing 25% to 30% in appreciation per year, it will be more in the range of 10% to 12% per year, which is still very good. When you see statistics that say prices are going down, that reflects the sellers that have to bring overpriced listings back to reality. There have been many overpriced listings on the market that have been reduced to a reasonable price in order to sell. That does not suggest that the real market value of South Florida real estate is declining. Considering the fact that there are more than 1000 people a day moving into Florida with the majority headed for South Florida, the outlook for the future is very good. Taking into account all of the baby boomers that will be moving to warmer climates in the next 10 to 15 years, South Florida real estate will continue to be in great demand. The population of Florida is projected to double by the year 2040. These new residents will need housing and will pay a premium to be in the coastal region.
In general, real estate price declines are rare. Historically speaking, nearly all local real estate market price declines were accompanied by large and prolonged job losses. The Miami region has added 126,000 jobs from July 2003 to July 2005, one of the highest in the country. The unemployment rate continues to drop in Miami and was 3.7 in December 2005, a record low. This is all very good news for the Miami Real Estate Market.
Compared to the rest of the country, South Florida is a unique real estate market due to the scarce amount of land available for development. Miami is considered to be the gateway to South America and is the main hub for Latin American business activity in the United States. South Florida has the strongest tourist market in the country and continues to draw millions of eager travelers each and every year. With all of these factors in its favor, the South Florida real estate market should continue to be in demand and grow for many years to come.
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