MiamiFlorida.com

The Wall Street Journal (WSJ) argues that the Miami shadow inventory could reach 24 months of supply as a result of an increase in the number of foreclosures coming to market in the months ahead. In the article titled “Foreclosures Seen Still Hitting Prices” the author concludes that “most efforts to modify loans with easier terms will delay, not prevent, the loss of homes to foreclosure”. Two recent studies published by John Burns Real Estate Consulting Inc. and Standard & Poor’s Financial Services LLC, were quoted as the source for the WSJ conclusions.

Miami has experienced a steady pickup in real estate sales since the summer of 2008 which marked the highest levels of inventory in record with almost 41,934 properties listed for sale in Miami-Dade County. As of today the county has approximately 24,948 properties listed for sale. That represents a drop of 40.5%. At this pace and from an inventory perspective, the Miami real estate market could reach normalcy in inventory levels in 2010. By historical standards a stable real estate market has 6 to 9 months of inventory.

With 24 months or so of shadow inventory menacing in the horizon, Buyers who have been frustrated by not getting the deals they were looking for, might get a second chance to close on that great deal in the months ahead!

For more information or if you have any questions or comments, please send me an e-mail to: michael@miamiflorida.com or call me at my mobile 305.450.0036

Some say a picture is worth a thousand words. Well, this picture is probably worth more.

Following is the text that shows on the top of the graph.

“The Yale economist Robert J. Shiller, created an index of American housing prices going back to 1890. It is based on sale prices of standard existing houses, not new construction, to track the value of housing as an investment over time. It presents housing values in consistent terms over 116 years, factoring out the effects of inflation.

The 1890 benchmark is 100 on the chart. If a standard house sold in 1890 for $100,000 (inflation-adjusted to today’s dollars), an equivalent standard house would have sold for $66,000 in 1920 (66 on the index scale) and $199,000 in 2006 (199 on the index scale, or 99 percent higher than 1890).”

The message here is that on a relative basis, prices today have lost close to 2/3’s of the price increases experienced from the late 1990’s to July 2006.

Keep in mind that this is a national index for standard existing houses. Therefore, you can argue that prices in some cities have stopped falling, hence creating a bottoming process. Is Miami one of those cities? Only time will tell.

Source: “Irrational Exuberance” 2nd Edition 2006 by Robert J. Shiller

http://www.macromarkets.com/csi_housing/sp_caseshiller.asp

If you have any questions or comments, please send me an e-mail to: michael@miamiflorida.com or call me at my mobile 305.450.0036