South Florida’s logic-defying housing market continued to embrace peculiar trend lines in May — sales soared, slashing down the inventory even further, but overall prices fell once again.
Market trends in Miami-Dade and Broward counties diverge from the national housing story, for better and for worse. Local sales are increasing while the national market slumps, but local prices are falling faster than the national average.
The region’s real estate narrative is also at odds with traditional market economics. The coexistence of shrinking supply, rising demand and falling prices has left analysts with a number of questions: How long can this frenzied sales pace —fueled by Latin American and cash investors’ appetite for discounted real estate — continue? With inventory shrinking rapidly, when will the strong sales activity translate into price stability and appreciation, as market economics dictate? How large is the “shadow inventory,” and how will those unlisted bank-owned homes affect the recovery?
“It’s an odd time,” said Ron Shuffield, president of Esslinger-Wooten-Maxwell Realty. “ We’re able to say we’re selling more homes and condos than we’ve ever sold in history, but at the same time 61 percent of our sales are short sales and foreclosures.”
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So why hasn’t the shrinking supply of homes led to price stabilization?
“We have a whole bunch of pent-up supply,” said William Hardin, professor of real estate and finance at Florida International University . “There’s a squeeze play going on because no one is going to sell a house in today’s market unless they have to.”
The majority of homes that are selling are under distressed circumstances —either a foreclosure sale, or a short sale that doesn’t cover the cost of the mortgage. Those properties — popular among cash investors and foreign buyers — sell at deep discounts, dragging down overall prices in the market.
Read: “South Florida real estate paradox: High volume cuts inventory but prices stay low,“ an article by SunSentinel.com.