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The volume of existing home sales in Miami-Dade County fell 20.8 percent in July compared to July 2015, according to a monthly report released Wednesday by the Miami Association of Realtors.
“That’s an eye-popping number,” said Peter Zalewski of Cranespotters.com
Three main factors are conspiring to slow down Miami’s real estate market: Not enough affordable housing for locals. A lack of foreclosure inventory available for investors to snap up. And a major drop-off in the number of foreign buyers, who’ve been burned by the strong dollar.
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“When you see a 20 percent drop, you start thinking not just housing recession but housing depression,” said Jack McCabe, a South Florida real estate analyst.
20.8 percentAnnual decline in existing home sales in Miami-Dade County
Even so, prices are still going up. And today’s housing market isn’t built on bad debt, unlike the financial crisis, lessening the chance of a massive bust.
Realtors say it’s not time to panic. The pace of sales set in 2013, 2014 and 2015 simply wasn’t sustainable, said Ron Shuffield, president and CEO of EWM Realty International.
“A lot of the decline we’re seeing is in the million-dollar market and in foreclosures,” Shuffield said. “The middle of the market is still strong.”
Overall, the new report shows Miami-Dade’s condo market suffering more than single-family homes.
Condo resales dipped to 1,104 in July, down 24.7 percent year over year, the Realtors’ group found. Existing condos are competing with a glut of luxury offerings, making older units a tougher sell.
Single-family resales fell to 1,128 in July, a 16.4 percent decline from last year.
A lot of the decline we’re seeing is in the million-dollar market and in foreclosures.
Ron Shuffield, Realtor
Miami-Dade sales numbers have dropped consistently so far this year, although not by this much.
Home buyers and sellers haven’t adjusted yet to slowing sales.
The median sales price for single-family homes in Miami-Dade rose 7.9 percent annually to $299,000 in July. Condo prices hit $225,000, up 15.4 percent year over year.
Prices usually lag behind sales six to 12 months, experts say.
Broward’s real estate market also stumbled in July, suggesting the slowdown could be region-wide. Zika travel advisories from the Centers for Disease Control and Prevention could also lessen interest from out-of-town buyers.
High prices, low wages
In Miami, wages and housing prices remain deeply out of whack. That’s because foreign investors have driven up prices beyond what many locals can pay. Since the bust, developers have built almost exclusively for the luxury market. And there’s little land left on which to build new homes. As a result, the inventory of single-family homes priced below $300,000 fell 34.3 percent over the last year, according to the Realtors’ association.
Four-in-five Miami-Dade households would struggle to afford a median-price, single-family home, according to research by the Metropolitan Center at Florida International University.
“There’s been an absolute dearth of construction in the lower and middle price ranges,” McCabe said. “We’ve had growing population due to migration, but we’ve seen no increase of supply in those lower ends.”
34.3 percentDecline in inventory for homes under $300,000
Without new construction of mid-range housing, don’t expect prices for homes under $350,000 to come down, even as luxury prices drop, he added. It’s an issue of supply and demand.
Low inventory at affordable prices is a nationwide problem.
Total existing home sales in the U.S. fell 3.2 percent in July, the first year-over-year decline since November, according to the National Association of Realtors.
“It’s very difficult to sustain growing sales volumes when there simply aren't many homes for sale,” Svenja Gudell, chief economist for real estate website Zillow, said in a statement. “What’s more, those homes that are for sale are increasingly unaffordable for first-time and entry-level home buyers.
Another reason for slow local sales: Miami’s massive foreclosure inventory is dwindling. Investors jumped on low-priced homes during the recovery to fix them up and rent them out. But in July distressed sales fell 55.3 percent, according to the Realtors’ association.
The county still has one of the highest foreclosure rates in the U.S. at 2.4 percent, but it’s falling fast, according to research firm CoreLogic. The foreclosure rate soared to 27 percent in 2010.
The pullback has been pretty dramatic.
Peter Zalewski, analyst
At the upper end of the market, the velocity of foreign buyers is down significantly over the last year. Currencies in Brazil and Venezuela have tumbled. Interest from buyers in new markets outside of Latin America such as Turkey and China is a positive sign but it could be years before they have a big impact.
“The pullback has been pretty dramatic,” said Zalewski, who watches the new construction market closely. “The industry has been recognizing that going forward with some of these projects doesn’t make sense. It’s not surprising.”