The Economic Time Machine

With few sales of new homes, Miami-Dade market still stuck in low gear

One set of numbers does not a boom make.

That’s something to remember before next week’s Realtors report. The latest numbers show existing houses in Miami-Dade selling at close to their prior peaks set in the summer of 2004. At the moment, Realtors report selling an average of 1,052 homes per month in Miami-Dade, 4 percent below the record of 1,093 monthly sales from June 2004.

But those numbers only tell half the story. While existing home sales continue to surge, sales of new homes remain well below past records.

Existing homes sold by Realtors are down just 4 percent from peak levels, but new-home closings tracked by Metrostudy are down a whopping 80 percent. That’s a significant shift in the housing market. In 2005, when developers were flocking to the outskirts of the county to build new subdivisions, new-home closings outnumbered existing-home sales by 2 to 1, according to Realtor and Metrostudy data.

Metrostudy records a closing every time a vacant new home is occupied -- be it by a renter or an owner.

Add in the new home-closings, and the total sales and closings are not down 4 percent — they’re down 54 percent (as shown by the gray line in the chart).

As the real estate market collapsed in 2008 and 2009, home construction virtually halted. In 2010, Metrostudy reported a monthly average of 166 new-home closings, compared to more than 2,100 in 2005. And while construction has bounced back (building permits for single-family homes in Miami-Dade are up 276 percent from a trough hit in the fall of 2009) the numbers remain far below where they were housing was booming.

Why the difference? Bradley Hunter, an economist with Metrostudy, said supply is a primary culprit: existing homes are simply easier to find than new homes, since builders still see housing prices as too low to justify buying up land and creating new product.

Investors paying cash, a key driver in the current Miami rebound, also see the most value in scooping up distressed existing homes.

“If an investor wants to speculate on home price movements or get current income, there is a much stronger seeming opportunity in the existing-home market,” Hunter said. “You can still find homes there that are fairly inexpensive. But new-home sale prices are always moving far head of existing-home prices.”

While the new-home numbers look ugly, Hunter said comparisons to peak levels don’t tell the real story of the housing market. While the boom was fueled by buyers planning to quickly resell for a profit, the current market relies on long-time buyers — be it investors planning to rent out their acquisitions, or actual users planning to live in them.

“People were buying new homes on a speculative basis back when mortgage terms were so liberal and home prices were moving up at double-digit rates,’’ he said. “We just don’t see the same kind of speculative fervor in the market we did back in 2004, ‘05, and ’06.”

“The level of true demand,’’ he said, “is actually rising rapidly.”

The Miami Herald’s Economic Time Machine seeks to give the long view on the latest financial numbers for South Florida. Visit for analysis of the numbers that drive the local economy. Our ETM index tracks more than 40 local indicators to measure where the economy has “landed” post-bust when compared to earlier economic conditions. The latest reading: July 2004.