My firm recently issued our final research report for the Miami Downtown Development Authority covering the Mid-Year residential market update in Greater Downtown Miami. The outgrowth of tracking residential market statistics in South Florida is that a fair number of friends and colleagues like to ask me about whether it’s a good time to sell (or buy). I thought I might save my readers the trouble of having to ask. The answer to both questions is the same: “What is your timing?”
If you are a seller, do you need to sell within a specific time frame? Are you relocating for a better job, or are you just moving to upgrade or downsize?
If you are a buyer, how long do you intend to hold your home or condo? Are you buying it because you think you can renovate and flip it, or are you buying it to live in it until your kids graduate high school?
For illustrative purposes, I have excerpted Figure 6 from the Miami DDA report, seen in the accompanying chart.
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While the data in the chart relates to the downtown Miami condo market (excluding pre-construction sales), the fundamental principles relate to your single-family neighborhood or any residential submarket. Assuming constant buyer demand, as the number of homes available goes up and pricing remains constant, it takes longer for everyone to sell. Many people want or need to sell within a shorter time frame, so to motivate a faster sale, they lower their price. The result is that on average, prices go down. This happens even if there is stable and unchanging demand (i.e., the same number of people are in the market every month contracting and closing transactions). When both events happen simultaneously (more sellers and less buyers), pricing changes faster.
What we see in Greater Downtown Miami currently is that resale inventory really started to build up in last summer. But the fourth quarter of 2015 sent inventory soaring. Throughout most of 2014 and 2015, the year-over-year closings (reflecting buyer demand) were relatively close. Since February, the market inventory leveled off and has hovered around the 3,000 unit mark, but there is also a decline in the number of closings year over year starting in January, meaning sellers stopped listing, but now there are fewer buyers.
This build-up of available inventory is a common theme throughout many submarkets in South Florida, but certainly not all. Broward County residential statistics were fairly positive through June, and Palm Beach County residential inventory remains generally in balance. Miami Beach and other high-barrier luxury markets in Miami-Dade also remain relatively in balance.
So, if you’re a possible seller, ask yourself or your Realtor this. Have the number of homes listed in your neighborhood and price range been going up dramatically in the past 6-12 months? Have properties been staying on the market longer? If so, then the answer is now may not be the best time to maximize your price. Remember, an agent or broker is there to provide a service. If you express a desire to sell, they will express a desire to list and find you the best price the market will bear at the time you want to sell. The level of inventory available for sale is up to the sellers to decide, not the brokers. Sellers must decide not to list, or to wait longer to achieve their price.
If you are a buyer, now is an excellent time to buy provided that you don’t expect to turn around in 12 months and sell for a 20 percent profit. Mathematically, if the seller pays a 6 percent commission, and some closing costs equivalent to 1 percent of the price, area values would need to increase more than 7 percent in the year just for you to break even. At the other end of the buyer spectrum, if you are planning on holding the property for 5-7 years, a combination of extremely low fixed interest rates and the opportunity to find a more agreeable seller means you probably made a great real estate deal.
It’s always a good time to buy, and always a good time to sell, so long as you are never compelled by time or circumstance to do either. Nobody can time the market perfectly, and anyone who says they can is lying or ignorant about how lucky they have been. The only thing that is certain is that real estate will rise and fall with the general economic conditions in which it is situated.
Where are we in the market today? Don’t sell if you don’t have to. Don’t buy if you want quick profit and liquidity. And whatever you do, don’t over borrow.
And last, remember my Dad’s cardinal rule of real estate investing: “Timing isn’t everything, it’s the only thing.”
Anthony M. Graziano is senior managing director for Integra Realty Resources — Miami/Palm Beach, based in Coral Gables. He has been involved in the real estate field since 1986. He can be reached at firstname.lastname@example.org and www.irr.com
▪ The headline of the accompanying chart was incorrect in an earlier version of this story. Also, the email address of the writer has been corrected.