In spite of the great number of foreclosures, home prices in the South Florida area — which comprises of Miami-Dade, Broward and Palm Beach
counties — have gone up over the last year. In fact, South Florida prices are now at May 2004 levels, but they are still nearly 37 percent below the peak of the market in December 2006, according to the S&P/Case-Shiller Home Price Index.
According to statistical data collected by Florida Realtors® association, South Florida single-family home prices rose 21 percent in 2013 alone, while condominium market values rose by an incredible 28 percent. Historically, in a balanced market, residential properties appreciate at 3 to 5 percent annually.
This is the equivalent of seven to eight years of home equity increase all in one year. However, the first months of 2014 have shown a continuation of price increases at a much slower and steadier pace, which is a good sign the market is recovering and reaching a more balanced market.
“All indications point to the return of normal appreciation levels.”
While there are many reasons for our market uptrend, the three core reasons are:
- The number of distressed sales, including short sales and real estate owned (REO) transactions, continue to sharply decline, lessening their negative impact on the overall market. In February, only 38.4% of all closed residential sales in South Florida were distressed sales. During the real estate downturn, distressed sales accounted for approximately 66.6% of all closed transactions.
- Housing inventory continues to be absorbed steadily. February showed 5.3 and 6.4 months supply of inventory for single-family homes and condominiums, respectively. A market that is balanced between buyers and sellers typically offers six to nine months of supply.
- Mortgage rates remain historically low.
Home prices are expected to keep rising in 2014.
“All indications point to the return of normal appreciation levels.” said Barb Kozlow, President of the Realtors® Association of the Palm Beaches (RAPB).
“…it’s a great time for sellers to list…”
Furthermore, according to CoreLogic, home equity is concentrated at the higher end of the market. That means that 92% of the homes valued at greater than $200,000 have equity compared with 81% of homes valued at less then $200,000. “Interest rates are also inching up and providing additional motivation for buyers, so it’s a great time for sellers to list too.” Kozlow also added
Six years ago when the residential market crashed, many homeowners found themselves in financial hardship and unable to pay their mortgages. Facing foreclosure, they tried to sell their homes only to find that the value of their home — their biggest asset owned — was less than their mortgage. The rebound in home values in 2013 hinted that despite the turmoil, there has been significant progress. It is evident our real estate market has a ways to go before negative equity is eliminated but there are signs that show we are heading in that direction and the fact that the South Florida market is leading the nation in employment and job creation is a good sign that our residential economy will continue to grow and flourish.
Norka Parodi is a member of the Institute for Luxury Home Marketing and is a Broker/Realtor®, with CDPE, CIAS, LMC, GRI, TRC designations
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