MIAMI – Aug. 4, 2010 – South Florida’s housing sector asserted its independence from national trends in July as a key measure of the real estate market improved year-over-year, with the region’s international buyers and still-drooping prices propping up the local housing market.
In July, pending home sales in Miami-Dade County stood at 10,113, up 40.5 percent from July of 2009, according to figures released Tuesday by the Miami Realtors. In Broward, pending sales stood at 7,830 in July, up 25.4 percent from a year earlier.
Pending home sales refer to the number of housing contracts that have been signed, and offer an early indicator of sales activity because typical sales have a one- to two-month lag between a sales contract and a completed deal.
South Florida sizes up well when compared to the national picture, where the pending home sales index hit a record low 75.7 in June, according to the National Association of Realtors. It was the second monthly falloff after the April 30 deadline to enter the federal homebuyer tax credit program, with June’s pending sales down nearly 19 percent from the same month a year earlier.
The local market hasn’t been completely immune from the post-tax-credit slump. In the past three months, pending home sales are down 3.2 percent in Miami-Dade and down 5.1 percent in Broward.
“We are encouraged by the statistics for pending home sales in the South Florida real estate market even after the expiration of the homebuyer tax credit,” Jack H. Levine, chairman of the board of the Miami Realtors, said in a statement. “While the number of pending sales has dropped slightly month-over-month, they are still significantly higher than they were a year ago.”
With financing still difficult to obtain, all-cash buyers and deep discounts on distressed properties are propping up sales, said Peter Zalewski, a principal at Bal-Harbour-based Condo Vultures.
About 60 percent of South Florida sales have gone to foreign buyers, who are more likely to pay with cash and were never eligible for the tax credit.
Additionally, more than half of recent sales in Miami-Dade and Broward counties involve short sales or bank-owned home sales. In the last 12 months, the number of bank-owned condos and single-family homes sold has more than doubled.
A short sale occurs when a home is sold for a price that is less than the value of the outstanding mortgage. In what has become a notoriously lengthy process, both the seller and the bank must agree to the price.
Banks have recently become more willing to allow sellers to pursue short sales, which now account for one in four South Florida sales.
There were 944 short sales in Miami-Dade and Broward in June, up from only 379 a year earlier, according to analysis by Esslinger-Wooten-Maxwell Realty.
That’s a reason to be cautious while interpreting pending homes sales data in a market like South Florida’s, said Doug DeWitt, Miami-based real estate broker.
Many short sale contracts are rejected by the bank after a seller agrees to sell for a price below what they owe, meaning those pending sales don’t lead to closings.
Additionally, because short sales take months to process, many remain in the “pending” stage longer than normal, boosting pending sales numbers for multiple months.
In Miami-Dade County, more than half of the pending single-family home sales on the Multiple Listing Service are short sales, said DeWitt.
“I’d say at least half of those are not going to close,” he said. “I would say stick to the actual closed sales to make the true comparison, because there’s a lot of different ways that these pending sales can fall through.”
The increasing number of short sales and bank-owned properties coming to market has put downward pressure on prices in South Florida, said Jack McCabe, chief executive of McCabe Research & Consulting in Deerfield Beach. In June, median prices of existing homes stood at $203,300 in Miami-Dade, down about 4 percent from the same month a year earlier. Median existing condo prices, at $128,000, were down about 9 percent in Miami-Dade.
“When you’re in a neighborhood that has two foreclosures and a short sale that are priced $50,000 or $75,000 below what you thought you could get for your home, you do not set the barometer for the other [home] prices,” McCabe said. “They set the prices for you.”
Tejus Karia, who has been trying to sell his Davie townhouse for eight months, has cut prices multiple times.
He has slashed the price on the three-bedroom, from $185,000 to $165,000 to draw in buyers but didn’t get a single offer. He recently decided to rent it instead.
Zalewski said many sellers are coming to accept the new, lower pricing levels being dictated by the market, and are acting accordingly.
According to a report by Trulia, one in five home sellers in the Miami area slashed prices last month, with an average reduction of 13 percent.
Karia said the main obstacle for most of his buyers was the lack of financing: “Nobody could come up with the money. The banks aren’t lending money, and that’s going to leave a lot of these houses in limbo.”
Copyright © 2010 The Miami Herald, Toluse Olorunnipa. Distributed by McClatchy-Tribune Information Services.