Last Monday, the National Association of Realtors released its monthly pending home sales index, which is derived from the number of homes that are "under contract" for each month in the country as a whole. Homes under contract are those whose owners have accepted an offer from a buyer and are waiting for the sale to close, which usually takes one to two months after the offer is accepted.
The index is a good indicator of home sales activity. It provides advance notice of what actual home sales are expected to be in the next couple of months and signals changes in the trends. The index is shown as a percentage of the average contract activity in 2001, the base year of the analysis, which is represented by 100 percent. As we all know by now, 2001 was the start of a four-year run of record home sales,
The index released on January 5th represents contracts signed in November 2009 and, at 96.0, it is 16 percent lower than the 114.3 registered last October,
According to the Realtor Association of Greater Miami and the Beaches, and reflecting the national tendency, actual pending home sales in Miami-Dade County (not an index) dropped by 2.21 percent last December. In Miami, at least, these figures don't tell the whole story and we can't infer from them that home sales are declining in our area. On the contrary, a look behind the numbers paints a much more optimistic picture.
There are two main reasons for the drop in pending home sales in the last months of 2009. One is the highly cyclical nature of home purchases, since families tend to buy during the spring to make sure their children finish the school year before having to move. The other is that most people, busy with holiday activities, postpone looking for a new home until after the festivities.
Sales spiked this past summer as buyers took advantage of a complicity of unparalleled favorable conditions that included the home buyers' tax credit, historically low interest rates, drastically rolled back prices and a wide selection of homes to choose from. The comparison of sales activity during the holidays with sales during the summer results in a skewed representation of our situation.
There are many facts that point to continued brisk sales, and to persisting interest on the part of buyers to profit from current opportunities before they are gone. For one, homes and condos sold much faster than during the same months in 2008. During November and December of 2009 condos sold after an average of 47 days on the market, and single family homes after 58 days vs. 81 and 67 days, for condos and houses, respectively, during the same months in 2008. During the same period, buyers were also willing to make better offers, with condos and houses commanding 96 percent of the list price, vs. 94 percent for condos and 95 percent for houses in the last two months of 2008. The most probable reason? The huge drop in median selling prices, from $160,000 for condos in December 2008 to $140,000 in December 2009, and from $215,000 for houses in December 2008 to $180,000 in December of 2009.
While locals are jumping on the bargains, foreign investors are not being left behind. It is now common to hear of bargain hunters from other countries who buy five or six houses or condos at a time, often in cash, taking advantage of the lower dollar. Not all buyers are families seeking a place of their own. Flippers and rehabbers are back, often buying an additional property as soon as they can unload another one.
Although high unemployment continues, there are signs that the economy is improving, and this year has started with an optimistic mood. As long as favorable investment conditions continue, we can expect Miami home sales to keep a swift pace in 2010.
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