South Florida residential real estate prices fell another two percentage points in November from their 2005-06 peaks, leaving the average discount from those peaks at 38 percent.
According to an analysis by The Real Deal, if the two percentage-point rate of decline continues and current market conditions persist, prices will have fallen 50 percent from their highs by the middle of next year. That’s exactly what most local real estate experts expect to happen.
“Due to the huge amount of existing and new inventory compared to current monthly demand and the incredible amount of foreclosures, which will escalate next year, prices will continue to decline,” said Jack McCabe, head of McCabe Research & Consulting in Deerfield Beach.
He and others agree that prices will likely fall another 10-15 percent. “Another 10-15 percent is reasonable,” said Craig Werley, head of Focus Real Estate Advisors in Coral Gables.
“The credit crisis has turned so much more severe over the last one-and-a-half months. Major lenders that have supported new construction in this area have locked up for now, and the same is true for mortgage loans.” Research firm Condo Vultures reported that prices asked for South Florida residential properties east of I-95 had dropped an average of 38 percent as of November 30 from the peaks of 2005-06. That compares to a 36 percent discount a month earlier.
With asking prices generally five to six percentage points above actual sales prices, one could argue that prices actually have dropped 43 percent and are headed for a total loss of 55-60 percent.
November’s price decrease represents “a continuation of the troubles from September and October with the meltdown of the U.S. financial system,” said Peter Zalewski, head of Condo Vultures.
“Some people are coming to the realization that they won’t be able to complete sales at desired levels.”
As for the factors that will continue pushing prices down in coming months, McCabe points out that Miami-Dade County has a condominium supply of about 25,000. With the current sales rate of 542 units per month, that’s a 46-month supply. “In a healthy market there’s a six- to eight-month supply,” he said.
McCabe sees a strong chance that South Florida’s unemployment rate, now 6.7 percent compared to 4.2 percent two years ago, may reach 10 percent in 2009. So foreclosures should continue to rise.
Foreclosure filings in Miami-Dade County totaled just under 6,000 in October, and about half of those properties will probably end up in lenders’ hands, said Brad Hunter, national consulting director for research firm MetroStudy. “It’s ramping up at a frightening pace.”