Finally our local housing market is becoming less insane. Far from normal, but less insane is progress. And the June numbers, available one month from today, will confirm that.
Here's a primer on how to read and interpret what is shown in the infographic above (all data for single family homes):
ACTIVE INVENTORY: means number of single family homes for sale. In the Tri-County area (in essence the MSA or Metropolitan Statistical Area described above), this number should be north of 14k or 15k. But then, I didn't say we're back to normal, did I? At least the number is going up, caused among other reasons by rising mortgage rates and FOMO - Fear Of Missing Out.
Those mortgage rates – and lack of reasonably priced inventory – caused a major drop in residential mortgage application: minus 32% compared to the same time last year. That in turn got sellers nervous, rushing to hop on the gravy train before it leaves the station. But, as I told a very nice prospective client from Hollywood who gets nudged by a neighbour to sell: if you don't move out of state, you have no business of selling. Even downgrading could cost the same, but with lesser quality housing.
PENDING INVENTORY: properties in contract which haven't closed yet. Average time from signing to closing is at least three weeks for cash purchases, and easily double that with a mortgage. That number will likely not head north for at least another one or two months.
CLOSED SALES: fewer homes for sale of course results in fewer closings. If pending numbers will take a month or two to stabilise if not go up, closings will take even longer.
As an analogy, think of the turning radius of ships: a tug boat is nimble, a small freighter much less so, while a super tanker the size of the Exxon Valdez needs at least a mile to turn, rudder hard over.
MEDIAN TIME TO CONTRACT: This is an interesting statistic we in the business call DoM or Days on Market. It means what it says: how many days was the property active until it went pending. 11 days is insanely fast, and I chose median on purpose, as average would have way too many outliers. Pre-covid, the number was typically in the 30s.
MEDIAN % OF LIST PRICE: How much of what they were asking did the sellers actually get? In an overheated market as we had for the last 20 or so months, the median reached 100% in summer last year, dipped a bit and now is at 100% again since February. It means there were plenty of properties selling above list price - good for sellers if they moved away - however you will see that number decrease very soon. Typical is between 95% and 97%, meaning buyers negotiated between 3% and 5% off asking. As always, desirable homes have to be discounted less, while oddballs have to swallow the bitter pill (or "swallow the toad", as we say in German). Remember: it's not the seller who dictates the price, it's the plethora or absence of buyers who make the market.
MEDIAN SALE PRICE: just what it says, the median of all 4,096 SFH sold in May. Important for you to frame the data: a healthy annual appreciation in a normal market in Florida hovers between 4% and 6% median. And: why median sales price? Answer: Because of the spread in our market; too many outliers which distort averaging.
To illustrate – and bear with me, we're getting into a bit of research – I'll use homes currently for sale, and closed homes in May.
For Sale: The lowest-priced SFH for sale today is listed at $60,000 (don't ask; you do not want to see it), the highest is $170m. The resulting average asking price of all homes listed today is $2,167,408, while the median price is $820,000. Neither $60k nor $170m is typical, but how many atypical listings do you eliminate? All four over $100m? The lowest four as well? Every month?
Closed Sales: The lowest-priced home sold in May for $45,000, the highest for $49,500,000. The resulting average selling price is $999,922, the median is $595,000. With nearly 100% difference, do you see why in our market with super-expensive listings, only median price data make sense?
In our housing market in South Florida the shift was caused by
If you're still reading: wow - thank you so much for your patience and interest! Feel free to post any questions or comments here, or contact me directly at 954 834 3088 or via email. Be well!
Tobias Kaiser works as an independent real estate broker and consultant in Florida since 1990. Always putting his clients' interest first, he specialises in modern Florida homes and architecture, as well as net leased investments.