As the economy sputters along and unemployment rates remain steady at more than  nine percent, there isn’t call for celebration. Whereas the real estate market was also lumped in with  these aforementioned Great Recession causalities, in certain regions sales of  homes and condominiums are showing positive signs giving hope to an industry  that has been treading water for over three years.  

 “The (Miami) market has done a complete 180 [degrees] from twenty-four to  eighteen months ago,” says Darin Tansey, vice president for Barclay’s Real Estate Group. “People were looking for deals and steals but now they are buyers looking at more  substantial properties,” he continued. “Last year, there were only twelve closings on the water, and we have already had  fifteen closings this year and we haven’t entered the fourth quarter yet.”  

 In September, the National Association of Realtors (NAR) released its monthly  report and the news was encouraging. From August 2010 to August 2011, sales of  existing single-family, townhomes, condominiums and co-ops spiked by18.6  percent. The report also found that sales on a monthly basis increased by 7.7  percent with unsold inventory dropping by three percent.  

 While these are aggregated national statistics show promise, these real estate  tea leaves should be read with caution. “Some of the improvement in August may result from sales that were delayed in  preceding months, but favorable affordability conditions and rising rents are  underlying motivations,” noted Lawrence Yun, NAR’s chief economist. “Investors were more active in absorbing foreclosed properties. In additional to  bargain hunting, some investors are in the market to hedge against higher  inflation.”  

 The Miami Herald’s “Economic Time Machine” finds that Florida’s real estate industry isn’t having a banner year but improvements are clear to see. For example, the  Sunshine State finished fourth in earnings from real estate in the second  quarter with a 1.2 percent gain from the start of 2011. Texas, Oklahoma and New  York were the only states that ranked higher with real estate earnings up  between 1.5 percent and two percent.  

 “Compared to last year, inventory is way down. In certain price ranges we believe  it is turning into more of a seller’s market again,” says Michael Light of Miami Condo Investments. “This is a surprising turn of events especially if you look at other markets  around the country,” adds Light, a member of the Realtor Association of Greater Miami and the  National Association of Realtors.  

 Market Indicators

 While there are stagnant and still suffering sub-markets in Florida, the Miami  area is becoming a standout market to watch. According to data released from  the Miami Association of Realtors, condominium sales increased to 60 percent,  from 818 to 1,311, compared to August 2010. “The fact that home prices are rising despite distressed sales that account for  the majority of sales is indicative of very positive trends in the Miami  marketplace,” noted Jack Levine, chairman of the Board of the Miami Association of Realtors. “If prices are rising for countywide figures that include distressed properties,  strengthening would be that much greater if distressed listings were eliminated  or reduced. We believe the Miami market in terms of pricing has bottomed out,” he added.  

 For real estate agents, brokers and analysts, finding the bottom can be viewed  as subjective. “The housing market is still struggling here in South Florida as it is everywhere  else in the country but the condominium market has rebounded nicely,” says Brad Capas, senior director for Cushman & Wakefield. “For the last few years South Florida was on everyone’s radar as the market to avoid due to the severe overhang of properties in  primarily downtown Miami but that picture has dramatically changed.”  

 While once unsold properties have been selling, the end buyers are investors  more so than families or young professionals. This trend is still viewed as a  positive because these buildings are no longer held by developers or lenders  which increase absorption rates setting the stage for the possibility of future  growth. “These properties have been mostly changed into rental units and most are rented,” says Capas, adding rental rates are exceeding 85 percent occupancy. “What are not rentals are second homes.”  

 In recent years, short sales and foreclosures were common, and in some cases,  still viable. Regardless of the transaction form, the old saying “Cash is king” is being embraced more and more in the Miami sub-market. According to data  released from the Miami Association of Realtors, the percentage of cash  transactions increased to 62 percent in September marking a month over month  increase of three percent. Cash sales accounted for 76 percent of condominium  closings. Conversely, nationally cash sales accounted for 29 percent of all  real estate transactions.  

 “We are seeing a considerable amount of money coming into this market,” said Tansey. “We are seeing Colombian, Venezuelan and European investors flooding the Dade  County market and we are starting to see more activity in Broward County, too.  This increase, and the interest in the markets, is significant.”  

 Whereas there were deals and savings as a result of short sales and foreclosures  in recent years, median sales price of condominiums increased 13 percent August  to August. This, in part, has attracted foreign investors who look to parlay  monies from their native country in what they deem a solid investment.  

 “Florida and South Florida are by far the top areas in the nation for  international home buying activity,’ said Miami Association of Realtors Residential President Ralph De Martino. “Already a magnet for international and for second and vacation home buyers,  Miami is now attracting domestic and foreign buyers who recognize that the  market has bottomed, and prices are on the upswing.”  

 Sales statistics tell the real story. The inventory of residential listings in  Miami-Dade County, for example, dropped by 40 percent from 25,679 to 15,405  active listings, in the last year. Since the real estate market remain tenuous  in other areas of the country, some out-of-state investors are entering the  market with unrealistic expectations. For many, they are too late to the party.  

 “We have potential buyers from the Northeast, say in New York, that are looking  to buy a second home for winter and they think they can get thirty cents on the  dollar for a premium unit. People think they can get a two bedroom on the beach  for $200,000, which is absurd,” says Light. “From peak pricing in 2006 there are still huge reductions out there but you have  to be reasonable and you have to be able to find that inventory and that is  hard to do today.”  

 In recent years, a buyer might have been able to find savings in the area of  forty to fifty percent off list price. In today’s quickly changing market, a buyer will be fortunate to receive twenty to thirty  percent off peak pricing moving forward. “A lot of people don’t believe this is the case but the market is changing,” says Light. “At the peak of the market there were approximately 25,000 units available and  now there are less than 2,000, so the math is easy. There are still some deals  out there.”  

 Future Growth

 If the sales and growth rate of greater Miami is surprising some analysts,  brokers and agents, the possibility of new construction would have been  considered a crazy thought two years ago. However, as absorption rates continue  to increase, there will be cause for mid-level and premium properties. The  question remains: will ground be broken on new properties?  

 “With the velocity of sales this year, the inventory is going to sell out in  twelve to eighteen months, and that is being conservative,” says Light. “If new construction started tomorrow, the building wouldn’t be ready for three to four years so there will be a period of time where there  will be no development and that will raise the price of existing condos. This  is good for owners and investors are taking notice.”  

 Capas adds that there will likely be continued investment in rental real estate  due to lending initiatives still in place from Fannie Mae and Freddie Mac. “Investors can finance these acquisitions,” says Capos. “In some cases homeowners have been displaced due to foreclosure and have moved  in to rentals. In other cases, renters who might have been looking for a home  before the economy turned are now staying in the rental market because their  job and security is in question,” he continues. “All of this has strengthened occupancy rates with the average stay of renters  increasing, which in turn increases the interest of investors in rental  properties.”  

 While market indicators are positive in the South Florida real estate market,  the pummeling of the last few years has left noticeable bruises. As a result,  industry professionals remain hopeful but are proceeding with “measured” optimism. “Prices have stabilized for a little while now,” says Tansey. “But people question if the economy will have another dip and there will be a new  wave of foreclosures. But the way buyers are acting right now, if there is a  new wave of foreclosures all it will do is increase the inventory and continue  the cycle we are currently in.”      

 W.B. King is a freelance writer and a frequent contributor to The South Florida  Cooperator.