2011 Year In Review Newsletter

1. Real Estate is Local in Nature

– Just because aggregate numbers about the market in general may look gloomy, many communities buck the trends and are performing quite well.

2. Mortgage Rates at Lifetime Lows

– The 30 year fixed rate average was 3.95% and the 15 year fixed averaged 3.24% in December. Five year ARMS were at 2.88%. These rates are down over 20% from a year ago. Many of our buyers who can afford to pay cash are opting to finance because frankly – Why wouldn’t they?

3. Inventory Low

– As a company, we aim to work with buyers and sellers evenly. In recent months, we’ve been working with many more buyers than sellers. Our buyers are sophisticated foreigners as well as domestic residents. They hail from Brazil, New York, Spain, Venezuela, India, Pinecrest, Coral Gables, Key Biscayne, Davie, Plantation, Miami Beach, etc. They are bankers, lawyers, engineers, retirees, investment advisors, health care leaders, internet entrepreneurs and the list goes on. We frequently find the need to extend our search to properties that are not on the market for sale in order to satisfy their needs. There’s just not that much good inventory out there right now.

4. Shadow Inventory Not as Big as You Think

– Going back to my previous point about geography, I don’t believe there is a large “shadow inventory” of foreclosures lurking in the more desirable neighborhoods. First of all, the term “shadow inventory” is defined differently depending on who you talk to. It’s usually a combination of bank-owned properties not currently on the market (a real number) combined with a nebulous estimation of foreclosures expected to hit the market in the future based on data marking when people stop paying on their mortgages and lender lis penden filings. I think these estimates are severely over inflated. A lot of properties where people have stopped paying their mortgages or where lis pendens have been filed are already on the market in plain view for everyone to see; not lurking in the shadows. Further, many of the bad loans that were made during the boom years were made looking through rose colored glasses in locations that were hugely inflated. The adage “location, location, location” is the one thing you can always count on in real estate. The desirable locations are on a much faster track of recovery.

5. Rental Market on Fire

– As you may know, the rental market is incredibly strong. As consumers coming out of the Great Recession have experienced damage to their credit, they are opting to rent rather than buy for the time being. These demands have put a huge strain on the rental inventory. Rental properties are hard to come by and when you find one that fits your needs you need to move fast. The flip side of this trend is a positive one for the market in general. The high rental rates owners are achieving continue to have an effect on price appreciation. Just look at the downtown Miami condo market and you will see a complete recovery where we have long since passed the bottom of the market.

6. Life Goes On

- Finally, people are still having babies, graduating from college, getting married, getting divorced and so on. As one of our agents said to me the other day, “I think my clients are experiencing recession fatigue!” When I asked her what she meant, she said that they were simply tired of sitting on the sidelines. They were expecting a second child, feeling cramped in the house they’ve been in since they were married and tired of sitting on the sidelines waiting for the market to bottom out. They were ready to move on and enter the marketplace.

That said, I think 2012 will be the year we all move on…
Many wishes for a happy and healthy new year!

- Lani Kahn Drody

President | Broker