Mountain of Inventory Slowing South Florida Housing Market Recovery

It’s a quiet Sunday afternoon in West Kendall.

The third in a row, in fact, in which Olga Alvarez has opened her house to buyers. But there have been no takers in this stagnant market.

The story of the South Florida housing market in 2006 was one of waiting. Buyers waiting for the right price, sellers waiting for the right buyer, everyone waiting to see where an uncertain market would go.

Now the question is whether 2007 will be the year the market turns around.

The answer lies in the mountain of homes across South Florida with “For Sale” signs - the single biggest indicator of a market out of whack.

If you look only at homes that sold throughout last year, prices on the whole went up 8 percent to $280,000, according to a Miami Herald analysis of Miami real estate sales as well as the sales in and around Broward County.

However, sales are only the tip of the giant iceberg blocking the market. The real story lies in the homes that did not sell.

For every home that sold in each month of 2006, an average of 14 did not, according to data from local multiple listing services. The number of homes on the market doubled to almost 66,000, as sales dropped to their lowest level in a decade.

The backlog for houses runs from a least-expensive fixer-upper to a luxury mansion. But it’s most bloated in the middle range of $200,000-499,000, where Alvarez’s house falls - along with 60 percent of houses for sale in South Florida.

A normal market has 6-12 months’ worth of houses for sale. But at the current sales pace, it’s up to 16 months in Broward County and 18 in Miami-Dade. For condos in both counties, it’s more than two years.

Anxious sellers are dangling incentives in front of buyers that effectively lower prices by as much as 5-10 percent. More than 100 sellers with EWM Realtors alone are offering to pay all closing costs.

But Wachovia Bank economist Mark Vitner, who studies Florida, predicts that sales are likely to slide back a bit in the spring, despite lower Florida mortgage costs. The lure of incentives will have run its course.

“We do see the market eventually bottoming out in 2007,” Vitner says. “But no way have we hit bottom yet.”

The result: If you’re a seller, you may still do fine on price, but don’t expect the huge gains of the recent housing boom. Many say the best-case scenario is for sales to inch upward and for home prices to stay flat or gain slightly - a trend that could last several years.

Also, don’t aim too high. The average asking price for homes in South Florida was down about 13 percent in December from a year ago.

And be prepared to wait.

“When a property is priced right, it will sell over a reasonable time,” says real estate analyst Michael Cannon. “A reasonable time can be six months to a year or more.”

If you’re a buyer, you have the advantage, but expect to keep your home for at least a few years rather than flipping it for a quick gain. Also, the betting is, houses will recover faster than will condos.

“If you want a house, don’t pass it up now,” says Gus Rubio, who heads Coldwell Banker’s Miami-Dade operations. “But when it comes to the condo market, unless it is something you are really dying for, you have the liberty to continue looking for a while.”

Throughout the 1990s, home prices in general went up gradually about 5 percent a year. Price increases in 2006 fell right in line with those before the housing boom.

The difference is that the years in between - the years of crazy price increases powered by low-rate Florida mortgage loans - that lifted the entire playing field so high that many were knocked out of the game altogether.

In January 2002, 48 percent of all houses listed for sale in Miami-Dade were for less than $200,000. Now, it’s 3 percent.

The price escalation means that many homeowners like Alvarez still make a tidy profit if they can sell. Alvarez and her husband, Zabdiel, bought their home in 2000 for $147,500. Since then, prices in the neighborhood have more than doubled, county records show.

But it’s also harder to sell in the first place because many people who are interested in buying simply can’t afford a Florida home loan to make it happen.

From 2001-2005, the price of a single-family home in Miami-Dade jumped 120 percent to $351,200. Broward was not much different. But average household income has increased just 17.6 percent in Miami-Dade and 15.9 percent in Broward.

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