If you’re looking for a cross-section of the housing market in the Southeast, Miami, Louisville and Atlanta are in varying stages of recovery, and each seems to be playing out a different style of rebound from the housing market’s colossal bust.
Miami is characteristically on the go once more, Atlanta has perhaps just recently awoken from the dead, and Louisville’s recovery is, like the city itself, steady and calm.
Let’s start with Miami, through the eyes of one of its foremost real estate watchers, Alex Sanchez, CEO of the Florida Bankers Association.
For four decades, Sanchez has watched the Miami real estate market go from boom and bust and back again. Now, after his hometown has survived a deep and long real estate collapse, Sanchez shows relief and perspective.
“Once again Miami will be saved,” he says. “It’s the story of Miami for the past 100 years. People from all over the Western Hemisphere come to Miami. The U.S. is stable, and they know that no matter what, they can invest here and never lose their investment. That’s why Miami is Miami.”
In fact, the Miami Association of Realtors says the city had a strong 2011, thanks mainly to these cash-rich international buyers, who choose South Florida over any other market.
The association notes foreign-born buyers pay more than their domestic counterparts, with a median home price of $222,500; what's more, 90 percent of international buyers purchase properties with cash.
Total sales for condos and single-family homes in 2011 at 24,929 units were 46 percent higher than in 2010. Equally important is that the number of transactions was actually 4 percent more than in 2005, the peak of Miami's housing bubble.
Sales of luxury homes rebounded crisply; Some 1,160 were sold in 2011, according to the Realtors association, versus 928 the year before. The median sales price tipped $1.6 million, up slightly from 2010, and the homes sat on the market fewer days (207 vs. 224).
Overall, residential inventory dropped 39 percent. The average price for a single-family home in Miami-Dade County increased 8.3 percent year over year to $327,060; that of a condo jumped 21.5 percent to $272,186.
Fernando Martinez, president-elect for the Miami Association of Realtors, attributes the drop in inventories to a combination of low home prices, rock-bottom interest rates and a 20 percent increase in the loan ceiling for federally backed loans to $429,000.
Miami's economy is also improving, lowering unemployment and raising consumer confidence, he says. The city's unemployment rate is down to 9.6 percent, 2.2 percent lower than a year ago.
“If you feel you won’t lose your job, and can heave a sigh of relief, and plan a vacation, then you can finally buy a house,” he says.
Even a new one, if you choose. Single-family housing permits — a sign of new construction—rose 32.3 percent from December 2010 to December 2011, according to the National Association of Realtors. The national average is down 7.4 percent.
If things are looking up in Miami, Atlanta remains a work in progress, though there are some recent signs of life.
According to S&P/Case-Shiller, Atlanta’s home prices ended 2011 12.8 percent lower than 2010; even worse, median home prices are down 30 percent over three years, versus the national median loss of 10.2 percent.
New construction limps along as well. As of the end of December 2011, new building permits totaled 6,291 units, down 2 percent year over year. At 9.4 percent unemployment remainshigh.
But even in moribund Atlanta, things have perked up in a little, says Mitch Kaminer, president of the Atlanta Board of Realtors.
Single-family home sales hit 2,680 in February 2012, up 15 percent year over year. Sales were also up 6.9 percent sequentially versus January. At the same time, however, median prices fell to $110,000 from $121,000 as foreclosures continued to depress property values.
“The faster foreclosures move through the market, the faster they will hasten our return to a healthier market,” says Kaminer.
Kaminer says the luxury market has stabilized compared to a year ago, as those buying such homes tend to have more secure jobs.
As for entry level, it’s a good time to get in, he says; whereas a home could have sold for $100,000 five years ago, it might now list for $80,000. When you combine that with the 3-percent down payment required by the FHA, it creates attractive pricing.
At both ends of the market, Kaminer says the ball is really in the buyer’s court, as sellers will not get what they want, but they will get what a house is worth.
There is little new construction, but that is still an uptick from the past several years.
“I now do three times the amount of work for the same money,” says Kaminer. “It used to be that every listing lead to a slam-dunk close, now maybe it’s one out of three. I’ve got to work three times as hard just to stay above water. Although a year ago it was maybe one out of four.”
Louisville Slugs Away
Atlanta real estate agent and blogger Sally English believes in the most stable part of the market in 2012 will be the middle, where homes are priced from $200,000 to $300,000.
There is too much inventory for luxury homes priced over $600,000 for sellers to see any real appreciation, and homes below $200,000 remain in competition with foreclosures. Bank-owned sales accounted for 48 percent of the total sales in metro-Atlanta in February 2012, a huge number.
At the northern edge of the Southeast, Louisville saw home prices in the fourth quarter of 2011 fall 3.7 percent from a year ago to $128,500, but over the last nine years the market there has been essentially flat, thanks partly to a prime-to-subprime ratio (15.4) higher than Miami (9.4), Atlanta (12.0) and the national average (14.4).
Louisville also happens to be one of 99 metro areas on the National Association of Home Builders/First American Improving Markets Index. Why? It’s not price appreciation, which is only 0.7 percent since its trough in February 2011. Housing permits, however, are up 6.5 percent from their July 2011 bottom, while employment is up 4.5 percent, since its February 2009 nadir.
Also, Louisville is affordable, with a monthly-mortgage-payment-to income ratio of 7.1 percent, about half the national average.
Sales in 2012 continue to pick up, with 742 houses sold this past January, versus 657 a year ago, the seventh-consecutive month of year-over-year gains. The median sales price during that period was unchanged at $125,000, even though active listings rose from 6,675 to 7,331.
John Fischbach, a broker and president of Louisville’s Multiple Listing Service Board for the Greater Louisville Association of Realtors, says price stability contributed to the 20 percent increase in home sales during the first two months of this year.
Luxury home sales, priced from $500,000-$600,000, almost tripled, even if entry level volume was flat.
“It’s a buyer’s market in that rates are low, a 30-year mortgage is around 4 percent and selection is 10 percent better than last year,” says Fischbach.
Another bright spot is building permits, which were 33 percent higher in the January-February period than a year ago.
What’s going to drive Louisville’s market going forward?
Fischbach notes the increasing numbers of new families and growth of cornerstone businesses in the city, including UPS , Zappos.com andFord Motor.
Equally encouraging but perhaps less tangible is a development in the real estate industry itself. More real estate agents are getting into the market, says Louise Miller, president of theGreater Louisville Board of Realtors.
“They feel they can make a living, and are pulling their licenses out of escrow," she says. "They feel things are coming back.”
Miller herself may be a good barometer. She has 11 properties listed to go on the market within the next eight weeks. Last year at this time she had four.
A sense of mission has returned.
“I get up, and have a million things to do, work 12 hours and then do it the next day,” she says. “It motivates me, because I like being busy."