It depends who you ask or what price range you are looking at. Generally speaking the real estate market is improving and our inventory levels in NE Broward County have dropped significantly across the board, with a few exceptions of course. For example, if you are a buyer looking to spend over $1 million on a single family home then you have plenty of choices and many opportunities to buy discounted properties. On the other end of the spectrum, if you’re an investor looking for bank owned deals under $200,000 then be prepared to get into a bidding war. Its all about inventory and understanding how it affects your real estate market and property values.
What is housing inventory?
In the real estate marketplace real property is our inventory and in South Florida we have just about everything you can imagine, from beach front condos to single family waterfront homes to multifamily investment properties. Not only is our inventory diverse, but we have something to offer everyone no matter what your price range. When we analyze our current residential inventory for example, we like to look at condos and single family homes in a variety of price ranges. We start by defining our geographic area. For the purposes of our discussion we will take a look at our backyard – Northeast Broward County including Fort Lauderdale, Lauderdale-By-The-Sea, Lighthouse Point, Wilton Manors, Pompano Beach and Deerfield Beach. Based on the number of current properties for sale and the average number of listings sold per month (absorption rate) we can determine our “months of supply” for our area. Months of supply is defined as how long it would take to sell all of the current inventory in the marketplace if no new listings came on the market. For example, looking at the data below and based on current absorption rates, it would take us 6.3 months to sell all of the current single family inventory between $300,000 and $399,999. We consider 6 months of supply to be an equilibrium market, so this is a good example of a market that is neither favoring the sellers or the buyers. Less than 6 months of supply is a seller’s market and more than 6 months is a buyers market. See the inventory chart below for your price range and see where you stand.
Inside the Numbers:
- In NE Broward County right now it is a seller’s market for single family homes under $400,000 and for condos the seller’s market is under $200,000. Above these price levels it is technically a buyer’s market, but there are plenty of exceptions.
- Anything decent under $100,000 is in extremely short supply and you can expect multiple offers for even average properties, especially foreclosures that are priced below market values. Be careful, don’t over bid!
- Single family homes over $1,000,000 have a supply of 28.6 months. That is almost 2 1/2 years! Condos over $900,000 are even worse off.
- Its not all about price however. Property location is also important to inventory analysis. For example, decent waterfront single family homes are in short supply, especially under $700k.
- Another segment in short supply is “newer” condominiums. Condos built after 1997 are in extremely short supply, especially those under $400,000.
- Overpriced inventory can skew the numbers and this is especially true in the higher price ranges. Look for downward pricing pressure in both single family and condominiums over $1 million where many properties are overpriced.
- Shadow inventory is defined as bank owned inventory that is not for sale yet. If the banks (this is a big if) start to efficiently release their inventory into the marketplace this should cause some stabilization of our inventory levels. If not, we will continue to see inventory depletion and rising prices, especially in the lower price ranges and on the waterfront.
Who needs this information?
- Buyers should study inventory levels before venturing into the marketplace and making an offer. For example, if you are looking for waterfront property under $400,000 right now in Broward County then be prepared to offer close to full price when the right property comes available. If you’re looking for a condo over $1,000,000 then take your time and don’t be afraid to make a low offer. There is almost 3 years of inventory to choose from.
- Sellers need inventory information for their neighborhood to effectively price their property for sale. For seller’s in the lower price ranges, be careful how you price or you may leave money on the table. Of course, unless you sell for cash, the appraisal could be an issue so be careful about pricing too high. In some cases you may be better off waiting or renting your property out before selling.