Here’s some interesting data from FL MLS: Miami home sales (by units) are up 101% from March 2008 to 2009 - 556 homes were sold in just March! The bad news, prices were down 39%. But is this bad news? Not if you were one of the 556 buyers.
In Lauderdale sales were up 47%, prices down by 30%. Tampa saw a 16% increase in sales, prices off 24%. W. Palm was up 20% and prices down 29%.
Florida state wide saw an increase in sales of 30%, with prices down 30% for a median home price of $141,300. This price point puts affordability squarely in the range of most two wage earning families, which is where housing should be priced in the median. For instance, with today’s 5.0% 30 year fixed, plus a 10% down payment, a family’s mortgage payment would be $710 on this average home in Florida. That would mean with taxes and insurance (high there) they may have a $1300 a month PITI payment. Using traditional debt-to-income ratios (28%) - our family would need to earn $56,152 to own a home, or $28,000 each. This equates to $14/hour.
Who makes $14 an hour in America? They can now own a home. Last year, to own the same home in Florida you needed to make more than $19/hr or $38,000 each in a 2 income household. That additional $20,000 per year in household, combined with this year’s lower real estate taxes (assessements are down 30%), and lower gas prices - on average $1700 per household, the typical Florida family can live the same lifestyle on $22,780 less per year, a reduction of 30% less.
What does this really mean? A family in Florida can buy or afford a home, even if they have lost 1 job or taken a 30% pay cut in the last year. It also could mean that people who bought last year saw their taxes and cost of ownership shrink. These home owners may feel ‘underwater’ on the value of their homes, but are they? No. Not unless they are in the market to sell right now. If they intend to hold their homes for 5 or more years, and natural appreciation continues at a ‘historical’ rate of 5% per year, within the next 5 years they should be able to sell their homes for a profit.
Real estate was never supposed to be a short term 30% per year appreciating investment, yet in Florida, some markets rose at 30% per year. Last year, this went the other direction. It will take a few years to regain values and inflation will likely help housing, and inflation is coming don’t worry about that.
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