Florida existing single-family home sales improved 15% y/y in June, decelerating relative to May’s 18% y/y increase. Despite a positive tailwind from the homebuyer tax credit, y/y gains in single-family sales (representing closings) have moderated since April. Positively, though, it appears that the tax credit has spurred enough sales to help reduce listed inventory levels across several key metro areas. Nevertheless, given the unusually sharp drop-off in demand witnessed nationally following the tax credit (extending through June), we remain concerned about the potential for further price declines in 2H10.
New patterns emerging. Recall that, throughout much of 2009, the South Florida market was characterized by sharp y/y sales increases coupled with steep median price declines, while the North Florida market witnessed weaker y/y sales comps and very moderate price declines. Interestingly, we are beginning to see these patterns reverse as the growth in North Florida sales (+20% y/y) meaningfully outpaced South Florida sales (+5% y/y). For the most part, median prices are still down on a y/y basis in North Florida; however, median prices are now up y/y in several South Florida markets (e.g., Naples, Fort Lauderdale, and Fort Myers). We caution, however, that uncertainty surrounding the oil spill has sidelined many buyers in Northwest Florida and along the Gulf coast. Notably, June pending sales across parts of the Panhandle are down ~40% y/y, while pending sales in Miami-Dade and Orlando are up 30-35% y/y.
Median price decreased 3% y/y in June, deteriorating relative to May (-2% y/y) and April (+1% y/y). While we have seen several signs of home price stabilization across Florida’s major markets, we remain concerned that Florida’s large backlog of foreclosures and high unemployment rate (11.4%) could result in additional pricing pressure, especially if the pace of real estate owned (REO) liquidation begins to accelerate.
Florida has the highest mortgage "non-current" rate in the country, with 25.3% of all mortgages statewide in some form of delinquency or foreclosure as of March 31, according to the Mortgage Bankers Association. Furthermore, roughly 2.2 million Florida mortgages were "underwater" as of March 31 (48% of all Florida mortgages), according to First American Core Logic. Unfortunately, we believe these troubling conditions are likely to remain an obstacle, hampering meaningful home price appreciation for the foreseeable future.
Florida condominium sales rose 33% y/y to 6,916 units in June, decelerating relative to May’s 40% y/y increase.Among the major condo markets, sales in West Palm Beach increased 42%, Tampa sales increased 36%, and Fort Lauderdale sales rose 8% y/y. Miami sales, which have been volatile, increased 33% y/y. Statewide median condo prices declined 16% y/y in June (compared to down 13% y/y in May) to $95,000. Among core condo markets, prices in Ft. Lauderdale fell 6% y/y, Miami prices declined 9% y/y, West Palm Beach prices declined 19% y/y, and Tampa prices slid 13% y/y.
Listings are still falling, according to the most recent MLS inventory data available from key Florida markets. We believe two factors are at work here: 1) the pervasive negative equity situation and weak labor market are discouraging many traditional listings and 2) the decline, at least temporarily, of listed REO inventory as lenders seem to be delaying thousands of foreclosure liquidations that continue to build in the distressed inventory pipeline. Notably, though, the non-seasonally adjusted month’s supply in Tampa (6.5) and Orlando (5.8) are below the national average (7.1).
MLS listings are not capturing the level of "shadow supply" overhanging the market, in our view, particularly in Florida.Even assuming a 50% workout rate on Florida’s active foreclosures and seriously delinquent loans (825,000 mortgages altogether, based on 1Q data from the Mortgage Bankers Association), implicitly, we estimate there is a 17-month backlog of distressed inventory statewide, before factoring in current bank-owned inventory.
Raymond James & Associates
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