There were a couple diametrically opposite views on Florida real estate in the past couple of weeks. But first let’s look at the facts via data from the latest S&P Case-Schiller numbers on Miami real estate prices. The following graph, covering the period of February 1987 to March 2008, shows that prices have fallen 26% from the December 2006 peak and are now back to January 2005 levels. Those in turn are still almost 100% higher than prices prevailing in 2000. If you extend the 1987 to 2000 trend-line on the graph then the extrapolated price would require a further 25% drop from current levels, even assuming that prices won’t undershoot the trend-line. You can make your own prediction.

                                                          

Sun-Sentinel’s Paul Owers in “Analyst paints rosy picture for S. Florida real estate agents” quoted National Association of Realtors’ chief economist Lawrence Yun predicting that by 2013 S. Florida real estate “easily could be 20-30% higher”. (Mr. Yun has been predicting a turnaround for the last year and a half, and sooner or later he will be right.) . He also called “2008 a year of cleanup and the second half will be better because mortgage markets are improving”. The paper also quotes doubters however, who feel that Palm Beach and Broward county prices would have to fall another 35% to reach the “affordable levels of 2000 to 2003”.

In “The truth behind Florida’s housing numbers” Brett Arends of the WSJ, reports from personal experience on a recent Florida trip that it is impossible to figure out what the real estate “market” really is like, especially in the middle of a crash like now. Arends points out that many real estate agents have actually shown him many properties 50% below their 2005 prices. His experience confirms not just the large price variability in the current market, but also the ongoing lack of transparency in the real estate market. (The current crash would be an ideal time for regulatory/legislative bodies to step in to establish suitable public disclosure and free access to market data- past sale prices and volume, inventories, bid-and-ask prices, etc. While property is not a commodity due to the large variety of parameters, the current lack of timely and adequate disclosure and easy access to data prevents buyers and sellers from obtaining a fair priced transaction.) In a surprise conclusion, Arends thinks it’s a good time to buy. This is very strange conclusion, since in his prior week’s article on the subject he correctly demonstrated that price to own is still almost twice the price to rent in Florida. But who knows?