During the first fiscal quarter of 2006, existing home sales in Broward County, Florida, dropped by 31 percent over last year. While that clearly reflects a lack of demand for properties (which you’d think would mean a falling in home values as well), the median home price in the county actually jumped 14 percent to $366,600.
Broward isn’t unique, either. In nearby Palm Beach County, sales dropped 32 percent in the first quarter, compared to the same period in 2005. Median home prices still climbed to $392,900, up 8 percent. In Miami-Dade County, sales dropping by nine percent were not enough to slow the runaway median price train, as prices ballooned by 21 percent to $376,900.
Why does this happen? For one thing, familiarity breeds contempt. In the South Florida housing market, and other sizzling real estate havens in the U.S., insane price run-ups have gotten almost customary. Even now that the demand is finally dropping out of the market, sellers refuse to see the light. They have a price in mind and initially will not budge.
In a sense, it’s easy to understand the stubbornness.
Historically low rates on Florida home loans have made real estate a can’t-miss investment over the past five years. Instead of seeming extraordinary, double-digit appreciation windfalls became another fact of life. So when the guy who bought the house next door netted a 25 percent profit last year after owning the place 18 months and doing minor renovations, people think they’re entitled to the same, even though market conditions don’t work like that. Thus, you have prices that don’t reflect demand.
That, or they are over-extended investors. People who know darn well what’s going on with the market, but who are hesitant to sell at a loss. Essentially, as hard as you try to make an offer on a house that’s fair, they are not looking to sell. Florida is not only a great place to live, it’s an investor’s paradise. In many cases, speculators secure properties with so little money down. With the cost of taxes, insurance, and upkeep, in addition to the home loan itself, investors need the market to bounce back in order to make a profit. So they ride it out.
If you’re a buyer waiting for prices to fall back to Earth, you might be waiting awhile. Moreover, the Florida home loan rates that helped fuel the real estate boom are now on the rise, increasing borrowing costs across the board. Now is as good time to enter the market as there will be, because there is some leeway. Prices remain high, but chances are good that you will find a seller who’s willing to deal. Search hard for what you want, and make an offer that’s fair. Don’t low-ball for the sake of it. In the end, you’ll get the concessions and the deal you need!