Figures released for US property prices in August point to another rise and bring the market close to its peak reached in July 2006. Prices went up across the board with some markets showing considerably higher increases, particularly in the case of property in Tampa and Miami. In Florida, analysts believe the property market is reaching ‘normality’.
One of the main indices for US property prices, Standard & Poor’s CoreLogic Case-Shiller released at the end of October its findings for August. In the 20 metropolitan statistical areas (MSA) covered by the Index, prices rose by 5.3 per cent in year to August. This monthly hike follows the rise of 5 per cent in July.
The latest price rises bring the national property index to just 0.1 per cent from its peak ten years ago. Some MSAs included in the Index has surpassed their peak while others continue to gain lost ground. These include the two Florida MSAs that feature in the Index – Miami and Tampa. In the 12 months to August, Tampa property prices went up by 7.6 per cent while those in Miami increased by 7.1 per cent.
Reasons for hike in US property prices
According to analysts, there are several factors pushing US property prices steadily upwards. These include the strong rate of job creation, particularly robust in some areas of Florida such as Tampa and Orlando.
Low mortgage rates are another incentive for buyers keen to make the most of some of the best US mortgage conditions for years. This combined with better employment prospects led to strong sales in both August and September. According to the National Association of Realtors (NAR), sales of property across the US went up by 3.2 per cent in the year to September.
Acute lack of supply
However, the US property market continues to suffer undersupply. NAR figures reveal that the number of homes on the market has dropped by almost 7 per cent since September last year bringing the total number of properties for sale in the US to just 2.04 million.
This combined with the low level of new construction leads analysts to predict “intense buyer frustration” in the US market. “The market can’t stay on this course forever and continued inventory shortages are leading to intense competition and escalating prices,” said Svenja Gudell, Chief Economist at Zillow. She reported that buyers are taking an average of over four months to find a property during 2016.
Another uptick in Florida house prices
Reflecting US property prices generally, those in Florida are also on a steady upward trend. The increase in September is, in fact, the 58th consecutive month in the trend. According to Florida Realtors, prices in Florida rose by 11.3 per cent for single family homes in the year to September and those for condo and townhouse properties went up by 6.7 per cent.
These latest increases bring the median price for a single family home in Florida to US$222,500 and to US$160,000 in the case of a condo-townhouse type property. Both these figures remain below the median for US property prices – US$242,000 in August according to NAR.
Still low inventory in Florida
Florida’s strong job creation and improvements in wages is pushing demand for homes throughout the state. However, like the rest of the US the state also suffers from very low inventory levels. According to the President of Florida Realtors, Matey Veissi, this shortage is particularly acute among the first-time buyer market.
“Latest data shows that a continued lack of inventory – especially in the mid-$200,000-and-under range – is affecting those potential homebuyers, leaving them with limited choices and higher prices as a result,” he said, commenting on the September figures for Florida property.
Return to normality
September’s property statistics also revealed two interesting trends in the Florida property market, both of which point to a return to a ‘normal’ market. Distressed sales represented just 10 per cent of sales of single family homes in Florida, down from the 19 per cent registered in September last year.
Cash-only sales – another sign of an abnormal property market – also fell. They accounted for 28 per cent of all sales, compared to 34 per cent last year. For Florida Realtors Chief Economist Brad O-Connor, these two trends are good news. “If our housing markets are going to return to some semblance of what many might term ‘normalcy,’ it’s vital that both of these trends continue,” he said.
“The latest figures for US property prices show a return to a stable market,” said Dies Poppeliers, Managing Director of BRIC Group. “Those for Florida are also encouraging, particularly from the point of view of the buy-to-let investor who directly caters for a market where buyers need to rent because there’s simply aren’t enough properties to buy.”
BRIC Group, an investment company specialising in global real estate opportunities, offers US real estate investments including turnkey properties in Florida and Houston, and land plots in Florida. BRIC Group is also developing The Coral resort, in Northeast Brazil, a luxury beachfront resort with land and villa investment opportunities. BRIC Group has been creating wealth for its clients since 1996 and has offices in Brazil, Dubai (consulting office), Hungary, Spain and the US.
(Sources: S&P CoreLogic Case-Shiller Index, Florida Realtors)