Miami sales prices up 17.7 percent, but gains reflect a complex picture

The median sales price of Miami’s coastal residential properties rose 20.9 percent in the second quarter of 2012, compared to the same period in 2011, according to a report from Douglas Elliman Florida. Miami’s average sales price also jumped 17.7 percent in the same period.
But while Miami prices have been trending upwards for some time, these recent gains reflect a more complicated picture.
There were two major reasons for the price jump, according to Jonathan Miller, whose firm, Miller Samuel, prepared the report: reduced inventory and a decrease in distressed inventory coming to market.
“The sharp drop in inventory is one of the reasons why I would characterize the market as stable or better than stable,” said Jonathan Miller, whose firm, Miller Samuel, prepared the report.
Through the second quarter, distressed inventory represented around 40 percent of all sales — a significant turnaround from a year and a half ago, Miller said, when distressed inventory represented a market share of almost 60 percent.
And it was that shift that contributed in part to the price increase, said Douglas Elliman Florida CEO Vanessa Grout. “For now, it’s pushing pricing up — there is a direct correlation to that,” she told The Real Deal. “Because if you simply look at non-distressed market prices, prices are up modestly — so it is sort of an artificial gain.”
But part of that price jump was caused by the recent penthouse boom in South Beach, which led to a few mega-sales partially distorting the data.
“We’ve had some real anomalies, especially this year,” she said, pointing to the $25 million purchase of a Continuum condo in May. “There were some really crazy sales happening recently, and that’s going to skew the averages.”
There are some fundamentals supporting Miami’s gains, however.
“It’s relatively positive,” Grout said. “We have less inventory on the market, and the number of closed sales is up majorly.”
Miami’s residential inventory has fallen 28.2 percent in the last year, while closed sales have decreased, both signs of a tightening market, Miller said.
Miller and Grout warned that prices could take a hit as more distressed inventory comes onto market, particularly with lenders ramping up their foreclosure processing activity in recent months.
The robo-signing scandal of late 2010, which led to a large-scale freeze on foreclosure processing activity by lenders, may have contributed in part to the drastic shift in distressed market share, Miller said, inventory that still looms over Miami’s residential sector.
“The catch is that we may start to see more distressed inventory appear on the market in the next few months,” Grout said.