The home building industry is rebounding! Or so was the consensus claim by economists, builders and product manufacturers last week at the International Builders' Show in Las Vegas. Nationwide, housing starts are up, the surplus inventory of homes is being absorbed and the pressure from distressed properties is subsiding. And, while lending remains tight, low interest rates, new household formations and positive job growth have bolstered consumer confidence. For the first time since the bubble burst, the construction industry is showing signs of life and perhaps even playing a part in lifting the economy.
Yet, while much of the industry is rejoicing, a cautioning voice came in the New York Times from Robert Shiller, of Yale University and the S&P/Case-Shiller Index. Shiller believes that while we are seeing positive growth, it is too soon to say that the recovery can sustain.
The bottom line for potential home buyers or sellers is probably this: Don't do anything dramatic or difficult. There is too much uncertainty to justify any aggressive speculative moves right now. If you have personal reasons for getting into or out of the housing market, go ahead. Otherwise, don't stay up worrying about home prices any more than you do about stock prices.
What does this mean for Miami and South Florida?
Miami is lucky. Although we were hit hard by the housing bust, foreign cash buyers have buoyed us through the last few years and will continue to do so. In a recent housing market snapshot prepared by Jonathan Smoke, chief economist for Hanley Wood MetroStudy, Smoke credits the developing arts hub in the downtown and midtown areas, a strong multi-family sector and international buyers as the three, highlighted market strengths in Miami.
Although Miami has many positives, the MetroStudy snapshop also points out that a slow judicial foreclosure process and shortage of developable land are factors that will hamper a strong recovery moving forward. MetroStudy believes that the bottom has passed, but even with housing starts up, we still have a ways to go before the housing market can be considered fully healthy again.
Here is a look at how some of these market factors may impact your decisions on where you live and whether it is best for you to rent or own:
Shortage of Land -- Consider Your Commute
A shortage of prime land pushes newer development deeper into exurbs, forcing long commutes on already congested roads. This will make newer developments less desirable. Even if home prices are more affordable, make sure that you consider the cost of living. This includes gas and life experience of commuting long distances.
Low Interest Rates -- Plan Ahead
If you are planning on purchasing while interest rates remain low, make sure to plan for the future. MetroStudy points out if interest rates go up in the next few years, any move you make will cause your monthly payments to jump dramatically. You would have to by a house of lesser value just to break even. The message here is simple: plan ahead. Look for a home that will meet your needs now and in the future. The longer you are in a home, the better value it will be, even when interest rates do go up.
Multi-Family Boom -- Rental Prices
The current rental market in Miami is almost at capacity, which is forcing rental prices up in the short term. The good news for renters is that as many as 3,000 additional rental units are projected be added in Miami-Dade County through 2015. This coupled with a strengthening single-family market will provide some relief in the coming years for your monthly rent.