“The market has bottomed.”
“The market is starting to rebound.”
“The market is continuing its decline.”

We have all heard these conflicting comments lately on the real estate market. In fact, it’s something we’ve all heard before. Over the past 38 years there have been four cycles – each bottoming in ’74, ’82, ’92 and most recently in ’06.

The good news is that a positive increase in unit sales and prices follows.  Each downturn in the past 30 years has had its unique issues – interest rates, oil prices, demographics and the overall economy. One thing was constant: All of the South Florida real estate downturns have been due to overbuilding.

For 81 years, Keyes has successfully navigated through the South Florida real estate waters and knows that the downturns are temporary.  The cycles begin with a strong rental market as buyers are on the sideline and concerned with the slower market. Then, the renters begin to move into first time buyers as they see prices stabilizing. The first time buyers move to second homes and the market over 3 – 10 years cycles up, until there is a feeding frenzy on the high end.

Historically, from the 60’s to the early 2000’s, South Florida real estate prices increased 5%, doubling every 15 years. From 2002 – 2006 we saw 20% per year increases, which raised the 45 year average of appreciation to 7%. We must remember that these increases are on the total value of the property with usually less than 20% cash down. So in effect, a 5% price appreciation on a 20% cash down payment is a 25% return on the money invested (carry, costs, fees should also be considered).

In an upward cycle – inventory drops. In a downward cycle - inventory rises. We have seen inventory triple in the past two years, however in the fourth quarter of ’06 we started to see a stabilization of inventory and even some declines in certain markets.

In our next issue, I will provide specific tips for you on how to succeed in this current cycle. In the mean time, if you are considering a change or just interested in exploring options, I would welcome an opportunity to meet or talk with you.  Wishing you continued Success!

About Steve Reibel