Severe Winter Weather Causes Pending Condo Sales to Drop

Dees Stribling, Contributing Editor

Washington, D.C.–Pending home sales, including both single-family and condo properties, showed an unexpected decline in January, according to the National Association of Realtors (the organization doesn’t separate the kinds of residential property in this case), partly due to bad weather across the Northeast. The organization’s Pending Home Sales Index (PHSI) is a forward indicator based on contracts signed but not closed in January 2010, dropped 7.6 percent to 90.4 from 97.8 in December 2009.

Lawrence Yun, NAR chief economist, suggested that the weather affected sales. “The abnormally severe and prolonged winter weather, which affected large regions of the U.S., hampered shopping activity.” January pending sales, though still higher than one year ago, remain much lower than expected given that a large number of potential buyers are eligible for the expanded home buyer tax credit,” he noted in a statement.
There was considerable regional variation in the index, but in all parts of the country the index is this January than in January 2009. The PHSI in the Northeast fell 8.7 percent to 71.3 in January, but is nevertheless 20.5 percent higher than January 2009. In the Midwest the index dropped 8.9 percent to 81.2 but is 11.8 percent above a year ago. Pending home sales in the South slipped 2.1 percent to 98.1, but the index is 18 percent higher than January 2009. In the West the index dropped 13.2 percent to 102.9, but is 1.4 percent above a year ago.

The index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales. An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined by NAR, as well as the first of five consecutive record years for existing-home sales.

Even regional estimates of pending home sales mask some local activity, however. For example, in the badly hit south Florida residential market, there were about 9,100 single-family properties and 11,100 condo units under contract in Miami-Dade, Broward and Palm Beach counties toward the end of February, according to the Florida Association of Realtors. It’s the first time in 15 months that pending sales have reached that level.

“Buyers are stepping up their purchases of resale product in South Florida,” says Peter Zalewski, a principal with the Bal Harbour, Fla.-based real estate consultancy Condo Vultures LLC. “Many of these buyers are purchasing all-cash as financing is still challenging.”

Post-bubble prices seem to be inspiring sales in places like southern Florida. In fact, according to Condo Vultures, more than two-thirds of the 41,000 condos currently listed in south Florida are asking below $250,000, far more than as recently as three or four years ago.

Even properties such as Trump Towers in Miami are dropping prices. Condos in the project sold for between $600 and $700 per square foot, once upon a time; now, according to the Miami Herald, the new owners, Dezer Properties, are asking between $300 and $600 per square foot.