Housing Market in Transition

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National Association of Realtors chief economist David Lereah came to South Florida on Tuesday to discuss the future of housing in the region. BY MATTHEW HAGGMAN mhaggman@miamiherald.com The housing standoff between buyers and sellers in South Florida will continue for another six months, and then prices in some areas will fall, a real estate trade group economist predicted Tuesday. In some cases prices may fall by 10 percent to 15 percent, said David Lereah, the National Association of Realtors' chief economist, who spoke Tuesday in Coral Gables. But in many areas prices will still rise modestly this year, by 4 percent to 5 percent, he said. And when sellers finally bring asking prices down, pent-up demand will likely result in hordes of new buyers in South Florida. The long-expected shakeout of the real estate market now underway is healthy for a region both overbuilt with new condominiums and overrun by speculators, Lereah said. Unlike in previous real estate downturns, the economic and demographic fundamentals underpinning South Florida real estate remain strong, he added. So strong, in fact, that the Washington, D.C.-based economist is looking to buy some investment properties here himself. ''We are not in a crisis but a transition,'' said Lereah, speaking Tuesday at the International Real Estate Congress and Expo. ``I am very bullish in the long term for real estate in Florida.'' Lereah pegged the end of the housing boom to August 2005. That's when mortgage rates crept up and speculators fled. Now, he said, home sales are declining. And the inventory of homes for sale has ballooned because stubborn sellers refuse to lower prices and buyers are ever willing to wait it out. Ultimately, he said, sellers will relent. ''When a transitioning market cools, it's the sales that drop first, and then prices,'' Lereah said. Prices are likely to drop more for condos than for single-family homes, he said. But in the long term, he is optimistic. Baby boomers continue to move here, international demand remains strong, unemployment in South Florida is low, and mortgage rates -- despite inching higher in recent months -- are still at historically low levels. Just as important, Lereah said, the speculators are fleeing the market. He contends that speculators are most to blame for huge price hikes. ''Florida will be better for it with them gone,'' he said. Lereah cited the increased threat of hurricanes and the availability of property insurance as South Florida's two biggest worries. Such worries, he said, are prompting some baby boomer and retirees to look away from Florida. He noted a trend of baby boomers moving to places such as the Smoky Mountains in Tennessee and North Carolina. But not Lereah. ''I was at another conference down here recently,'' he said. ``I drove around looking at property myself.'' So where is the chief economist for the national Realtor association buying? ''I am not telling,'' he said.