In Miami we have had an incredible year of growth with an ever shrinking supply of condos and homes and continued demand from international and domestic buyers. Throughout last year the mortgage rates were at record lows and buyer incentives were high. In Miami, investors and home buyers found themselves in bidding wars over properties and this mad scramble reduced the inventory significantly. Home prices in both the condominium and single family home markets are up in the double digit percentage points and builder confidence is so high that we have over 60 new developments under construction in South Florida. Some believe that we are looking at another housing bubble, however most economists consider this to be a bonified recovery. Here are some factors to consider.

Inventory. Across the nation there is a considerable shortage of inventory, no more acutely felt than in the Miami single family home market. The condominium market will have a price adjustment due to increase of inventory with new developments, which will have an effect on the prices of single family homes, which will be one factor to watch.

Affordability. Homes values have increased with the reduction of inventory and the reduction of distressed homes on the market. As the inventory shrinks, home prices can be inflated with lack of comparable properties, making some homes too expensive and over valued, which will slow the selling pace. It will be important to watch the affordability and buyer actions resulting from price increases, to judge the demand accurately.

Investors and Individual Buyers. Investor Behavior is integral in the recovery. As prices increase, investors will slow their buying. This will leave homebuyers purchasing with financing. The way this process unfolds is important to watch since it will give some indication on how reliable the recovery is.