Realtor Hazel Goldman of RE/MAX Pinecrest had the busiest December in her career. Goldman accumulated $5 million worth of pending transactions that are set to close in the 2014 first quarter – and the transactions aren’t five $1 million properties. Three lingering contract offers could add to her early 2014 activity, too. Goldman anticipates a strong year ahead, especially considering she already doubled her closings from last year’s first quarter. Beyond personal success, Goldman – along with other industry professionals – believe the real estate market is poised for a positive 2014.

New single-family home sales are projected to experience only a 9 percent year-over-year increase in the first quarter of 2014, according to a U.S. Economic Outlook report compiled by the National Association of Realtors (NAR). However, NAR predicts the third and fourth quarter will experience year-over-year increases of 54 percent and 33 percent, respectively. The report forecasts gradual year-over-year increases in new home prices, peaking at a 7 percent increase in the 2014 fourth quarter.

High Demand, Low Supply

Such statistics are encouraging, but they’re not to say the year doesn’t present any question marks. Goldman concedes that the state of interest rates going forward is uncertain, though rates are still historically low. Goldman says there are plenty of active buyers. That fact, however, could be troublesome. Buyer demand is necessary for a healthy market, but does Miami have an appropriate stock of inventory so that prices don’t skyrocket? Goldman says the amount of inventory depends on price range.

“Inventory’s our problem,” she says. “Inventory at certain price points is very hard to come by.”

Inventory is bountiful in the $2 million and above market, Goldman says, but available properties are scarce in the $500,000 – $1.3 million range, which attracts the most buyers.

Goldman says the combination of strong demand and little supply created tension around an essential component of negotiations: price.

“Right now, every deal that we have, every issue is price,” Goldman says. “The seller wants more and the buyer wants to pay less.”

New Construction Still Flourishing

Likewise, Realtor Chris Zoller of EWM says inventory is at about 2.5 months for properties under $1 million. However, he expects to see a slight increase in inventory across the board, which will help meet demand and will prevent sellers from overpricing their properties. But where will Miami get this relief-supply of inventory? Zoller says it’s new construction.

A recent report by the World Property Channel estimates the Miami area has 46 proposed condo towers totaling 13,600 units, a number included in the approximately 25,000 units planned, under construction or recently completed.

In the Brickell neighborhood, 4,300 units became available throughout the last two years, and 60 percent of them have sold, according to data provided by International Sales Group (ISG World), an organization that specializes in the sales and marketing of real estate. ISG represents Echo Brickell, a high-rise condominium under contract in Brickell with 180 units, 126 of which are sold. Le Parc, a luxury residence under reservation located at 1600 SW. First Ave. sold more than 80 of its 129 units by press time. Another Brickell building under contract – Centro – sold 245 of its 350 units by press time.

The surge in new construction is an encouraging sign of the market’s resiliency, Zoller said. Furthermore, he believes the method of financing such properties presents developers and banks with little risk, by giving buyer’s a large share of financial responsibility early in the process.

“The cranes have returned to the city and to Miami beach,” Zoller says. “There’s new construction booming, and there’s a lot of people excited about that. We had more than 70,000 condos on the market at one time, and people said it was going to take us five years to sell; instead it took us only 15 months to sell them all. The resilience and the demand for Miami is our best strength.”

Zoller says new construction is gaining steam in every price range. People from all over the world, including other regions in the U.S., are moving to Miami. The city must keep up with the demand, because Zoller says he doesn’t see it slowing down any time soon. Even high real estate property taxes aren’t deterring eager newcomers (though Zoller says this acceptance comes usually after explaining that there is no state income tax in Florida).

Federal Decisions Could Prove Damaging

There’s plenty evidence that Miami’s real estate market is recovering nicely. Demand is healthy, and supply – due to new construction – might reach stable levels in 2014. If any hindrances to buyer confidence do appear, they will likely be a result of matters that are out of Miami’s control.

The actions of the federal government in 2014 might affect many prospective buyers and sellers across the country. Yes, the Mortgage Forgiveness Debt Relief Act expired at the start of the year, meaning homeowner debt that is alleviated through short sales is considered taxable income. But in Miami, another issue looms larger.

“Flood insurance. That’s our No. 1 Realtor concern – I think nationwide – but definitely here in Florida,” Zoller says.

The U.S. Senate is scheduled to vote in upcoming days on a bill that would delay large increases in flood insurance rates offered through the National Flood Insurance Program. The program is making changes to combat its growing debt. Proponents of the bill want to delay the increases until the Federal Emergency Management Agency completes an affordability study.

Zoller says some rates could increase 10-fold, and could prevent a buyer from purchasing a home. Liza Mendez, the Miami Association of Realtor’s (MAR) 2014 chairwoman, has similar concerns about flood insurance.

One pair of homeowners recently told Mendez their flood insurance bill would leap from a couple hundred dollars to $3,000.

“For someone in an affordable price point – $100,000 – $200,000 – that [rate] is a number,” Mendez says. “Add on another $3,000 – $5,000 in property taxes, [and] that’s going to impact their affordability.”

An increase in flood insurance rates could affect people in the higher price ranges, as well. Mendez says she’s heard rates could reach up to $20,000 per year.

“A Great Time to Buy”

However, despite the uncertainties entangled in flood insurance and interest rates, Mendez says now is a great time to buy and sell, adding that there is “demand pretty much across the board.”

The fact that Miami is making positive gains as a whole – not just with its real estate – is an especially good sign for 2014, Mendez says.

“What’s very exciting is a lot of new businesses are coming on board,” she says. “There’s some technology things coming in, we’ve got great stuff happening with the ports, [and] more business brings more jobs. One area feeds off the other, and that makes such a vibrant community.”