Although recent index readings and reports proclaim that South Florida’s housing market is among the hottest in the nation, developers and investors might want to take a closer look at current inventory levels and comparisons to pre-recession prices before “betting-red” on South Florida housing.

The S&P/Case-Shiller Index revealed that home prices in the Metro Miami area (which includes Miami-Dade, Broward and Palm Beach Counties)jumped 10.3% in September from a year earlier despite a broad slowdown nationally. This increase is the largest annual gain of any of the metro markets tracked by the index. The report noted that, “the only region showing any sustained strength is the Southeast, led by Florida.”

Freddie Mac’s Multi-Indicator Market Index (MiMi), which measures home purchase applications, affordability, mortgage delinquencies and employment, reported that the Metro Miami area scored a 69.9 for September. This reading is up 10.95% from a year ago, with only Las Vegas (20.98%) and Chicago (13.81%) posting larger annual increases.

Len Kiefer, Freddie Mac’s deputy chief economist, noted that the Metro Miami area is being held back by the number of distressed homes working their way through the court system. He added, “unless the economy hits a real big rough patch—which we aren’t forecasting—I think South Florida will continue to improve.”

Despite bullish index readings and optimistic guidance from economists, it is important to compare today’s home prices to pre-recession prices, as opposed to just focusing on the haste with which property prices are rebounding. As Ken Johnson, a real estate economist at Florida Atlantic University, describes, “we just got down so far, so we will improve more rapidly than others. It’s like starting a new business, I can say I had a 100% increase in revenue, yeah, but I started with $1.00.”

Developers and investors should also carefully analyze inventory levels and current and imminent development. In Miami-Dade County, existing inventory is plentiful and sellers face rising competition as new construction raises supply. In October, 11,362 existing condo units were listed on the Multiple Listing Service (MLS)—the highest level since April 2011. This inventory represents 8.2 months of supply, or 8.2 times the number of condos sold in a month. Experts generally consider six months of supply to be a balanced market between buyers and sellers. This oversupply has caused homes to sit on the market for a longer period of time and has aided buyers in negotiating larger price-cuts. In Miami-Dade County, condos are selling at a median of 58 days—two weeks longer than in October 2013—and at 93.7% of their original list price compared to 97.6% in October 2013.

The inventory of Miami-Dade County single-family homes remains more balanced, with 6,439 units listed on the MLS in October, which represents 5.8 months of supply.

Although South Florida’s housing market will likely continue to improve, with housing supply rising and previously depressed recession prices augmenting percentage-price-increases, we would think that investors would want to perform a holistic analysis of South Florida’s housing market before making an investment.