South Florida Home Prices Continue To Rise
The average South Florida home is overpriced by 13 percent more than the market average, according to researchers from Florida Atlantic University.
Although this is nowhere near the record highs achieved during the market crash of 2007, the speed at which prices are rising has become a cause for concern among experts. Economists agree that real estate companies will have to find a way to finance and supply their businesses fast. Otherwise, we may be in for a rough decade of imbalanced property cycles.
FAU Economy Professor Concerned About Price Acceleration
The acceleration of home prices, as FAU professor Ken H. Johnson puts it, is worrisome. It is certainly beneficial in service of the ongoing housing boom, but for now, local housing markets are bearing the costs of that benefit.
According to Johnson, almost 250,000 people moved to Florida in 2020, particularly to South Florida where home prices and cost of living were ideal. But this influx has made the pendulum swing in the opposite direction, driving prices up, possibly higher than can be sustained.
An Unbalanced Real Estate Cycle Could Lead To Dire Consequences
FIU professor Dr. Eli Beracha added that overly fast growth bodes ill for the market at large. According to Beracha, if the real estate cycle is overextended due to demand not being met, it could destabilize future cycles for years to come.
With experts such as Forbes contributor Joshua Pollard saying that the current housing boom could last for 10 years, Beracha’s warning becomes even more concerning. For now, those looking to buy a home in Florida are best advised to seek financing options, such as a jumbo home mortgage lender.
Seeing as mortgage rates are at an all-time low in Florida, this could be a great opportunity to get in at the ground floor of this price hike. Every person who buys up property now is one less prospective homeowner on the fence about buying given the increasing prices. This keeps the market from stagnating and puts pressure on real estate companies to find a way to increase supply.
Why Rising Sales Figures Point To A Potential Problem
Since the spike in people moving to Florida, condo and townhouse sales rose by 24.6 percent, while single-family home sales rose by 18 percent. In addition, more Florida homeowners are holding on to their properties rather than selling. This is either due to the lack of other housing options or because they are waiting for selling prices to go up even higher.
Demand is far outstripping supply and the number of people on the waitlist for a property they can afford is becoming insurmountable. So, buyers will have to wait until the next cycle for supply to recover. The next cycle will have to find a way to satisfy this extra demand. But if the real estate market cannot produce a windfall of adequate supply, it is highly likely that it will take multiple cycles to fully clear up this imbalance.
Real estate companies are going to be hard-pressed to find inventory to alleviate the housing demand that continues to compound. While they are doing that, the best that the average buyer can do is to either purchase a home as soon as possible or to give up searching for an ideal property altogether.
Time will tell whether the current demand could be satisfied. But waiting around and adding to that demand could make the situation even more difficult and less likely to be resolved quickly.
Source: South Florida Reporter
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