By Cheri F Rosen
It’s easy for non-real-estate people to listen to nightly news stories and think, “Oh no! The market’s crashing!” But, as I have been writing in each of my end-of-the-month articles for this column, it’s just slowing during a market correction and is still quite solid.
As we all know, 2021 was a record year for real estate in South Florida; the last five months of 2022 have been about the market slowing. Questions and concerns abound as to how bad the decline in the market is and whether it’s headed for a crash.
There’s little doubt that the market has slowed over the past four to six months; pending contracts and sales are down as buyers grapple with rising interest rates. It’s taking longer to sell a home, and bidding wars are rare, if any still occur at all.
That doesn’t mean that the South Florida market is crashing.
The market simply corrected itself because it needed to. Comparing 2022 to the pre-pandemic 2019 housing market provides additional context and can help one view the market more realistically since 2021 was so exceptional.
To gauge where the housing market in South Florida is, the South Florida Sun Sentinel looked at data from 2019, the most recent “non-pandemic” housing market, and compared it to 2022. They considered trends in median prices, inventory levels, price growth, and how long it takes to sell a home.
As of November, the most recent numbers from the Broward, Palm Beach, and Miami-Dade counties show that while the median sale prices of single-family homes in the tri-county area are still showing double digit year-over-year increases, on a month-to-month basis, the prices have either started to decline or moderate.
It’s not indicative of a housing crash or a decline. Rather, the data simply signifies that the median sale prices of single-family homes in South Florida are on their way to possibly stabilizing.
People need to understand that even with a slight rise in inventory, on a month-to-month basis, home prices in South Florida currently look like they are in the beginning stages of returning to where they should have been in a normal progression from 2019. For example, in Palm Beach County, the median sale price of a home in July was $600,000, before decreasing to $570,000 in October.
By contrast, prices in Palm Beach County were relatively unchanged on a month-to-month basis in 2019. In July, August, and September, the median sale price of a single-family home was about $355,000. It increased to about $359,000 in October of 2019.
And prices now, while seemingly unstable, are substantially higher than they were in 2019.
In Broward County, the median sale price of a home is 49% higher than it was three years ago. In Palm Beach County, it’s about is 58% higher, and in Miami-Dade County it’s about 57% higher.
While it takes longer to sell a home, it’s still faster than three years ago. A large marker of the 2021 housing frenzy was how quickly homes flew off the market as buyers rushed to put offers on what little inventory appeared, scared to miss out on lower mortgage rates, and, of course, eager to get away from the Northeast and Northwest. Now, buyers have grown more hesitant, in part because they have more to choose from as inventory levels rise. Additionally, higher mortgage rates have pulled some buyers to the sidelines, easing the insanity of the fall of 2021 through the spring of 2022.
As a result, it is taking slightly longer to get a home under contract, but an average of 30 days on market is still way faster than three years ago. In 2019, it took about 50 days to get a home under contract in Miami-Dade County, 46 days in Broward County, and 54 days in Palm Beach County. Four weeks rather than four days is heralding a return to normalcy; it’s certainly not a harbinger of impending doom.
While the jump in inventory has been significant (from less than a month to two to three months) it’s still well below the supply of homes on the market in 2019. Buyers have more options now than they did a year ago, but it’s still nowhere near a balanced market, which experts say is about six months of supply on the market. And the increase of supply isn’t enough to cause the market to crash.
In general, the experts agree that despite the rebalancing, the housing market in South Florida is still strong and extremely unlikely to crash.
As stated, the current housing market has been driven in large part by low inventory levels due to years of underbuilding, intense demand from families looking to relocate, and, until recently, record low mortgage rates. The market crash a decade ago was caused by risky lending practices and too much supply on the market.
Crashes occur when there is extreme imbalance between supply and demand. Currently, we have the opposite, and unless there is a total reversal, no crash appears to be on the horizon.
According to Florida Realtors’ Chief Economist Dr. Brad O’Connor, “The fact that monthly sales still remain in the neighborhood of pre-pandemic levels despite today’s significantly higher home prices and mortgage rates only illustrates that despite these headwinds, housing demand in Florida continues to receive support from its recent surge in post-pandemic in-migration, vacation home purchases, and the ever-increasing number of millennials looking to find a home for their growing families.”
So, it seems clear: if you were considering making a move to Florida, now is as good a time to buy as any. Sellers are becoming more pragmatic with their expectations, leading to more realistic pricing. Also, the mortgage rates appear to have stabilized for now. The next Fed rate hike scheduled for December 14 is expected to have little or no effect on mortgage rates since inflation looks to have slowed down. Also, just days ago, FHFA announced new conforming loan limits for 2023, and most buyers can borrow up to $726.2K without a jumbo loan—and it’s over $1M in some areas.
But what about sellers? With home prices’ peaks likely in the rear-view mirror, should sellers waiting to maximize profit jump in before it’s totally too late or wait and hope for another market reversal? Now, with more homes coming to the market and higher interest rates, buyers have started to reclaim more of the power, throwing sellers into unfamiliar territory.
For potential sellers looking to list now, there is some anxiety. They must now question whether their house will be worth more in six months or a year than it is today, while examining the current economy and interest rates.
Generally, it is believed that if they are moving out of town, or if it’s a vacation or investment home that they want to pull money out of in the next five years, they should really sell now, unless they are OK with waiting possibly another five or ten years because there are no guarantees.
While things have cooled off in South Florida, keep in mind that interest rates and inventory levels have been a significant part of the driving force of the housing market. Presently, inventory levels, while they have gone up compared to last year, are still low enough to keep prices high, a plus for sellers. Should more homes become available on the market, sellers would face more competition in selling their homes. So, for sellers, the path forward seems a bit less clear. The crucial factors are why they are selling and where they are going. Obviously, if they are living close to a house of worship that offers them no benefit, while that location is not only advantageous but vital to certain buyers . . . Sell, sell, sell! n
Cheri F Rosen, of Lang Realty, has been a realtor in South Florida since moving to Boca Raton over a decade ago. You can learn more about real estate in South Florida by calling Cheri at 561-221-2233 or visiting Cheri’s website: southfloridacondosandhouses.com or just Google the words Orthodox Boca. Cheri’s website is the top search result. Submit your personal questions and concerns to Cheri, and they will be answered personally or anonymously in future columns.