Why are homes so expensive in South Florida?

If you are trying to purchase a home anywhere in South Florida (Palm Beach, Broward or Miami-Dade counties), we are sure that you are finding it extraordinarily difficult.  Asking prices have reach stratospheric levels and new listings are receiving multiple offers in the first few days.

We are constantly being asked, why is this the case?  

Simply put, it comes down to supply and demand.  During the pandemic a larger than usual number of out-of-state buyers became interested in purchasing homes within South Florida, thereby inflating the demand level.  More significantly, the amount of inventory declined as home sellers removed their properties from the marketplace.  

South Florida Commercial Office Market (Third Quarter 2020)

COVID-19 continues to weigh on the commercial real estate market in South Florida.  While there are some positive signs in specific markets and sectors, overall the market has been adversely impacted by the pandemic. 

Following are the latest statistics for the commercial office market in South Florida (Palm Beach, Broward and Miami-Dade counties).

Click here to see more third quarter 2020 stats for all sectors of the commercial real estate market in South Florida.

Housing: How High Will It Go?

With dozens of headlines in major news sources explaining how the housing market is setting new records every month, what more can be said?  In over 25 years of working in this industry, we have never experienced this level of volatility.  Just a few months ago, single-family home sales in the state of Florida were down more than 20% (year-over-year).  This past month the number of sale transactions were up by 22% and the overall dollar volume increased by 50% (year-over-year); a staggering change from earlier in the year.

Nationwide, sale transactions rose by more than 20% (year-over-year) and home prices across most markets and most price points are also up considerably, marking 103 straight months of year-over-year price gains.

We are constantly being asked, “How high will it go?”.  That’s a tough question to answer but at the current pace of sales, there is less than a three-months supply of homes on the market for sale, so unless we see additional inventory, 2021 could get even more volatile with respect to supply / demand equilibrium.

If you have clients, colleagues or friends considering selling, now may just be the perfect time to do so.

Frenchman's Reserve Aerial

The Red Hot Housing Market

Existing home sales NATIONWIDE (which include single-family homes, townhomes, condominiums and co-ops) rose 10.5% year-over-year during the month of August.  Median existing-home prices across all housing types increased by 11.4% to $310,600, marking 102 straight months of year-over-year gains.

According to Lawrence Yun who is the chief economist for the National Association of Realtors, “Home sales continue to amaze, and there are plenty of buyers in the pipeline ready to enter the market”.  He continues “Further gains in sales are likely for the remainder of the year, with mortgage rates hovering around 3% and with continued job recovery.”

National Association of Realtors – 2020 Weekly Housing Market Monitor

September 14th to September 17th

The National Association of Realtors just published the Weekly Housing Market Monitor for September 14th to September 17th.  The highly detailed report provides updated data on the housing market, mortgage forbearance programs and general economic conditions. 

According to this report, “The housing market continues to recover strongly, fueled by low mortgage rates. Contract signings during the past four weeks ended September 13 were up 23% from one year ago, a strong pace despite the slight decline from last week’s pace (26%) as we enter the Fall season.”

Real Estate – Where is it Heading?

The COVID-19 pandemic has led to significant changes in the real estate market, both for the good and for the bad.  Over the past few months we have witnessed strong demand in certain sectors like luxury residential homes (outside of dense urban cities) as well as significant weakness in the retail and hospitality sectors. 

Where things progress from here is challenging to forecast due to uncertainties with the economy and the political climate as well as the impact from the pandemic.  However, certain markets (South Florida being one of them) are starting to see signs of a recovery in most sectors.

Is the Real Estate Market Recovering?

Since the onset of the COVID-19 pandemic the commercial and residential real estate markets in Miami-Dade, Broward and Palm Beach counties have experienced significant volatility.  In the past 30 to 60 days as businesses reopened and residents went back to work, the number of real estate transactions experienced considerable improvement from their recent lows in April and May but still are far behind prior year levels. 

With the resurgence in the number of positive cases which is causing a delay in reopening, not only the real estate market but also the economy is on unstable footing.

South Florida Property Owners Should Be Prepared to Pay More in Taxes (2020)

Despite the COVID-19 pandemic, taxable property values have risen across Palm Beach, Broward and Miami-Dade counties.  As a result it is anticipated that individual property taxes will increase unless the government officials reduce the millage rates.

According to Florida law, property appraisals are conducted in January which reflected the state of the real estate market pre-coronavirus. If the valuation occurred today, most residential property values would remain consistent but commercial properties like hotels, office buildings, retail shopping centers and free-standing restaurants would likely see a decline in their valuations due to lost revenue and tenant closures. 

2020 Countywide taxable property values based on preliminary estimates are as follows:

  • Palm Beach County: Increased 5.5% to $209.5 billion
  • Broward County: Increased 6.14% to $211.264 billion
  • Miami-Dade County: Increased 4.6% to $322.783 billion

Pending Home Sales See Record Decline in April ’20

According to the National Association of Realtors (NAR) nationwide pending home sales took a large drop in April 2020, down by 21.8% as compared to March and more than 33% year-over-year. This marks the single largest decline since NAR began tracking contract-signing activity in 2001.

Single family home pending inventory levels in Florida were even steeper with a decline of 35.1% as compared to April 2019.

Real Estate Transactions Plunge in April Due to COVID-19

Real estate transactions of all types plunged during the month of April 2020.  On a national level existing home sales were off by 17.8% while commercial real estate transactions dropped to their lowest levels since 2010 with a decline of more than 70%. 

 

Highlights are as follows:

  • Existing single family home sales under $100,000 and over $1 million were down by more than 30%.
  • Single family residential inventory levels have declined by approximately 20% as home sellers removed properties from the market.
  • Median home prices across all housing types rose by 7.4% with gains shown in every region (98 straight months of year-over-year gains).
  • Office and industrial transactions were off by 60% (year-over-year).
  • Hotel sale transactions were virtually non-existent during April, down by 98%.
  • Commercial property prices have risen by 6.5% year-over-year.

Read more >