Housing demand to weaken?

Did you know? The national median home price is approaching $350,000, which is almost double what it was a decade ago. Although this is fantastic news for homeowners, it has certainly presented challenges for first-time home buyers. With this said, this article is not about the current market being a housing bubble. In fact, a housing bubble occurs when there is speculation and buyers purchase properties for the sole purpose of selling it quickly for a profit. This strategy is also known as “house flipping” and it is not occurring anywhere near where it was during the last housing collapse.

Indicators of future demand weakening

For starters, some economists believe that home prices are overvalued nationwide by about 10% to 15% when comparing price-to-income or price-to-rent ratios with their long-run historical averages. In regions such as the South and the West, some believe that prices are overvalued by even 20%. In addition, The Federal Reserve seems to think that the economy will soon return to full health and is signaling that it will soon begin to normalize interest rates. Needless to say, this alone will significantly impact buyer demand as the level of home affordability will certainly decrease as well.

Lastly, the “work from home” phenomenon will likely have lasting effects. However, it is likely to partially unwind as some companies require employees to come back into the office. Although we may be witnessing permanent changes for many companies that have adopted a virtual environment, it is largely believed that many will still go back to their traditional office model. This could certainly impact some of the hottest real estate markets that have benefited from an influx of Americans working remotely and moving into the area.


A cooling off of the housing market is inevitable. After all, prices can not simply continue to rise forever while incomes do not keep pace. However, it is important to note that it is largely believed that we are not in a housing bubble. In order for broad-based housing price declines to occur, there would need to be a significant increase in mortgage defaults and distressed sales, which is unlikely given the improving job market and generally tight mortgage underwriting standards since the financial crisis. Some modest price declines may possibly occur in select high-end markets, second- and vacation-home locations, and in smaller and midsize cities that have seen the biggest influx of work-from-anywhere households. 

Are you looking to buy or sell property in South Florida? Now more than ever, it is critical to have a qualified real estate team and the proper search tools behind you. At Live South Florida Realty, Inc., we have been a leader in the South Florida market for many years. Let our team of professionals assist you with buying or selling your piece of paradise today! In addition, our recently launched “Florida Home Search” app is now available on the Apple App Store and Google Play Store. With real-time MLS feeds, this app lets you set your own alerts to notify you as soon as a property meeting your needs hits the market. Furthermore, it will also let you know of recent closed sales in your area so that you may be even more educated on the market. Be sure to download this app for your smartphone or tablet today!

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By natasha@livesouthfl.com

REALTOR® with Live South Florida Realty, Inc.