The number of bidding wars in the housing market have dropped for the first time in six months as an increasing number of buyers get priced out of the market, according to a new report. In addition, pending home sales nationwide are now down 8% year-over-year. Nonetheless, we are still seeing a number of hot housing markets throughout the country. Not surprisingly, the South Florida market would be included in this list of hot markets.
Could FOMO lead to irrational exuberance?
Known as “FOMO”, the fear of missing out may be playing a role in the current housing market. In markets where home prices continue to rise unchecked for a period of time, it is natural for many home buyers to fear that if they don’t become homeowners, they may be priced out for good. The danger with this phenomenon is that it can lead to irrational exuberance that causes the housing market to move away from basic market fundamentals like mortgage rates, inventory and income. The main concern from many economists is that this irrational exuberance has the potential to lead to a housing bubble. In fact, the last time the housing market saw such exuberance was before the crash of 2008.
The challenge for many potential home buyers that have been waiting to see if prices would decrease is that while they have been watching home prices soar, they have also seen their rent soaring as well. Needless to say, this has presented an additional challenge when it comes to saving for a home purchase. In fact, rents have risen an average of 30% since last year alone. Add in record-high inflation and you have a perfect storm of challenges for these would-be home buyers.
Many of you reading this article remember the housing collapse of 2008 quite well. During that period of time, no market throughout the country was spared and we saw home prices plummet. Fast forward to today and most economists agree that market forces are vastly different than during the housing collapse of 2008. If any price correction should take place in the current market, it is widely believed that it will not be to the magnitude of the 2008 crash. The main reason for this is because the forces behind today’s market include low inventory, rather than excessive borrowing.
When analyzing the South Florida market in particular, it is quite likely that prices have a greater chance of stabilizing as opposed to decreasing. The main reason for this is because we continue to see an extremely low inventory of homes for sale combined with a consistent population growth.
At Live South Florida Realty, Inc. we have assisted many clients with their real estate needs. Are you looking to buy or sell a 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. Live South Florida Realty, Inc., has 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!