What a difference just a few months makes in the housing market! It was only several months ago when spring home buyers were bidding up homes with hopes of winning the home ownership sweepstakes of paying well above listing prices. Fast forward a few months with record inflation and thus rapidly increasing mortgage rates and it is if as though the housing market switch was turned off. Did people all of sudden lose interest in moving to South Florida? Well, this is hardly the case. In fact, South Florida continues to lead the country as the most desirable destination for relocating Americans. Unfortunately, the “1-2 punch” to the housing market right now are the high prices combined with the rapidly increasing mortgage rates. Add in out-of-control inflation and now a recession and you can see the headwinds facing American consumers. These factors have essentially priced out a large segment of the home buyer market.
How much have sales decreased?
Throughout the South Florida market, closed sales have dropped significantly. In fact, looking at data through the month of June shows the following reductions in the number of home sales:
- Palm Beach County: sales have dropped over 30%
- Broward County: sales have dropped by 20%
- Dade County: sales have dropped by 26.1%
Not surprisingly, this decrease in the number of closed sales is resulting in more properties staying on the market longer. In addition, even if a few new listings hit the market, this results in home inventories to edge slightly higher. As a result, we have seen the number of active listings for sale rise as follows:
- Palm Beach County: up 50%
- Broward County: up 22.5%
- Dade County: up 19%
The impacts of less buyers
High home prices, rapidly rising mortgage interest rates, 40-year high inflation, and now a recession have finally forced many would-be home buyers to sit on the sidelines. This has caused a domino effect in the housing market as follows:
- More price reductions: With the days of buyer frenzies leading to bidding wars for homes essentially over, we are seeing a significantly higher percentage of homes reducing their prices. In cities such as West Palm Beach, Fort Lauderdale, & Miami we have seen the number of prices reductions increase by 20%, 15%, & 13.7%, respectively.
- The demand for rentals has risen: As expected, a byproduct of this reduced buyer demand has resulted in even more competition for rental housing throughout South Florida. It should be noted that the rental market was already competitive before this shift, due to the number of Americans relocating to The Sunshine State.
- Rental prices are skyrocketing: Increased demand + decreased supply = skyrocketing prices. In addition to more would-be home buyers reentering the rental market, we have seen the virtual workspace result in many more Americans relocating to South Florida. It is expected that as more companies permanently adopt the virtual workspace, South Florida will continue to see more working-aged Americans moving here.
Whether you are a first-time home buyer or a seasoned investor looking to add more properties to your investment portfolio, it is important to remember that there are opportunities in any market. As a home buyer, this may be a great opportunity to take advantage of less buyer competition for homes and some likely price reductions. Of course, the higher mortgage rates will mean that you will likely want to have a larger amount of money saved for a deposit on a home purchase (to finance a lower amount). As for seasoned investors, this is also an opportunity to take advantage of the decreased buyer competition. If you are looking to add more rental units to your portfolio, this is a great time to take advantage of the increased demand for rental housing resulting in higher rental prices.