This is a question on many peoples’s minds for a while now. Tight inventory, low mortgage rates, and more buyers entering the market in search of more space has created quite a frenzy in the past 14 months. As we all know, the real estate market is cyclical, however most economists are predicting a strong market well into 2022 or even 2023.
The National Association of Realtors® believes that home prices will rise by about 9% through 2021, but at a slightly slower pace heading into 2022. At that point, the expected growth will be by 3% due to more houses heading onto the market, according to Nadia Evangelou, senior economist and director of forecasting at the association.
When will the South Florida market cool off?
A stable inventory of homes for sale is typically around 5.5 – 6 months. As of April 2021, South Florida had 1.4 months of supply. Add to this the increased demand from Americans moving to The Sunshine State and you have a recipe for a strong seller’s market for the foreseeable future. As we have written about many times on this blog, the spike in remote working capabilities for the American workforce has significantly contributed to the increased migration to Florida. Whereas historically South Florida saw mostly retirees moving to the area, now we are seeing more working-aged professionals relocating here.
The expectation by most economists is that we will see a rise in the 30-year mortgage rate in six to 12 months, at which time we should see housing prices begin to moderate. Whether this will result in slower appreciation, price stabilization, or slight decreases is yet to be determined. In South Florida specifically, the continued migration into the state should keep the demand strong and therefore mitigate any significant price decreases.
In South Florida, affordability in addition to inventory constraints, continues to be a major concern. Increased demand combined with inflationary pressures are also critical factors in the market currently. An increase in new home construction will help ease the inventory challenges, however supply-chain challenges and shortages of building materials are making it difficult.
Another important factor for the future of the South Florida real estate market will be whether companies continue to look to relocate to The Sunshine State. In particular, several companies in the financial services industry have been relocating to South Florida. As a result, we would expect the luxury real estate market to continue in a bull market.
Are you thinking about buying or selling a home in South Florida? We can help. Contact Live South Florida Realty, Inc. today!