The elephant in the room

Interest rates are going up, and buyers are pushing back; what is happening to the real estate market?

These are variables worth factoring in across all US markets, but the Florida market is unlikely to feel such an impact. The demand is too high.?

Recent studies by universities find that future population growth in Florida will extend the housing “unaffordability for a prolonged period.” As mentioned in my previous articles, the demand is not diminishing; current inventory, including pre-construction, is not enough to curb the continuously increasing demand.?

Yes, we see a decrease in asking prices in the luxury market (above $5M), but that doesn't mean the prices are going down; it simply means they are not going up.

The housing study considered population growth numbers from some areas of South Florida to be anywhere from 12% to 17.5% over the next decade, an addition of about 200,000 people.

Contractedly, some country areas could see only a 0.8% population growth. With higher interest rates, that near-stagnant growth is something that could dramatically cool – if not topple – the housing market in some areas.

According to FAU real estate economist Ken H. Johnson, “there is a reckoning coming. Around the country, we will continue to be unaffordable for several years, or a region could see a crash.”

The average interest rate on a 30-year fixed mortgage was 5.48% Thursday, an increase of 7 basis points over the past week.

Still, most economists are not predicting the catastrophic housing crash of 2007-2009, when there was a surplus of homes nationwide and a market saturated with bad mortgages.

The study states that renters are up against the same spike in prices as homebuyers, with Florida having five of the nation’s top 25 most overvalued rental markets.

Palm Beach, Broward, and Miami-Dade counties came in first place for the most overvalued rents, with people paying nearly 22% more than historical pricing trends. Fort Myers was runner-up, with rents overvalued by 18%. Tampa was third at 17%, followed by Sarasota (16.9%) and Port St. Lucie (15.6%). The first market listed outside of Florida was Killeen, Texas. Also in the top 10 for most overvalued rents are Lakeland, Bakersfield, Calif., Phoenix, and Knoxville, Tenn.

In the midst of all this, visionary developers see the light and start to build. We don’t have time in our favor; these projects can’t be completed soon enough. Projects are being sold out months after being released. But then, who can blame them? Given our options, it’s hard to pass up the opportunity to pre-purchase a condo at a fraction of what the finished project will sell for. This math does not consider their deposit schedule, where they require less than 50% of the discounted price.

The message is clear: don’t pass the opportunity to lock your Florida condo at pre-construction prices. Message me for more information.