You’ve heard of Florida Man, but it might not live up to the Florida bubble. Consider a new study Since Florida Atlantic University And Florida International University researchers in South Florida. They found that the average home in the area is overvalued by nearly 35% compared to its long-term pricing costs, and they are sounding the alarm.
“This trend concerns me because prices continue to rise in the Miami metropolitan area, but not in the rest of the measured areas in Florida,” said Ken H. Johnson, a real estate economist in FAU’s College of Business, in a communicated. .
The combination of rising property premiums and mortgage rates is “a potentially worrying sign for the housing market”, the researchers said. March data from Top 100 US real estate marketswhich FAU tracks on a monthly basis, shows South Florida housing prices increased 15 basis points, or 0.15 percent, compared to February.
But what’s more worrying is that rising housing prices in South Florida could be a sign of a real estate bubble. This happens when housing prices are rising at a rapid rate, demand is increasing, and inventory is low. All of these are evident in today’s South Florida real estate market.
“South Florida may be on the verge of a housing bubble” Alyssa Soto Brodyreal estate broker and co-founder of the real estate sales and marketing brokerage development marketing team based in Miami and New York, tells Fortune. High mortgage rates and inflation have affected real estate markets across the United States, including South Florida, driving up prices, she adds. However, some new housing development projects are moving forward to address the low housing supply, and rents in Miami have declined slightly.
“Combined, these factors can alleviate the challenges created by interest rates and inflation, and can help steer this market away from a housing crash,” says Brody.
Why South Florida Home Prices Are Rising
What researchers and other housing experts agree is that South Florida’s extremely overvalued market is due to extremely low housing inventory, which drives up prices. FAU’s Top 100 U.S. Housing Markets dashboard calculates how overvalued or undervalued a typical home is in the nation’s most populous cities. Johnson and Eli Beracha, director of FIU’s Hollo School of Real Estate, study the difference between a city’s actual average housing prices and compare it to long-term price trends. They use Zillow data for their research.
House prices in a given area should “closely track” long-term trends in house prices in the region, Johnson said in a statement, but that is not the case in South Texas. Florida. This allows “purchases today to be worth more soon without worrying about house prices swinging violently above and below trend.”
“This is a key factor in securing the American dream of homeownership,” Johnson said in a statement. “Unfortunately, that has not happened in the last two cycles in South Florida.”
While South Florida real estate prices are trending upward — and are vastly overvalued — other real estate markets in the state are showing slower price growth. For example, Cape Coral saw a 0.63% decline in housing premiums; North Port showed a decrease of 0.48%; Deltona showed a decrease of 0.32%; Lakeland fell 0.07%; and prices in Tampa showed a decrease of 0.04 percent, according to the FAU and FIU study.
“Price growth is expected to be tepid given slowing rents and rising interest rates, but South Florida prices continue to rise despite these market forces,” Johnson said.
South Florida’s real estate market could collapse
To be sure, other South Florida real estate experts view the sharp rise in home prices as a correction because cities like Miami have “long been undervalued,” said Nancy Batchelor, vice president of brokerage real estate. Compasstell Fortune. This is especially true as Miami and other South Florida cities have grown in popularity in recent years, particularly among the ultra-wealthy, like Jeff Bezos, who bought several homes there.
“Rising house prices are just a way for the city to catch up to its true value,” says Batchelor. “I think it’s just a correction for a city that was undervalued. The market has changed and we will not experience the large price increases that we have experienced in recent years. Rather, it will be a gradual stabilization.
While Johnson doesn’t expect a “major crash” for South Florida’s housing market, it “bothers” him that home prices continue to rise despite rising mortgage rates, he said. -he declared in a press release.
“The region could experience a prolonged period of stagnant real estate prices, making rental and reinvestment slightly preferable at this point,” Johnson said.
This article was updated on May 2 to clarify a post-publication request.
