Florida home sales are showing strong monthly and yearly increases, but a recent analysis warns that prices are so high that first-time buyers may want to stay on the sidelines for the time being.
An analysis of 25 years of Zillow data by the Florida Atlantic University College of Business found that homes across the Sunshine State were selling at 19.24 percent above their long-term price trend as of May 31 – an increase of 17, 17 percent at the end of April.
"The acceleration of price growth in all of these markets is particularly worrying," said real estate economist and assistant dean of FAU's College of Business, Ken Johnson, who co-authored the report. "Although I don't think a devastating property crash is imminent, the higher the premium, the more worried I will be about future price instability."
Tampa Bay was at its greatest extreme, with homes selling at a premium of 28.53% in May, up from 26.14% in April. Miami homes were selling 14.88% above long-term trends, up from 13.18% the previous month, and Orlando homes were selling 19.79% versus 18.45%.
"Given the current pricing situation in Florida, the best way to try to avoid greater exposure to future price instability is to have more potential buyers seriously consider renting and reinvesting at this point," the report co-author wrote , Eli Beracha, Ph. D., of the FIU's Hollo School of Real Estate. "This will dampen property demand and slow down pricing and help stabilize the state's housing markets."
According to the Florida Association of Realtors' May report, the average sales price rose 27.7% annually to $ 344,900 nationwide. A year ago it was $ 270,000. The average sales price was up 2.5% from April when that value was $ 336,525.
Home demand remains strong due to low supply and low interest rates. According to Freddie Mac, the 30-year fixed-rate mortgage averaged 2.96% in May 2021, down from 3.23% in the same month last year.
“I had a property in Coral Gables that I listed on a Tuesday morning. By the afternoon I had five offers, ”said Lourdes Alatriste, Executive Director of Luxury Sales at Douglas Elliman in Miami.
While interest in homebuyers remains high, Alatriste has seen a slight decline in the past month or two, in part attributing to families moving from the northeast and having problems with private school occupancy. Combined with the fact that many schools there have reopened for personal tuition, many northern families have chosen to stay there, she said.
In May, the single-family home inventory rose for the first time since March 2020, from 31,618 in April to 32,021 by the end of May, according to the Florida Realtors report.
"Of course, we're still down 58.2% year over year, so we're still a long way from thinking outside the box when it comes to housing," said Brad O'Connor, chief economist at Florida Realtors, in a press release. "But we can at least take this flattening of the inventory curve as a sign that we are finally at the beginning of a long march back towards a balanced market."
Single-family home sales rose 57.9% in May from the same month in 2020, just as the state began lifting certain restrictions related to the pandemic. A total of 30,985 apartments were sold last month, compared to 19,622 in May.
The number of existing homes available for sale over the past three months has generally been in line with recent pre-pandemic historical norms, which has helped prevent the stock from falling further, O’Connor said.
"While the [stock] has been falling very steadily from month to month since the beginning of the pandemic, the last three months have been very stable for single-family homes," he said. “So not better, but not worse. So that's a good thing. "