To withstand record breaking inflation, the Federal Reserve is increasing interest rates for the second time this year. Which is henceforth directly impacting the housing market and local residents, particularly in the South Florida region.
South Florida’s property values skyrocketed to new extremes – 10% in comparison to the previous year – and rent soared as the area underwent an inventory shortfall. Although increasing interest rates and concerns of a potential recession, South Florida’s real estate market is beginning to cause an impact on buyer demand.
According to a report by the Miami Association of Realtors, the amount of single family homes and condominium sales depleted as a whole, versus last month, but prices increased by at least 1.7% for all property types across the Miami-Dade, Palm Beach and Broward counties. The sole difference was in Palm Beach County, where the amount of single family homes sales grew alongside the median price.
Regardless of the moderate increase between June and May, these costs are far beyond what they were less than a year ago. In comparison to 2021, the median prices for both condos as well as single-family homes across the three main counties within the South Florida region rose by an average of 15% for houses in Miami-Dade, which hit $575,000 in May 2022, to as much as 29.5% in Palm Beach.
Mortgage rates are at 5.4%, having increased over the past eight months. Rates struck their lowest during the pandemic ranging as low as 2.75%, which assisted in sustaining the real estate market as buyers hurried to seize such an opportunity. However, the present uptick in rates has caused the ability to purchase homes an unaffordable task for most individuals.
“This is a big deal on what they can afford price wise,” Jason Rodrigez, a realtor with Coldwell Banker Real Estate, said. “It’s taking the buyers out of play who were also a big portion of those individuals who were involved in bidding wars across the housing market.”
In Palm Beach County, the median sale price rose 29% in comparison to last year to $601,000. Broward County struck a 20% rise to $560,000, while in Miami-Dade County the median sale price increased to $565,000, an average 10% growth versus the previous year.
However, portion of sales have declined. Rodriguez proposed that there could be a possible transformation entering the market. Closed sales, or the amount of closed transactions, decreased 25% in Palm Beach County versus last year, 15% in Broward County and 21% in Miami-Dade County.
“It’s due to both less inventory and homes having gotten too expensive for buyers,” Andres Garcia, a realtor with RE/MAX, said. “There is a limit to how high this market is going to go.”
“It’s still a seller’s market, but I see it evening itself out,” Garcia added. “I see it becoming more balanced but still favoring sellers.”
With reports spiraling about the Federal Reserve increasing interest rates by more than a half percentage point in attempts to decelerate inflation, the mortgage rates trailed in suit. Currently, there are countless potential buyers who are altering their budgets since the cost to acquire funds is on the rise. It’s up over five percent for the first time in over a decade.
Over the past two years during the wave of the pandemic, buyers from across the U.S. who migrated to the south have ignited South Florida’s market. All in all, the trends – as of late – haven’t let up. That’s despite inflation soaring, breaking a four-decade record, the Federal Reserve increasing interest rates and the stock market taking new hits, all in the course of these past two months.
“The shift that we’re seeing in our market is happening,” Rodriguez said. “How extreme it’s going to be this time around remains to be seen, but locally in our market, because so many people are relocating here, that supply and demand is still going to be out of balance.”
Since the start of the pandemic, as quick as properties would be listed on the market, offers would come piling in. Spiking interest rates, inflation and housing prices have become impossible to ignore when trying to make ends meet.
This has been an ongoing issue and will continue to be one in the near future, which only heightens the concerns of many local residents in South Florida who fear the possibility of purchasing their own home is too far out of reach.