Home sales in Florida are showing strong monthly and annual gains, but a recent analysis warns that prices are so high that first time buyers may want to stay on the sidelines for now.
An analysis of 25 years of Zillow data by Florida Atlantic University College of Business found that by May 31, homes across the Sunshine State were selling for a 19.24 percent premium above their long-term pricing trend — an increase from 17.17 percent at the end of April.
“Accelerating price growth in all these markets is particularly disturbing,” said real estate economist and associate dean in FAU’s College of Business, Ken Johnson, who co-authored the report. “While I don’t believe a devastating housing crash is imminent, the greater the premium becomes, the more I get worried about price instability going forward.”
Tampa Bay had the greatest extreme, with homes selling at a 28.53% premium in May, up from 26.14% in April. Miami homes were selling at 14.88% above long term trends, up from 13.18% the month before and Orlando homes sold at a 19.79% premium, up from 18.45%.
“Given where Florida prices are now, the best way to try and avoid greater exposure to future price instability is for more potential buyers to seriously consider renting and reinvesting at this point,” wrote co-author of the report, Eli Beracha, Ph.D., of FIU’s Hollo School of Real Estate. “This will curb the demand for ownership and slow down pricing, helping to stabilize the state’s housing markets.”
The median sales price statewide grew 27.7% annually to $344,900 according to the Florida Association of Realtors’ May report. A year ago, that figure was $270,000. The median sales price grew 2.5% from April when that figure was $336,525.
Demand for homes remains strong due to low supply and low interest rates. The 30-year fixed-rate mortgage averaged 2.96% in May 2021, down from the 3.23% average during the same month a year earlier, according to Freddie Mac.
“I had a property in Coral Gables which I listed on a Tuesday morning. I had five offers by the afternoon,” noted Lourdes Alatriste, executive director of luxury sales at Douglas Elliman in Miami.
While home buyer interest remains strong, Alatriste noted a slight decline in the last one to two months, which she partially credited to families who were seeking to relocate from the Northeast running into problems with private schools being at capacity. Combined with the fact that many schools there have started to reopen for in-person classes, many Northern families have decided to stay put, she said.
In May, inventory for single-family homes increased for the first time since March 2020, rising to 32,021 by the end of May from 31,618 in April, according to the Florida Realtors report.
“Of course, we are still down 58.2% compared to a year ago, so we are by no means out of the woods in terms of the housing shortage,” Brad O’Connor, Florida Realtors Chief Economist, said in a press release. “But we can at least take this flattening inventory curve as a sign that we might finally be at the start of a long march back toward a balanced market.”
Sales in May for single-family homes rose 57.9% from the same month in 2020, just as the state began lifting certain restrictions related to the pandemic. A total of 30,985 homes were sold last month compared with 19,622 the previous May.
The number of existing homes being listed for sale over each of the last three months has generally been in line with recent historical norms prior to the pandemic, which has helped to prevent a further decline in inventory, O’Connor said.
“While [inventory] has been falling on a very consistent basis since the beginning of the pandemic, from month to month, the last three months have been very stable for single-family homes,'' he said. “So not getting better, but not getting worse. So that's a good thing.”
