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Miami Real Estate Market:
Mid-Year Insight & Q3/4 Outlook

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Number of Homes For Sale vs. Sold vs. Pended vs. New Listing (May. 2021 - Jul. 2022)

Number of Homes For Sale vs. Sold vs. Pended vs. New Listing (May. 2021 – Jul. 2022)

As we take a mid-year look at the Miami real estate market and the overall South Florida residential real estate market, we see that the story of what will happen for the remainder of 2022 really began a few months ago, as we entered the second quarter.

Seemingly overnight, we went from discussing plummeting inventories (something we’ve been doing since COVID ignited the residential real estate market in the summer of 2020), to dramatic increases in the number of properties for sale throughout Miami-Dade, Broward, and Palm Beach during the second quarter of 2022.

We’ve even seen increases reaching 60%+ across many of our South Florida single family home markets.

Q2 Year-Over-Year Comparison

It isn’t news to home Buyers or Sellers that the number of closed sales in South Florida for Q2 2022 were down — in the range of 20% to 30% across all markets — when compared to the same period in 2021. Of course, we also know that the inventories at the end of 2021 were at extreme lows, which dropped our months of supply under 3 months for most markets. This was a large factor in the decreased number of sales in Q2.

The strong measures recently taken by the Fed have stimulated a sharp increase in our inventories, which is already having a positive impact on the number of pending sales in July 2022, compared to the pending sales in June 2022.

Nonetheless, while months of supply have certainly increased compared to where they were, they are still very low relative to the healthy market range of 6 to 9 months.

Post Recession Market vs. Post Pandemic Market

In stark contrast to the last major upheaval in our real estate markets, we’re seeing nothing like the inventory glut experienced during the post-recessionary years, when the supply of homes and condos reached over 3 years.

After slumping to less than 3 months’ supply at the end of 2021, we have been inching our way back to a more optimum number of homes and condos for sale, as noted, a 6 to 9 months’ supply.

Yet, as we saw prices plummet and inventories grow during the recession years of 2007 and 2008, we’ve had the exact opposite market conditions since COVID, with home and condo inventories plummeting, while prices sky-rocketed.

Real estate pricing and inventory extremes over relatively short periods of time are not good for the overall market. Therefore, the economic measures currently being utilized by our Federal Reserve, while stressful for many, are vital. They have a proven record of serving to rebalance our overall home values, leading to a more stable housing market.

The Long Road from 2008 to Now

Having seen, heard, and read so much about the prolific recent price increases in the Miami real estate market and throughout South Florida, it’s interesting and useful to track how this situation has evolved since the 2008 recession.

  • The median price in Miami-Dade County for single family homes was $383,000 in March of 2007.
  • The recession drove that median price down to $153,000 by early 2011 – a 60% drop in value.
  • It did not reach $383,000 again until March of 2020, after a 4-year mind-numbing drop, followed by 9 years of steady month-by-month increases.
  • Demand sky-rocketed after COVID set off panic buying, which pushed prices higher and higher over, a 2½ year period, to a 54% increase in the median price of a Miami-Dade single-family home. This began in December 2019 at $380,000 and grew to $585,000 by June 2022.
  • Broward County has reflected the same patterns as Miami-Dade. The median price of a single family home grew by 59% between December 2019 and June 2022, from $380,000 to $605,000.
  • Palm Beach County was even more dramatic in the December 2019 to June 2022 period, where the median price of a single-family home increased from $375,000 to $675,000 – an increase of 80% — by far the largest in our region.

What to Watch

The impact of the increase in mortgage interest rates, coupled with the confluence of concerns surrounding 40-year-high inflation rates, stock market uncertainties, and geopolitical stressors will continue to be important metrics to monitor over the remainder of 2022 and into 2023. Following are the various key metrics/conditions we’ll be tracking:

  • Buying Power: With mortgage interest rates increasing from approximately 3.1% in January to almost 5.5% today, Buyers have seen their purchasing power drop by approximately 26%. For example, the monthly principal and interest payment for a 30-year fixed rate loan of $1,000,000 at 3.0% is approximately $4,200 to fully amortize the loan. If the borrower is qualified for a maximum loan payment of $4,200 per month, the maximum loan amount that can be borrowed at 5.5% is approximately $742,000 – approximately 26% less than what could have been borrowed at the end of 2021. These interest rate increases have obviously decreased the amount available to many Buyers over these past few months.
  • Increasing Inventory: Adding more single family home and condo inventory in each of our South Florida markets will continue to be a major focus. The goal is to grow inventory levels back to a base of 6 to 9 months across all markets priced for less than $1 million and 12 to 18 months for properties priced at more than $1 million.
  • Slowdown in Price Increases: Reaching the optimum level of months’ supply will slow the steep value increases we have experienced for the past 24 months across all housing sectors. Double-digit increases, year-after-year, in home and rental prices isn’t sustainable — or healthy — for our overall economy. Keeping a watchful eye on the Months of Supply metrics will be very important in gauging future sales, as well as future values. This metric is the #1 metric in our industry. Real estate is a business built on supply and demand, so closely watching the Months of Supply metric is critical to planning your future real estate moves.
  • Global Economic Data: Keeping a watch on national and international economic data is also important, since a high percentage of Buyers entering the South Florida real estate markets will continue to come from outside our region. The decisions made by these Buyers are often heavily influenced by conditions where they currently live. The proven robust, long-term appreciation of South Florida real estate values provides the confidence of a solid investment opportunity for all. For our domestic Buyers, Florida’s status as one of only 8 states with no state income tax has proven to be one of our greatest assets.
  • Epidemics & Pandemics: Having experienced the massive and unexpected impact of COVID on our real estate markets, it makes good sense going forward to remain mindful of health conditions throughout our region, nationally, and internationally.
  • Latin American Financial, Political & Lifestyle Conditions: South Florida has always benefited from our close ties to Latin America. These relationships should therefore continue to stay top-of-mind for all of us.

Bottom Line

For the past 2½ years, South Florida has been riding the hottest residential real estate market wave in history. The frantic pace of sales, abnormally steep decreases in inventories, and startling increases in values that defied the prediction of nearly everyone in our industry in early 2020, were not only unsustainable, but also unsettling to Buyers (and Sellers) in search of a more orderly strengthening of long-term property values.

As we move through the second half of 2022 and into 2023, we’re looking toward continued market stabilization in the form of increasing inventories across all price points, providing more options for Buyers, a subsequent increase in the number of properties being sold, and more controlled pricing.

South Florida has earned a prime position in the esteem of millions-upon-millions of worldwide watchers – a position that will enhance opportunities for generations to come, not only within the real estate market, but across all South Florida economic sectors.

If you have any questions about the Miami real estate market or your options for Buying and Selling, contact Monica any day of the week.