This summer, the average value of housing in South Florida started to lower. This trend became another sign of the local market’s recovering the balance after an unprecedented growth.
Although the real estate market will remain strong and favoring sellers, it is still continuously changing. Buyers are seeing more options, as the supply grew by over 20%, but their capability to afford housing reduced due to growing interest rates. This led to a 20% reduction in sales.
Bonnie Heatzig, Executive Director of Luxury Sales at Douglas Elliman, calls the last year’s situation “crazy”, as the supply hit a record low and the market accordingly collapsed under its own weight.
There are currently several factors driving a reduction of South Florida housing prices: the supply is growing, the interest rates are increasing, and the buying capacity is diminishing. As a result of these trends, sellers are beginning to take less attractive offers compared to those they used to receive at the peak.
Whitney Dutton from Dutton Group in Fort Lauderdale says we are witnessing a reduction of prices, as sellers are adjusting the value of their properties and agreeing to negotiate.
Although the market is somewhat liberalizing, house prices are still higher than a year ago. In Palm Beach County, they rose by 17% year-on-year, and in Broward and Miami Dade Counties, by 13% and 10% respectively.
Heatzig thinks it’s hard to predict what is going to happen in the future in terms of value growth. Everything will depend on the inventory level in the market.
The supply is growing, so buyers have far more choice now. And when they have a greater choice, they are slower to make offers, so houses stay in the market a little bit longer, according to Patty Da Silva, a broker at Green Realty Properties in Cooper City. As a result, closed sales in Palm Beach County dropped by 20.4%. They also plummeted by 26.0% in Broward County and by 21.2% in Miami Dade County.
This does not mean that buyers have left the market, but the growing interest rates affect what they can afford. Each percentage point of increased mortgage rates reduces the purchasing power by 9 – 11%.