Should Investors Buy or Sell When It Comes to Florida Real Estate
The real estate market in Florida took an especially hard hit during the real estate market crash of recent years. Which begs the question: is Florida is a good buy for real estate investors today? With home prices continuing to inch up, some wonder if the recovery is going to continue or if this is just a short-term phase. In an effort to answer the question, supply demand, and affordability all need to be analyzed as they specifically relate to Florida.
First, supply - There has been a major decrease in the number of homes for sale in Florida in recent years. In fact, this past June saw a 31% decrease in the number of homes for sale in Florida versus the previous year. Currently, it would only take the market about 6 months to absorb the entire remaining inventory, which is down from 10 months one year ago. New listings just aren’t being added to the market like they used to, and what is for sale is being scooped up by eager buyers looking to enter the real estate market or to take advantage of shockingly low interest rates that some thought they would never see again.
Home builders have scaled back on bringing more homes to the market after the housing market crash that left them with standing inventory for months. When housing prices were at an all-time high, building permits spiked. However, when the market crashed and prices dropped dramatically, builders pulled back all the same. This is where we are today--in a situation where there are too few homes for sale given the amount of interested buyers. To be fair, there have been some building permits issued, but given the size of Florida; the number is very low in comparison.
Now demand, on the other hand, has been extremely high in recent months. In June, the average number of days a home was on the market was 60, a 23.1% decline over last year. Homes were also netting 91.5% of their asking price, up 3.2% from 2011. Pending home sales were up 31% and closed home sales increased 5.3% over last year.
Buyers have been shy in recent years because of the way the real estate market blew apart. There’s been nothing but negative news highlighting the willy-nilly lending practices of banks, and most people have believed that either banks had no money to lend or there was no way they would qualify anyway. Now, as news is emerging of historically-low interest rates and different programs aimed at helping the real estate market recover, many buyers are entering the real estate game. Demand is at an all-time high, especially in places like Southern Florida.
Affordability can help determine whether a real estate market can sustain price increases, or if it is due for a sell off. If home prices only cater to the financially elite, the market is not sustainable. This happened during the real estate boom and many people were priced out of the market.
In Florida, the housing affordability index currently is 168, and is a computation of the median home price, median family income and average mortgage interest rates in a given area. Florida’s score of 168 means that most families can afford homes.
The realtors and agents at Palm Beach Premier Real Estate have sold homes and condominiums in some of Palm Beach Florida’s most exclusive communities, and would love to help you find the home of your dreams. Please contact our team of local real estate experts to discuss your unique real estate objectives.
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