South Florida's Housing Market Defies Conventional Wisdom as Prices Soar Amidst Sales Decline

South Florida's real estate market has been making headlines as home prices continue to rise despite a dip in sales. The Miami Association of Realtors recently released a home sales report comparing October 2023 to the same period in 2022. Surprisingly, while existing home sales were down, new contracts and listings saw an upward trend. This paradoxical situation prompts a closer examination of the factors contributing to this unique scenario.

Sales and Contracts: In October, existing home sales in Florida experienced a year-over-year decrease, according to Florida Realtors. However, new contracts and listings were on the rise. The housing market seems to be in a holding pattern, with experts suggesting that a true shift will depend on a substantial downward move in interest rates. The contradiction is evident in the 8.4% increase in new pending sales of single-family homes, even as the typical 30-year fixed mortgage rate climbed to about 8%.

Townhouses and Condos: While closed sales for townhouses and condos fell by approximately 3% year over year, new contracts increased by a more modest 1.4%. Coastal areas witnessed a notable weakness in new contract growth, potentially influenced by the surge in multifamily unit constructions. Cash sales constituted nearly 54% of closed sales in this category in October, reflecting a response to the 8% interest rates.

New Listings and Inventory: New listings of existing single-family homes showed a substantial increase of 14.5% year over year, with a notable uptick on a month-over-month basis. This surge was more pronounced in Southwest Florida, where the aftermath of Hurricane Ian suppressed listings in the previous year. Statewide inventory of single-family homes increased by 8.6%, indicating a potential shift in the market.

The townhouse and condo category experienced an even more significant increase in new listings, rising by nearly 30% year over year. Despite these increments, both single-family homes and townhouses/condos inventories remained below pre-pandemic levels, contributing to a continued scarcity of supply and maintaining stable prices.

Factors Driving the Market: Florida has become the top destination for professionals aged 25 to 36 earning at least $200,000, according to a report by SmartAsset. The influx of high-earning individuals, coupled with a three-to-one ratio of newcomers to departures, has contributed to the state's robust housing market. Florida has seen a surge in wealth in-migration during the pandemic, outpacing other states in increasing taxable income.

New York residents have become a significant driver of this trend, with nearly 130,000 individuals relocating to Florida in 2021 and 2022. The appeal of Florida, including tax benefits, remote work opportunities, and a lifestyle change, has led to a construction boomlet in Miami condos designed for part-time residents.

South Florida's housing market continues to defy conventional expectations, with rising prices amid a drop in sales. The influx of high-earning individuals, particularly from New York, tax benefits, and lifestyle changes, has fueled a construction boom and sustained demand. As the market navigates through uncertainties related to interest rates and economic indicators, the unique dynamics of the South Florida real estate landscape showcase its resilience and attractiveness to a new wave of homebuyers.

Miami Real Estate sales by Brosda and Bentley Realtors (305) 788-9393.