The South Florida real estate market is overvalued right now. But, what exactly are the factors that are contributing to higher prices for real estate?
The State of the South Florida Real Estate Market in 2022
South Florida is known for many things — its sandy beaches, tropical climate, diverse culture, and leisure scene are definitely something to boast about. But, in terms of real estate, this particular region in the Sunshine State is known for its expensive housing. In fact, this year, South Florida continues to face a housing affordability crisis, one that experts are calling the worst in decades.
So, how is the real estate market in South Florida? In a sentence, it is the most overpriced across the United States. And there are a few factors at play here.
The Effects of the COVID-19 Pandemic on Housing Supply
It is hard to discuss the recent housing boom without mentioning the effects of the coronavirus pandemic that started in 2020. The health crisis forced people to shut themselves indoors for months on end. As people spent more of their time inside the house, good quality homes became a priority.
Additionally, interest rates shot down during the COVID-19 pandemic. People took advantage of the low interest rates and bought houses even in the midst of a worldwide health crisis. Homeowners refinanced their mortgages. Now that people are benefiting from low mortgage payments, they don’t feel the need to sell or move.
As a result, South Florida is facing a shortage in housing supply. There just aren’t enough homes on the market right now.
A Higher Demand in South Florida
The demand for homes in South Florida has seen a rise in recent years, mainly due to the population influx. South Florida is welcoming more and more new residents, even more than usual. And while people have always gravitated toward the Sunshine State, some have attributed this population increase to Florida’s more relaxed restrictions.
But, Florida has always been a very attractive place to call home. On top of no personal income tax, South Florida offers gorgeous beaches and warm weather. The area is also overflowing with restaurants, bars, and retail stores — perfect for leisure and entertainment seekers. Culture vultures will also have a good time here, as the region boasts a diverse mix of people as well as a vibrant arts scene. For those who want to feel more connected to nature, South Florida is teeming with outdoor spaces, too.
Beyond that, South Florida is home to an abundance of attractions. These include the Naples Botanical Gardens, Pérez Art Museum Miami, the Naples Museum of Art, Calusa Nature Center and Planetarium, John Pennekamp Coral Reef State Park, Jungle Island, the MDC Museum of Art and Design, Miami Children’s Museum, Edison and Ford Winter Estates, Miami Seaquarium, Museum of Discovery and Science, Bill Baggs Cape Florida State Park, Naples Zoo, and Vizcaya Museum & Gardens.
The high demand for houses, though, is not solely because of new residents. Many locals are also looking for homes to purchase, and they have new people to compete with now.
The Resulting South Florida Real Estate Prices
It does not take a genius to understand the law of supply and demand. A low supply of houses coupled with a high demand for them has caused housing prices to spike. Sellers know they can fetch a higher price, even if they ask for more than what their homes are worth. And there are still people who are willing to pay. This has led to an overvalued South Florida real estate market.
Furthermore, several economic factors are also influencing the real estate market. With inflation, the price of virtually everything is going up — gas, food, labor, and materials. Because it costs more to make new units, they end up selling at higher prices, too.
How Is the South Florida Rental Market?
Homebuyers are not the only ones taking a hit due to the overvalued real estate market in South Florida. Renters are also finding it more difficult to look for affordable units to rent. The high demand for housing means that landlords can ask for a higher rent, too. And there is nothing stopping landlords from charging exorbitant rent prices.
While some municipalities in the state can temporarily implement rent control during a state of emergency, Florida itself does not have permanent rent control laws. In fact, state law even prohibits such measures at the local level. With no rent control, it is hard to regulate the rental prices of homes in South Florida.
The Only Solution Right Now
High demand and housing supply shortages have resulted in skyrocketing prices in the South Florida real estate market. Unaffordable housing has become a real problem in the area, though experts don’t see the end of the tunnel just yet. Whether it is to buy or rent, the real estate market in the South Florida region is predicted to remain expensive for a while. The only solution experts see right now is to speed up the construction of new housing units.
As South Florida embraces a wealth of new renters, property owners will need all the help they can get. Look for property management companies in your area today using Florida Property Management’s comprehensive online directory.