The number of homes sold last month decreased for the first time in a year, while prices remained stable. Closings in Palm Beach were down 10.0%, Broward 2.8%, and 3.5% in August as compared with last year, with the median sales price in Palm Beach being $480,000.00 (up 20% from last year); $495,000.00 in Broward (up 19%), and $500,500.00 in Miami-Dade (up 20%). While there may be other reasons for the decrease in sales such as back to school and purchasers simply waiting for the spring to look, a shortage of affordable homes may also be the main reason for the decline.
Interest Rates Decline and Appreciation Rises
Low interest rates may also pose an issue for purchasers trying to find a home as more purchasers, who take advantage of the lower interest rates, making offers on fewer homes. As a result, a smaller number of homes for sale leads to fewer closed sales.
Home appreciation continues to rise in South Florida with home values increasing 2.1% from July to August. According to Zillow, the local housing market may not slow down for a bit, and since the real estate market remains strong here, it is likely that home appreciation will peak later than the national market.
Enter the Luxury Condo Market
While there is demand for affordable housing, at the same time, there is demand for new luxury condos. The major difference is that the luxury condos are being offered at prices beyond what many middle to upper income groups can afford. From Fort Lauderdale to Delray Beach, there are several ocean condos that are 95% presold with prices starting from $900,000 to over $10 million, depending upon the project. Developers are focusing on the high-end luxury market as it has larger profit potential, especially since they incur high prices for materials, labor, and land. In addition, there is a significant number of upper income people relocating from other parts of the country as the Florida weather, tax rates and pro-business environment are benefits they seek.
While residential developers are seeking land, developers of luxury condos are also taking over older buildings, demolishing them, and then building new units. As a result, there may be more high rise communities attracting the luxury market within the foreseeable future in South Florida.
What does all this mean?
The pandemic has brought challenges in the housing market, which, in turn, has affected the supply of housing. While this issue still remains, there is a very distinct divide between affordable housing and the luxury market. Until such time as the economy becomes stable, the housing market will remain somewhat dysfunctional.
Most experts believe as interest rates start rising and the moratoriums on evictions and foreclosures come to an end there will be new distressed housing brought on the market, especially at the affordable level, thus allowing the market to regain its equilibrium.
Should you have a question about a potential real estate purchase or sale or another legal matter, our team at Oppenheim Law may be reached at 954-384-6114. Should you need assistance with a real estate purchase or sale, our title company, Weston Title & Escrow, Inc. can be reached at 954-384-6168.
Roy Oppenheim
From The Trenches
originally posted at: The Divide: Affordable Home Sales and the Luxury Condo Market - South Florida Law Blog
