6 leading real estate economists and pros on what to expect from the housing market this winter

6 leading real estate economists and pros on what to expect from the housing market this winter

by Real Estate News

Getty Photos

Some aspiring homebuyers are in for some substantially-essential reduction. “Right now may well appear additional desirable to some prospective buyers mainly because, not too long ago, the housing market place has been cooling. Charges are dropping in a lot of locations, housing offer is increasing, sellers are featuring more concessions and property finance loan charges are falling,” suggests Jacob Channel, senior economist at LendingTree. (See the greatest property finance loan charges you may perhaps get now listed here.)

But no doubt, following swift escalations in household price ranges and mortgage loan fees in the past couple yrs (though both of those have eased just lately), numerous purchasers are cautious of what is to appear. So we questioned economists and true estate execs for their housing marketplace predictions this winter. 

Prediction 1: Property finance loan costs will “continue their downward trek”

“With the Fed switching to a smaller sized charge hike in February, house loan prices will go on their downward trek and a decrease home finance loan rate enhances affordability, bringing far more prospective buyers back to the sector,” suggests Nadia Evangelou, senior economist and director of real estate exploration at the Nationwide Affiliation of Realtors (NAR).

For his section, Channel also says decrease fees also may provide at least some consumers again. “There may possibly be additional purchaser demand from customers assuming prices go on to fall, or at the really the very least really do not get started climbing once again, but it does not seem like there’s a high chance that demand will dramatically rise back again to wherever it was at the begin of final 12 months. All in all, February’s housing sector will probable remain far more pleasant to purchasers than it was just a handful of months in the past,” suggests Channel.

Kate Wooden, household qualified at NerdWallet, gives a comparable sentiment: “Buyers might be additional determined if fees show up to stabilize and people who ended up priced out when premiums rapidly elevated final fall might be keen to give dwelling acquiring an additional shot.”

Prediction 2: Household value gains will sluggish even further more

Realtor.com facts reveals that the expansion of median inquiring selling prices for residences nationwide eased again into solitary-digits in December for the to start with time in 12 months and just about held that speed shifting into January.

“The milestone of single-digit rate development is genuinely a continuation of the moderation that began in the summer season when rates had been increasing at a rate of 18{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9} 12 months more than yr,” suggests Danielle Hale, chief economist at Realtor.com. The report reveals that the median rate of homes for sale has increased by 8.1{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9} each year in January, which is somewhat fewer than December’s expansion rate with the national median record value remaining stable at $400,000 in January, down from a history high of $449,000 in June.

Hope even slower progress this month, suggests Evangelou. “Home cost gains will slow even more in February. Home loan prices are last but not least relocating down, easing affordability, but several purchasers continue on to be priced out of the current market, particularly initially time potential buyers,” says Evangelou.

That mentioned, rate alterations will change involving markets. “Markets with the greatest imbalance amongst supply and desire will see increased softness in prices, even though for the majority of other folks it is far more a leveling out in price ranges,” states Greg McBride, chief financial analyst at Bankrate. 

Prediction 3: Buyers have a lot more place to negotiate

Hale suggests: “It will not be all annoyance for purchasers. A surging selection of houses for sale might not signify falling  household costs, but it is enabling potential buyers to acquire back a evaluate of negotiating ability and together with a extended time on market place compared to a year ago, prospective buyers are additional likely to see homes with a record price tag that has been decreased down below original inquiring value,” says Hale.

Prediction 4: The market place is on a sluggish route to normalcy

“The housing sector is continuing its return back to a extra regular-on the lookout industry following the pandemic-fueled frenzy. We are far from out of the woods with the affordability disaster that has been weighing heavily on dwelling product sales, but we are beginning to see some green shoots pushing up as price ranges and mortgage loan costs have fallen. That dip in mortgage loan costs has started to entice renewed desire from customers and gross sales are climbing again when compared to very last year, but need stays considerably reduced than the past two years,” states Nicole Bachaud, senior economist at Zillow.

The guidance, suggestions or rankings expressed in this post are individuals of MarketWatch Picks, and have not been reviewed or endorsed by our business associates.

Is the housing market about to crash? Here’s what experts say

Is the housing market about to crash? Here’s what experts say

by Real Estate News
is the housing market about to crash? - the two-car garage and front door of a suburban home, with a maymont

Benjamin C. Tankersley/For The Washington Post via Getty Images

After a record-breaking run that saw mortgage rates plunge to all-time lows and home prices soar to new highs, the U.S. housing market is finally slowing. Home sales had declined for 11 consecutive months as of December 2022, and home values seem to have peaked.

While demand and price gains are cooling, any correction is likely to be a modest one, housing economists and analysts say. No one expects price drops on the scale of the declines experienced during the Great Recession.

Rob Dietz, chief economist at the National Association of Home Builders, sums up the consensus among housing experts: “We’re thinking this is going to be a moderate downturn,” he says.

The real estate party raged on longer than anyone expected. The National Association of Realtors reported that median prices in the spring of 2022 topped $400,000 for the first time ever. Even after a recent retreat, prices are up a robust 32 percent since the coronavirus pandemic began in March 2020, according to NAR data.

Now, bidding wars have largely faded, inventories are loosening and the feeling of frothiness is gone. “The market is clearly turning,” says NAR chief economist Lawrence Yun.

Is the housing market going to crash?

The last time the U.S. housing market looked so frothy was back in 2005 to 2007. Then home values crashed, with disastrous consequences. When the real estate bubble burst, the global economy plunged into the deepest downturn since the Great Depression.

Now that the housing boom is threatened by soaring mortgage rates and a potential recession, buyers and homeowners are asking a familiar question: Is the housing market so hot that it’s about to crash?

Housing economists agree that prices could fall, but the decline won’t be as severe as the one homeowners experienced during the Great Recession. One obvious difference between now and then is that homeowners’ personal balance sheets are much stronger today than they were 15 years ago. The typical homeowner with a mortgage has stellar credit, a ton of equity and a fixed-rate mortgage locked in at a rate well below 5 percent. So no foreclosure crisis looms.

“The wild ride known as the U.S. housing market slowed dramatically in the fall of 2022, as mortgage rates surged and home prices remained high,” says Molly Boesel, principal economist at CoreLogic. “Home sales started strong in early 2022 but took a nosedive later in the year. On the plus side, generous amounts of home equity will protect many borrowers from experiencing the type of foreclosure activity seen during the Great Recession.”

What’s more, builders remember the Great Recession all too well, and they’ve been cautious about their pace of construction. The result is an ongoing shortage of homes for sale.

“We simply don’t have enough inventory,” Yun says. “Will some markets see a price decline? Yes,” he says. “[But] with the supply not being there, the repeat of a 30 percent price decline is highly, highly unlikely.”

Lightbulb

Key housing market statistics

  • A total of 30,822 U.S. homes had foreclosure filings — default notices, scheduled auctions or bank repossessions — as of December 2022, according to ATTOM Data Solutions.

  • South Carolina had the highest foreclosure rate of any state in December, at one foreclosure filing for every 2,301 housing units, according to ATTOM. It was followed by New Jersey, where one in every 2,378 homes were in some stage of foreclosure.

  • Lenders repossessed 3,663 U.S. properties through completed foreclosures — known as “real estate owned,” or REO — in December 2022. Altogether, 42,854 properties were repossessed in 2022, according to ATTOM.

  • Home sales fell 34 percent from December 2021 to December 2022, the National Association of Realtors says. The median sale price in December 2022 was $366,900.

  • Existing home sales for 2022 totaled just over 5 million, per NAR — down 17.8 percent from 2021.

Existing home prices

For many months, economists have been predicting that the housing market would eventually cool as home values become a victim of their own success. Home prices have risen far more quickly than incomes, creating an affordability squeeze, and mortgage rates doubled since August 2021, before starting to retreat a bit.

Experts say home prices could fall

“Most markets are going to experience price declines in the high single digits,” Dietz predicts. Home price declines of 8 to 9 percent would create some economic pain, to be sure. But this correction will be nothing like the utter collapse of property prices during the Great Recession, when some housing markets experienced a 50 percent cratering of values.

Rick Sharga, executive VP of market intelligence at ATTOM Data Solutions, expects declines of 5 percent. “It’s almost inevitable we’re going to see home prices drop,” he says.

Yun says high-priced regions such as California are most vulnerable to a downturn in prices. The Midwest, on the other hand, is unlikely to see a decline in home prices. Overall, he expects national prices to remain flat next year.

5 reasons the housing market is not about to crash

Housing economists point to five compelling reasons that no crash is imminent.

  1. Inventories are still very low: The National Association of Realtors says there was a 2.9-month supply of homes for sale in December. In February, that figure was as low as a tiny 2.0-month supply. This ongoing lack of inventory explains why many buyers still have little choice but to bid up prices. And it also indicates that the supply-and-demand equation simply won’t allow a price crash in the near future.

  2. Builders didn’t build quickly enough to meet demand: Homebuilders pulled way back after the last crash, and they never fully ramped up to pre-2007 levels. Now, there’s no way for them to buy land and win regulatory approvals quickly enough to quench demand. While they are building as much as they can, a repeat of the overbuilding of 15 years ago looks unlikely. “The fundamental reason for the run-up in price is heightened demand and a lack of supply,” says Greg McBride, CFA, Bankrate’s chief financial analyst. “As builders bring more available homes to market, more homeowners decide to sell and prospective buyers get priced out of the market, supply and demand can come back into balance. It won’t happen overnight.”

  3. Demographic trends are creating new buyers: There’s strong demand for homes on many fronts. Many Americans who already owned homes decided during the pandemic that they needed bigger places, especially with the rise of working from home. Millennials are a huge group and in their prime buying years. And Hispanics are a young, growing demographic keen on homeownership.

  4. Lending standards remain strict: In 2007, “liar loans,” in which borrowers didn’t need to document their income, were common. Lenders offered mortgages to just about anyone, regardless of credit history or down payment size. Today, lenders impose tough standards on borrowers — and those who are getting a mortgage overwhelmingly have excellent credit. The typical credit score for mortgage borrowers in the the third quarter of 2022 was a high 768, the Federal Reserve Bank of New York says. “If lending standards loosen and we go back to the wild, wild west days of 2004-2006, then that is a whole different animal,” says McBride. “If we start to see prices being bid up by the artificial buying power of loose lending standards, that’s when we worry about a crash.”

  5. Foreclosure activity is muted: In the years after the housing crash, millions of foreclosures flooded the housing market, depressing prices. That’s not the case now. Most homeowners have a comfortable equity cushion in their homes. Lenders weren’t filing default notices during the height of the pandemic, pushing foreclosures to record lows in 2020.

All of that adds up to a consensus: Yes, home prices are still pushing the bounds of affordability. But no, this boom shouldn’t end in bust.

FAQs

  • Actually, economists do not think it will. Housing economists point to five main reasons that the market will not crash anytime soon: low inventory, lack of new-construction housing, large amounts of new buyers, strict lending standards and a drop in foreclosures.

  • Home prices rose sharply for years. And while the heated market has cooled down, it’s not likely to experience an equally sharp drop soon. Greg McBride, CFA, Bankrate’s chief financial analyst, says a plateauing of prices is more likely than a steep fall. Matthew Pointon, senior property economist at Capital Economics, also expects a slowdown rather than a freefall, predicting a 5 percent drop by mid-2023.

  • It depends on how much money you earn versus how much you pay out in debts and expenses each month. Many financial advisors recommend the 28/36 percent rule of home affordability, which states that you should spend no more than 28 percent of your gross monthly income on housing expenses, and no more than 36 percent on total debt. Bankrate’s home affordability calculator can help you crunch the numbers.

  • Different minimum credit scores are required by lenders for different types of mortgages. However, a score of at least 620 is typically required for a conventional loan — and if it’s as high as 740, all the better. Successful borrowers today tend to have outstanding credit, with a median score of 768.

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US housing market seeing ‘meaningful’ damage that’s ‘not normal,’ CEO of investment firm warns

US housing market seeing ‘meaningful’ damage that’s ‘not normal,’ CEO of investment firm warns

by Real Estate News

Pulte Funds CEO Invoice Pulte discusses the housing and building industry as the U.S. 30-yr preset property finance loan charge falls for the fourth week in a row at 6.1{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9} on ‘Mornings with Maria.’

The U.S. housing market place is in for a tough year, according to the CEO of 1 non-public equity investment decision agency. 

GOLDMAN SACHS Says 4 US Towns WILL Go through A 2008 CRASH IN Home VALUES

“In 23′ it is really heading to be sluggish. I assume we are heading to have a tough row to hoe. I imagine that coming in the next yr, you are truly likely to see the hurt that’s likely on,” Pulte Money CEO Invoice Pulte described on “Mornings with Maria.”

“We have to have to make sure that these administration teams are absolutely concentrated on executing appropriate now since, Maria, you get 40{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9} reduction in orders. And the big builders, they want to step up their sport appropriate now,” he ongoing. 

for sale sign in front of building

The 2023 housing marketplace will be sluggish, according to Invoice Pulte.  (STEFANI REYNOLDS/AFP via Getty Illustrations or photos / Getty Photographs)

The 30-12 months set home finance loan amount dipped for the fourth 7 days in a row to 6.19{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9} this 7 days from 6.23{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9} previous week. A calendar year back, the regular level was practically fifty percent, at 3.54{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9}. 

Host Maria Bartiromo pointed out that the property-purchasing home finance loan software level is down 10{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9}, and questioned irrespective of whether Pulte believes that the U.S. housing current market is currently suffering from a economic downturn. 

“It’s going to be a difficult row to sow the rest of the year. And I consider you heard that on the earnings get in touch with. I imagine you might be going to see that coming into – even next 12 months, frankly – Since, Maria, these orders are down,” he stressed. “Pulte Group’s orders, for illustration, are down 40{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9} yr-above-year. I mean, that is meaningful, Maria. So, you can connect with it a economic downturn. You can get in touch with what you want, but 40{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9} orders being down, that’s not regular.” 

The Agency founder and CEO Mauricio Umansky reacts to the Goldman Sachs report that signifies which U.S. metropolitan areas are envisioned to suffer a property price crash.  

Fascination Level VOLATILITY, INFLATION CRIPPLES HOUSING Market place, BUT Security WILL Help Whole Financial system REDFIN CEO

The FOX Organization host bolstered Pulte’s claim, in convert citing the November Circumstance-Shiller 20-city index that disclosed dwelling charges have been down .08{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9} in November, declining for a fifth thirty day period in a row. Bartiromo argued that the mother nature of this report would be an “encouragement” for shoppers to “get in the marketplace,” but as an alternative, several are finding mortgage charge “sticker shock.”

WHITE Property Making use of A single-Dimensions-Matches-ALL Strategy TO Guard RENTERS AT LANDLORDS’ Cost: ‘VERY FRUSTRATING’

“It is. But Maria, just one of the matters, and you should really know this, which is definitely occurring in the sector, which is why a whole lot of these builders and VR described. For example, very last evening the third-most significant builder, they described a fantastic report as properly,” he discussed. 

new build construction

During his overall look on “Mornings with Maria,” Wednesday, Bill Pulte argued that U.S.’s major builders will need to ‘step up their game’ in purchase to assistance decrease the brittle authentic estate industry. (Photographer: Rebecca Noble/Bloomberg by using Getty Visuals / Getty Images)

Pulte ongoing, pointing out that quite a few builders are employing money to pay out down the fascination price of individuals. 

Simply click Listed here TO Read through Extra ON FOX Enterprise

“So properly, you know, you confirmed that the costs were 6{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9} moreover possibly 7{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9} in some cases. They are ready to get these fees down to like 4{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9} with what the builders are giving in phrases of incentives,” Pulte concluded.

Housing market slump gives homebuilders no choice but to offer aggressive mortgage rate buydowns

Housing market slump gives homebuilders no choice but to offer aggressive mortgage rate buydowns

by Real Estate News

The 2nd 50 percent of 2022 noticed the crimson-incredibly hot U.S. housing current market thrust into an abrupt—and sharp— slowdown. That’ll occur when property finance loan prices spike from 3{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9} to 6{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9} just soon after U.S. household price ranges skyrocketed in excess of 40{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9} all through the Pandemic Housing Increase.

Contrary to present house sellers who can just hold out out the storm, U.S. homebuilders—who have a historic amount of models in their backlog—have no choice but to sweeten the deal for new purchasers in 2023. Their incentive of selection? Intense mortgage loan fee buydowns. 

How do home loan amount buydowns operate? Fundamentally, builders pay back lenders a lump sum of revenue in order to decrease home finance loan prices for future customers. For case in point, a builder could possibly offer a 2-1 fee buydown, in which the mortgage level is diminished from say 6{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9} to 4{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9}, and primarily based on the arrangement, the level would maximize each yr immediately after by 1 proportion level until eventually it reaches 6{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9}.

“If you seem back above time, there’s distinctive incentives that do the job all through various intervals of time—the explanation that amount buydown is operating proper now is because rates acquired so large,” Devyn Bachman, senior vice president of study at John Burns Authentic Estate Consulting, instructed Fortune. “It’s always been a thing, it’s just that it is the preferred preference in today’s sector.”

Although the 2-1 non permanent fee buydown is commonly made use of to make an give extra enticing, Bachman mentioned customers are favoring full-term buydowns. That implies they’re “buying down the rate for the entirety of that person’s home finance loan,” Bachman said.  

As of final month, 75{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9} of nationally surveyed homebuilders mentioned they are buying down buyers’ house loan costs to make payments far more affordable, according to John Burns Serious Estate Consulting. That very same survey found 32{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9} of builders are purchasing down the whole 30-year phrase, while 30{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9} are only temporarily lessening the charge for the very first two years. 

Bachman informed Fortune that huge incentives bolstered by amount buydowns are encouraging far more people to take into consideration obtaining new residences as opposed to present houses because the resale industry just cannot contend with all those presents.

The company’s hottest builder survey identified new dwelling revenue rose 11{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9} from November to December, she said. And though there are several aspects at enjoy, the incentive of rate buydowns does carry some excess weight in deciphering the improvement. 

“There’s plenty of variables at engage in, but the price buydowns and the dimensions of them, is unquestionably a person of the levers that’s encouraging customers to order new homes,” Bachman claimed. 

As for the expense of home finance loan price buydowns for builders, every single .25{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9} reduction in the charge generally prices around 1{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9} of the bank loan quantity. But with the industry scarcely commencing to see indications of depressurization, it is frequently the only incentive builders can offer you prospective buyers to press the sale through. 

Nevertheless the value of the price buydown differs and is dependent on a several variables, which include: household price and down payment—which in alone varies based on the marketplace remaining cost-effective or unaffordable—the type of bank loan, and the form of buydown. 

Find out how to navigate and improve believe in in your business with The Belief Variable, a weekly publication inspecting what leaders require to do well. Signal up listed here.

Want to Invest in the Housing Market? Try This REIT.

Want to Invest in the Housing Market? Try This REIT.

by Investment Property

Owning a rental residence isn’t as quick as it could audio, even if you employ the service of a property supervisor. But which is not the only way to commit in the housing market.

One more choice to contemplate is obtaining shares in AMH (AMH 1.35{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9}), formerly known as American Homes 4 Lease. This real estate expenditure trust (REIT) owns a huge and diversified portfolio of solitary-spouse and children residences. It’s not specifically like proudly owning your own rental property, but it gets you quite a few of the most critical gains whilst preserving you stress and danger. Here are some key info to take into account.

1. Diversification matters

Most little serious estate traders will only personal a several qualities, possibly only a single, in addition to their most important home. That indicates a vacancy at a one home can have a large affect on your income movement. Similarly, an surprising value at a property (like changing a broken furnace) will be a weighty load. AMH owns extra than 59,000 solitary-family members houses. No single house will have a discernible affect on its in general results or the revenue you acquire from the REIT’s dividends.

A sign in front of a home that says house for rent.

Image source: Getty Visuals.

On prime of that, with only a handful of belongings, most tiny serious estate traders are uncovered to just just one or two markets. AMH’s portfolio is spread across the Southeast, Midwest, Southwest, and Mountain West locations of the United States. It would be almost impossible for most scaled-down landlords to realize that type of diversification.

2. Responsible dividend

To be honest, AMH’s 2.2{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9} dividend yield is just not specifically massive. That mentioned, it is notably larger than what you would get from an S&P 500 index exchange-traded fund (ETF), at this time all-around 1.65{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9}. But the true vital is that the dividend has been held constant or increased each and every 12 months due to the fact AMH commenced paying out dividends in 2014, the REIT’s 1st complete yr of daily life as a public company. In the meantime, in the third quarter of 2022, AMH’s altered funds from operations (FFO) was $.33 per share as opposed to a dividend of $.18 for each share. That prospects to an adjusted FFO payout ratio of all over 55{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9}, which is very conservative. 

3. Hire and appreciation

When it comes to REITs, dividends are a essential issue. On that score, lease advancement more than the previous pair of yrs has authorized AMH to maximize its quarterly payment to $.18 for each share for every quarter from $.05 for each share per quarter in 2020. In other words, buyers are benefiting specifically from the business’ powerful operating outcomes. 

Even so, that’s not the only story here. AMH began developing its portfolio in the aftermath of the Great Economic downturn, which was driven by a housing downturn. It was opportunistically purchasing residences on the inexpensive. The inventory has doubled due to the fact its IPO, reflecting the reality that housing price ranges have gone up because that place. Massive gains like that aren’t likely to come about again, but if home price ranges raise in excess of time, the improve is probable to be mirrored in a bigger stock cost just the same. In other phrases, if you are observing housing costs go up, AMH is an prospect to get in on.

Virtually like carrying out it you

AMH’s inventory rate has pulled back approximately 25{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9} since the begin of 2022 as desire prices have headed better. So there is probable to be far more price volatility here than if you bought a rental assets on your own. And however, that fall has pushed the generate towards traditionally high stages. And you get the benefit of specialist management and diversification. AMH isn’t really an specific substitute for obtaining a rental residence, but if you are conservative, it could be worth a deep dive when you consider the complications and hazards of getting a landlord.

Home sales plunge in Miami in 2022, strong sign of housing market slowdown

Home sales plunge in Miami in 2022, strong sign of housing market slowdown

by Real Estate News

Home

Despite falling home sales last year, South Florida’s median prices for houses and condos increased as people competed for homes to buy. This is an aerial view of North Bay Village, near housing hotbed Miami Beach.


MATIAS J. OCNER

mocner@miamiherald.com

Home sales in Miami-Dade County plummeted in 2022 compared to the prior year, the strongest indication the frenetic homebuying spree that defined South Florida during the ongoing coronavirus pandemic finally has ended.

The county recorded 32,627 single-family house and condominium sales last year, a 20{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9} drop from 39,394 sales in 2021, according to the Miami Association of Realtors housing sales report released late Friday.

The median prices in December for houses and condos provided further evidence of a slowing residential real estate market. The midpoint prices were $530,900 for houses and $374,500 for condos, only slightly higher than year-ago prices and the second-lowest monthly figures in 2022. This easing of pricing momentum as home inventory remains tight indicated the pandemic-fueled market was weakening as the year closed.

To be sure, Miami-Dade finished another year in which the monthly median prices showed sellers had the upper hand. The average midpoint price for 2022 settled at $555,013 for single-family homes and $388,586 for condos, up from $495,333 and $325,649, respectively.

Housing market trends were similar in Broward County, where there were 32,573 sales last year, down 19{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9} from 40,423 in 2021. In December, median prices of houses and condos in Broward also rose moderately compared to the previous year.

Over the past 12 months, Broward’s average monthly midpoint price of $553,125 for single-family homes mirrored Miami-Dade. But the condo slice of the market was cheaper with a $254,083 average condo in 2022, compared to $217,871 in 2021.

READ MORE: Want to stay informed with the Miami Herald’s real estate coverage? Sign up here for RE|source, our free weekly real estate newsletter.

As the South Florida housing market slowed in the final months of last year from its breakneck speed, a disconnect developed between buyers and sellers. Looking ahead, there’s a chance by midyear that homebuyers could be on equal footing with sellers in a balanced housing market. Expert say don’t, however, expect monthly home prices to fall below the prior year, because there’s still strong demand to relocate here from the Northeast, other parts of the country and Latin America.

Buyers and sellers are on different wavelengths here and in many parts of the United States, said Mariya Letdin, a business professor at Florida State University. The high prices and annual slowdown in sales volume exemplify their disconnect.

“If a seller is patient, they will not transact at prices that fall below their expectations. If sellers see the reality doesn’t match expectations, they will wait,” Letdin said, noting that the higher median prices in South Florida are the result of “sellers refusing to list at lower prices. … They can do that for a few months, before reality sinks in.”

The Federal Reserve’s push all of last year to boost its benchmark interest rates to thwart inflation, led to higher mortgage rates, which eventually took the steam out of South Florida’s overheated housing market. As of Friday, Freddie Mac, the government-sponsored mortgage lender and secondary market buyer, reported an average 30-year mortgage rate of 6.15{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9}, nearly double the 3.56{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9} rate from a year ago.

Looking back on 2022, the region enjoyed a robust housing market, but one in which the affordability gap widened more than perhaps anywhere in the nation. The continued population growth in South Florida kept home sales activity and price tags on a steady upward trajectory during the first half of last year, reaching a record median price of $579,000 for a house in Miami-Dade in June.

Many wealthy people relocated to the Miami area last year to take advantage of remote work, low taxes, loose COVID-19 restrictions and warm weather. Companies also expanded and relocated to South Florida, drawing middle- and working-class employees from elsewhere in the country.

“What we’re seeing is that the demand is still strong,” Alyssa Brody, head of New York real estate brokerage and marketing firm Development Marketing Team, said of the desire to live in Miami and South Florida overall.

The emergence of a technology sector and growing financial hub in Miami, Brody said, has brought global financial services giants like Citadel to the city. In perhaps the most high-profile relocation, the Chicago-based hedge fund operator run by billionaire Ken Griffin said last year it’s moving Citadel’s corporate home and securities trading operations to Miami. That corporate move alone will bring thousands more workers here over the next few years. Despite global cryptocurrency markets hitting headwinds that rattled Miami, area residents for the large part have more diverse job opportunities than in the past.

The well-paid newcomers bid up houses and condos in Miami-Dade in 2022, with many paying cash to get the homes they wanted. In December, just over 40{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9} of home sales were cash deals, sharply higher than the 28{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9} national average.

“The challenge that Miami had over the years is there was no industry here to work in,” Brody said. “Now that these industries are opening up,” the labor market will continue to become diversified.

Despite Miami emphatically putting itself on the world stage in business and finance, it came with a high price and exacted a toll. The housing market and broader cost of living kept many longtime residents and natives from buying homes and made it extremely difficult to maintain apartments as rents soared.

Take Jackson Health System physician resident Dr. Onome Oboh. After being handed a 32{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9} monthly rent hike — to $2,700 per month from $2,050 per month — to live in Miami’s Overtown section downtown, Oboh moved north to Broward.

“I caught a wave of overcharging,” she said. “At that time, they began charging $200 more for rent and would not let me sign a new lease six months before my rent went up.”

Last year’s torrid pace of home sales activity and overheated residential rental market forced many to flee the region, leaving small business owners floundering to find essential workers — especially in hospitality and personal services jobs.

Most area real estate experts predict a less competitive housing market in 2023, one that will enable buyers and renters to avoid nerve-wracking surprises.

“I don’t have a crystal ball with interest rates. We’ve all been surprised with how high they’ve gone up,” Florida State’s Letdin said. “I expect to see continued increases in (home) inventory, especially in less established markets.”

Profile Image of Rebecca San Juan

Rebecca San Juan writes about the real estate industry, covering news about industrial, commercial, office projects, construction contracts and the intersection of real estate and law for industry professionals. She studied at Mount Holyoke College and is proud to be reporting on her hometown.
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Profile Image of Michael Butler

Michael Butler writes about the residential and commercial real estate industry and trends in the local housing market. Just like Miami’s diverse population, Butler, a Temple University graduate, has both local roots and a Panamanian heritage.