Sellers call the shots in Florida’s overvalued housing market

by R. Michael Brown

FAU Economist: Beware of bidding wars as home price correction looms.

Florida homes are selling for more than 17% above their long-term pricing trend according to professors at Florida Atlantic University and Florida International University.

Single-family homes, townhomes, condominiums and co-ops in the Sunshine State are overvalued by 17.17%, while Tampa Bay properties are fetching a 26.14% premium. The analysis is based on more than 25 years of housing data from Zillow, the online real estate portal.

“The results indicate that most Florida sellers will have no trouble finding favorable deals, while buyers will be at a distinct disadvantage in negotiations,” said Ken H. Johnson, Ph.D., a real estate economist in FAU’s College of Business. “Buyers in Tampa Bay and elsewhere need to be careful about getting into bidding wars. If the price is difficult to justify and the terms don’t feel right, walk away. There will always be another property.”

Johnson, a real estate agent for 12 years prior to his academic research pursuits, predicts that South Florida is approaching a peak at 13% and the coming expected correction will mean a period of flat property appreciation. Lack of inventory and continuing population growth will not make a 2007 like bubble burst.

📸: Ken H. Johnson, FAU Real Estate Economist & Eli Beracha, FIU Real Estate Professor

📸: Ken H. Johnson, FAU Real Estate Economist & Eli Beracha, FIU Real Estate Professor

Johnson and Eli Beracha, a real estate professor with FIU’s Hollo School of Real Estate, said Florida consumers should expect a near-term housing correction, but it almost certainly won’t be anywhere near the magnitude of the last housing crash in 2007 to 2012, in which many homes lost half or more of their values.

“Simply put, we are just not that overheated as compared to the last cycle in 2006, when some parts of the state were overvalued by more than 60%,” Beracha said.

The analysis also revealed the current degree of overpricing in other metropolitan markets throughout Florida:

  • Orlando, 18.45%
  • Jacksonville, 18.22%
  • Miami, 13.18%
  • Tallahassee, 10.48%

Current long-term mortgage rates are directly tied to activity by the Federal Reserve. Indication of a tapering of the latest round of quantitative easing by the Fed almost certainly will lead to an increase in mortgage rates, Johnson said.

“Eventually, higher mortgage rates will prompt more people to hold off buying, and that reduced demand will trigger the next housing event in Florida and the U.S. as a whole,” he said. “The housing inventory shortage has been building for 15 years in South Florida and it’s not going to be corrected overnight. Plus, the population continues to grow here.”

But rates still have a long way to climb before would-be buyers get skittish, he added. What’s more, the extreme shortage of homes for sale will help keep prices from falling too far, according to the professors, who said first-time buyers will continue to struggle with housing affordability even if home prices level off.

“For real estate agents,” Johnson said, “it’s going to be back to business as usual during the flat market. They list houses, they sell houses, they close houses and some days it’s going to rain.”

New agents haven’t been through these cycles like the peaks in 1981, 1983 and 2006 and the flat periods in 1989 and 1999 according to Johnson. They might expect this market to continue. However, experienced South Florida brokers realize that while a 13% rise isn’t trivial, when the flat period happens, they will get back to serving families moving to Florida, transferring because of jobs, moving up because of raises and promotions, getting married or divorced and that those routine life events will sustain their business.

The data spans January 1996 through April 2021. Johnson and Beracha used a previously developed methodology that creates a home price estimate based on past pricing and compares it to existing levels to approximate the current premium.


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