Have we reached peak housing yet? By looking at a few charts we may determine that we did in the last few months across South Florida. A glance at the average sale prices, transaction volume and inventory in the Fort Lauderdale, Miami and Palm Beach markets should help determine how the real estate market will perform in the remainder of 2020. After a booming month of 8,630 closed sales during the month of August, the number declined slightly to 8,506. It’s a bit early to say this may be the end of the rally in real estate deals and prices, but declining sales volume is usually a good indicator of future prices.
Have we reached a peak housing prices?
The surge in prices for single-family homes is bananas! Take a look of this chart of the average sale prices in the South Florida residential real estate market. The average sale price of a single-family home in the tri-county area reached a whopping $655,533 during the month of September. This number was obviously led higher by the surge in luxury home sales. Condo prices continue to lag, but were still holding-up at $329,285 in September.
Are we running out of housing inventory in South Florida? One of the factors contributing to the climb in prices is the lack of available inventory of single-family homes. There were only 11,414 houses on the market across South Florida in September. You may have already seen a pivot in the sales pitch from real estate agents. They quickly flipped from pitching “FOMO” and how you need to buy a property and get into the booming market, to the new pitch: “Now is a great time to sell your home!” If the agents don’t convince people to list their house, maybe the surge in insurance costs will do the heavy lifting for them. Meanwhile, there were 27,280 condos available for sale on the market, so that segment still hasn’t participated in the recent rally.
Along with over a decade of various bailouts, historically low mortgage rates have helped to prop-up the real estate market after the last housing crash. Before the coronavirus pandemic hit, we actually thought that rates may normalize. Our guess was wrong as rates hit a new low over the summer. That was another catalyst for buyers to rush into the real estate market, not realizing they were overpaying for the properties, even though they may have a low mortgage rate. If the economy is really starting to recover, rates should move higher. That will put the brakes on this housing frenzy.
Monthly average transactions
The number of closed sales in 2020 is still lagging behind the prior eight years. Take a look at this next chart and you will see that 2015 had the highest monthly average of closed sales for this cycle.