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It’s over, find a new show!

Does anyone remember this scene in Forgetting Sarah Marshall?  This comes to mind as this epic housing bubble starts to unwind.  Nobody wants to hear it, but we have witnessed the peak in this craziness and it has certainly run it’s course. We have been discussing this at length in our  market outlook,  now hopefully you will understand our rants.  Let’s look at some charts on where the South Florida real estate market stands and be prepared for where it may be heading.

Mortgage Rates

This move in rates over the last few months will not only slow activity, but it will slam on the brakes.  Most people don’t even realize that the day trading clown show at the Federal Reserve just stopped buying mortgages in March.  They were buying up to $40 billion every month over the past few years and here is a link  showing how much of the mortgage market they own.  If you have been priced-out of the real estate market, you have every right to be angry at those who have created this monster of a housing bubble.  They now own $2.7 Trillion in mortgages and helped put housing out of reach for everyday Americans trying to buy a home.  it just seems like we go from bubble to bubble without learning any lessons.  O.K., time to look at some charts before we go off on too much of a rant.

Mortgage rates say it's over

It’s over get a good look at house prices in South Florida

This chart doesn’t show the impact of higher rates yet, as the data only covers through the month of March.  Anyone closing in March had their financing secured and mortgage rate locked ahead of the big move.  It will take a few months for these rate increases to trickle into the market, but they could easily shave 10% off prices in the near-term.  We haven’t seen rates this high since the last housing bubble popped and all the ridiculous 13 years of cheap money and bailouts started.

it's over - real estate prices set to drop

It’s over for condo prices too

There was a strong migration of buyers to condo properties in the last few months.  The main reason for this would be the lack of inventory in the single-family home market.  This market will be hitting a wall in the next few months as well.

Condo prices swing higher, but it's over

Transaction volume – houses

housing inventory

Transaction volume – condos

It's over for Condo sales in South Florida

Inventory is still low, for now

Here are a few charts of the inventory for houses and condos across the tri-county area:

Housing bubble

And the condo inventory is low as well.

Condo market bubble

Are we in a housing bubble?  Yes we are.  A few things are different from the housing market crash back in the 2008 financial crisis:

  1. Leverage isn’t as bad overall and most property owners have a low fixed rate mortgage.  During the last crisis, buyers were using adjustable rate mortgages, since rates were climbing until the housing bubble popped.
  2. Inventory is ridiculously low and will take awhile to rebound.  That should keep a bid on properties.
  3. Mortgage foreclosures take forever in Florida, so that won’t be any immediate risk.  You will see from the chart below that they are trending higher after being halted for a few years.

Foreclosure activity in Miami, Fort Lauderdale and Palm Beach

This real estate market outlook covers real estate activity in Miami-Dade, Broward and Palm Beach County, Florida.  Here are just a few of the cities in each of these three markets:

  • Miami-Dade – Aventura, Coral Gables, Miami Beach, Hialeah, Sunny Isles Beach, North Miami, Homestead, Doral, Miami Lakes, Downtown Miami, Brickell and Key Biscayne.
  • Broward – Fort Lauderdale, Pompano Beach, Deerfield Beach, Hollywood, Hallandale, Weston, Parkland, Wilton Manors, Oakland Park, Plantation, Cooper City, Davie, Coral Springs, Sea Ranch Lakes, Lauderdale by the Sea and Lighthouse Point.
  • Palm Beach – Delray Beach, Highland Beach, Jupiter, Palm Beach Island, Boynton Beach, Boca Raton, Highland Beach, Palm Beach Gardens, West Palm Beach, Wellington and Lake Worth.