Maybe we won’t see the bubble pop in South Florida real estate.  It might just be a slow leak over time.  How do you get price discovery in a housing market?  You need properties to sell.  With a slower pace of sales, this process will just take a bit longer during this cycle.  You can’t really get a market to crash if things aren’t selling.  We will run though some charts today and you should be able to notice that price discovery will reach the condo market in South Florida before single-family homes.

This chart of residential inventory shows how the number of condos for sale across the tri-county area still hasn’t reclaimed levels we saw before COVID.  Give it a few more months.

The inventory of condos looks troubling in the Broward County / Greater Fort Lauderdale area.  This market is already at levels we haven’t seen since the last bubble burst.  During the month of November there were 10,299 condos available for sale in Broward County.  That line is going parabolic!  This is one area that could see something more drastic than a slow leak.  Once the pace of transactions picks up, there could be a trap door opening in the price floor.

Mortgage rates have remained elevated, which will keep both buyers and sellers on the sidelines.  If you own a property with a sub-3 or 4% mortgage, would you want to purchase a property with a loan in the 7% range?  That’s precisely why the correction in real estate prices will take much longer this time.  Looking forward in 2025, we could see mortgage rates moving higher toward 8%.  We even discussed the risks of mortgage rates remaining elevated over a year ago.

How about prices?  You will see from this chart that average selling prices spiked dramatically beginning in the latter part of 2020.  There were many factors fueling this bubble in real estate and if you glance at the mortgage chart above and the low rates during the 2020-2022 period, they were certainly a factor.  Rates have more than doubled since then!  If you bought a property around 2022 or later and try to sell it now, you will probably lose money on your investment after paying commissions and closing costs.  We have talked repeatedly how the COVID gains in the South Florida real estate market will be erased.  It may just take a few years.

Take a look at the trend of average monthly sales volume in Miami-Dade, Broward and Palm Beach.  Deals will be closing, but don’t expect a feeding frenzy.  The blue line in 2021 obviously stands out in this chart.

What else should you be watching as the housing bubble deflates?  The pace of new foreclosure filings across the Miami, Fort Lauderdale and Palm Beach markets.  The number of monthly filings has remained low for now, but may be on the upswing as we move through the new year.

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.