South Florida Home Sales Are On Fire

Marc Jablon Boca Raton Home Sales , boca raton realtor , broward county homes for sale , palm beach county homes for sale , south florida home sales , south florida real estate , south florida realtor Leave a Comment

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According to the Standard & Poor/Case-Schiller home price index statistics, South Florida home sales are on fire. The index shows that Palm Beach, Broward and Miami-Dade county prices have risen for 15 months in a row.

The National Association of Realtors (NAR) concurs with this positive analysis. Its figures indicate that the tri-county area has a median home price of $289,000, which is 7.4 higher than it was at the end of June of 2014.
In addition, homes sales numbers of Broward County increased by 21%. Palm Beach County numbers rose 16%.

In Boca Raton, my home town, pending sales are up by 17.5% from last year. However, active listings on a year to year basis are up only 5.4%.

Prices continue to rise due to lack of inventory.

The net result is that prices have jumped up due to a continuing lack of inventory. Boca Raton homes show a 4.3 month supply, up from 4.2 last month. A six month supply of homes generally signals equilibrium, where neither seller nor buyer has an advantage. At the moment, due to tight supply, sellers are still winning.

In most markets across the nation, the NAR says that sales of homes are rising far faster than they have since 2006. Median prices across the nation have moved up to $236,400.

Low mortgage rates still available.

Helping this buying frenzy is the fact that mortgage rates, despite news of pending increases, continue to remain in the 4% range. Prognosticators continue to state that an uptick rates will put a damper on buyer enthusiasm. While that may occur, rates have not yet moved high enough to negate buyer enthusiasm, nor to temper consistent attempts by sellers to test higher and higher market prices.

The greatest problem for the housing market in Boca Raton and the rest of South Florida, from where I sit, is that the majority of new home buyers are looking for homes priced under $450,000 and under.

So at some point in the not distant future, especially if mortgage rates move into the 5% and over range, buyer resistance will hit a wall. Here’s why:

Home prices are outpacing ability to pay.

The reality of finance, even at today’s low mortgage rates, means that a family needs an income of close to $75,000 per year in order to carry a $250,000 home with a minimal down payment.

If you look at the average closing statement you’ll see that there are payments for mortgage, taxes, monthly home owner association payments, insurance, and private mortgage insurance (necessary if a buyer puts down less than 20%).

If the ratio of payments needed versus the income earned is too great, the buyer won’t get financing. Banks will not grant mortgages over the predetermined ratio.

New Boca buyers suffer from lack of inventory.

The Boca Raton home market, which brings in younger, first time buyers because of its highly rated school district, has become very difficult to enter. That’s because there are dozens of buyers for the limited number of homes in that range. The result: demand is driving up prices and making formerly affordable homes unaffordable.

The outcome of that scenario can either be a drop in prices to meet realistic demand, or a squeeze in inventory such that only very wealthy buyers with cash will be able to afford the ever decreasing number of homes for sale in the area.

According to experts, a 3 – 6% per year rise in prices creates a sustainable market. For the last fifteen months, we are running well above those rates on an annual basis in most of the nation.

Condos prices pushed up by house prices.

Home price increases also drive condominium prices upward. Sales of Broward condos were up by 5% based on MLS figures, while the median price increased by close to 4%. Similarly, Palm Beach County condo sales leaped by more than 20%, and the median price rose to $149,450. (Median prices means half were above and half were below). This was an 8% increase.

Not surprisingly, Freddie Mac, the mortgage company, stated that our housing market is now considered the “most stable” in sunny Florida. In addition, the Federal Housing Administration (FHA) numbers indicate that sales using their low down payment mortgages, typically favored by first time home buyers, are increasing.

However, that stability is still based on the fact that there are enough buyers to purchase the small number of homes for sale. If prices continue to increase in South Florida, young families may have to go elsewhere.

Is it a good time to buy or sell?

That is always the ultimate question. At the moment, if you’re an owner, it’s a great time to sell because demand is outpacing supply. And that, of course, is the reason why South Florida home sales are on fire. If your home is in good condition and your asking price conforms to the current market, you are likely to sell at, or very close to, full price.

If you’re a buyer in the under $450,000 market, you’re in a heated competition. However, we are not seeing predictions about falling prices or lower market demand. So if you’re ready and able to purchase a home, you may want to do it before the next price rise.
Marc Jablon, the Jablon Team
Re/Max Complete Solutions
[email protected]
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Marc Jablon