Housing inventory in South Florida remains tight but some trends may loosen things up | Opinion

Over the past 18 months, South Florida’s red-hot real estate market has been celebrated and well-documented in these pages and other media outlets, and for good reason.

Sales volume and prices have maintained extraordinarily high levels (particularly in the luxury sector), with domestic buyers clamoring for our region’s weather, lifestyle and COVID-friendly policies, amid the mainstreaming of virtual work and education. (The growing migration of tech and finance companies from high tax/cost of living locales like New York and California have also fueled this phenomenon.)

But real estate markets are complicated ecosystems and dramatic growth in one area will often lead to weakness in another. In the case of South Florida, the rapid and extreme loss of inventory has become a major obstacle to this success story, inflating prices unnecessarily and squeezing out qualified buyers who simply want to break free from renting.

Even my middle-class and well-heeled clients are reluctant to sell their current homes, fearful of facing a limited and too-expensive pool of purchasing options if they want to stay in this market. (In the interest of transparency, this dearth of inventory is also troubling for real estate professionals like me, who prefer healthy, predictable and balanced markets to maintain their business.)

While this inventory shortage is a dark cloud over our industry, streaks of sunshine are beginning to poke through, potentially stabilizing the market in small but meaningful ways.

During the early, terrifying months of the COVID pandemic, the federal government established two programs to assist homeowners dealing with serious financial uncertainty: mortgage forbearance and a moratorium on foreclosures. Forbearance allowed mortgagees to delay their monthly payments, and while more than 4 million homeowners were in the program as of May 2020, that number had dropped to 1.6 million by August 2021, according to the Mortgage Bankers Association.

The foreclosures moratorium expired in July and filings already increased 27% from July to August, according to the 2021 U.S. Foreclosure Market Report from ATTOM, a mortgage data company and parent company of foreclosure marketplace RealtyTrac. (An increase of 60% from last year.)

While most experts say not to expect a flood of foreclosures over the next few months, the numbers are predicted to gradually increase. With so many homeowners now faced with either foreclosure and/or the resumption of mortgage payments, it is reasonable to assume that a very large percentage will opt to sell in this sizzling market, creating more buying opportunities down the road.

Here in town, I have already seen an increase in “short sales” resulting from these changes and have even placed offers on some for my clients. (Readers may recall the popularity of short sales in the aftermath of the Great Recession of 2008, whereby thousands of homeowners found themselves “underwater,” with their property values lower than their mortgage loan amounts. Under these transactions, lenders would accept the net proceeds of sales at closing, satisfying a greater amount of the mortgage debt.)

In recent weeks, I have had a flurry of properties listed by my longtime and older clients who, for a variety of reasons, are compelled to enter the market at this stage. This is a common trend when hot cycles are perceived to have cooled off a bit. Some simply want to get in the game while they can demand higher pricing, while others are ready to downsize through major lifestyle or life cycle changes.

My own neighborhood of south Coral Gables offers a snapshot of this trend. A single-family rental property (which once demanded a lease of $8,500/month) hit the market at $2.75 million and went to contact after a reduction to $2.45 million.

Nearby, an elderly couple eager to relocate to a luxury active adult community listed their home for $1.45 million, and found a willing buyer over the asking price in one day. Yet another longtime owner’s youngest child started college this semester, and they are seriously considering downsizing as well. As Greatest Generation members, Baby Boomers and even older Generation Xers experience these changes in larger numbers, we should expect inventory to open up accordingly.

While this next trend is just getting started, I believe it could positively impact the availability of condominiums in the coming years. As The Miami Herald has reported in-depth, many disparate factors need to coincide to make bulk buyouts of buildings possible, but once completed, developers would have the opportunity to renovate or completely raze and build new towers, creating hundreds of new units for buyers to consider. (With the added benefits of modern, safer materials and building techniques.)

According to new data from Realtor.com, smaller homes — between 750 and 1,750 square feet — represented about 35% of homes for sale in the region in August; an increase of 9.1% from last year. These homes, typically priced at more affordable levels, represent good opportunities for first-time homeowners. Like those homeowners previously mentioned, sellers of these smaller homes are choosing to list now to get in on a hot market, but local agents also attribute this trend to migration out of South Florida, sales of second homes, or the deaths of relatives.

To be sure, I would not expect any of these factors to individually have a major impact on the market of available homes, which will only relax appreciably once prices stabilize for a long and consistent duration. But taken together, they could put a dent in the steel curtain of inventory faced by South Florida buyers this year.

Master Brokers Forum board member Christopher Zoller is an agent at BHHS EWM Realty International. He was the 2017 Chairman of the Board for the 52,000-member MIAMI Association for Realtors, and can be reached at 305-321-3221 and/or zoller.c@ewm.com.

This story was originally published October 31, 2021 at 6:00 AM.