Researcher: The South Florida housing market sees highest overvaluation in eight years
The South Florida housing market is experiencing its highest overvaluation in eight years. Still, a housing crisis is unlikely, one expert said.
Florida Atlantic University professor and real estate economist Ken H. Johnson found that homes in the Tri-County area were 20% overpriced. The study “Consumers should be careful to avoid cycle’s peak, economist warns” analyzed quarterly reports from the Federal Housing Finance Agency. Published on Monday, the study measured changes from 1982 to the first quarter of 2020.
Homes in Miami-Dade were valued 19.2% above their long-term pricing trends, according to the study. Home values in Broward were priced 17.4% above long-term price growth.
“We are slightly overpriced with downward pressure on home ownership,” Johnson said. “In the housing crash, we were 60% overpriced. Should we be leery of a market crash? I don’t think so because we have stronger incomes, low interest rates and sound credit. Government stimulus is causing mortgage rates to stay at record lows.”
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In early 2020, 76% of people in South Florida had good credit compared to 67% in early 2009, according to Federal Reserve Economic Data. The percentage of people with good credit in South Florida in 2020 is the highest amount that the region has seen in the 21 years of data collection, Johnson said.
Interest rates are at 3.2% for a 30-year fixed loan, Johnson said, nearly the lowest rate for 30-year fixed loans in 40 years.
Homeowners are taking advantage of interest rates, helping keep the housing market afloat, he said.
“All evidence would suggest that the pandemic would slow demand for housing but two things are happening: People in their 20s, 30s and 40s feel that they are not as impacted by the virus, and these same people are buying now, taking advantage of the low interest rates,” Johnson said.
The luxury market is expected to feel the most headwinds. Homes priced above $1 million “are the more expensive homes, they inflate the most,” he said.
Home values continued to increase for single-family homes and condos in Miami-Dade and for single-family homes in Broward year-over-year in May. Looking ahead, prices are expected to remain relatively the same.
“Prices are not expected to continue to rise as quickly as they used to,” Johnson said. “They will likely stay the same or see year-over-year growth increase by 3% or 4% instead of the 6% or 7% that we’ve seen in prior years.”
This story was originally published July 15, 2020 at 7:00 AM.
