Home prices increased in June in Fort
Lauderdale, throughout Broward County and across South Florida, continuing to
approach the all-time peaks hit before the great real estate market collapse a
decade ago.
Even so, analysts are not forecasting
another meltdown.
“Most economic indicators support
today’s prices,” explains Ken Johnson, a professor and economist at Florida
Atlantic University. “I don’t see us waking up one day like we did in 2008 or
2009, realizing we are in free fall.”
According to the latest statistics
released by the Greater Fort Lauderdale Relators, Broward’s median price for
existing single family homes hit $355,000, up 9% over June 2016. The Realtors
Association of the Palm Beaches reported an 8% increase in the value of
existing single-family homes over the past annum in Palm Beach County, where
the median price is now $345,000. In Miami-Dade, the median price was $335,000
according to the Miami Association of Realtors, which represents an increase of
6% over the past 12 months.
Home values in these three counties,
which comprise the geographic reporting area of South Florida, have been
climbing steadily since the real estate market began to recover around 2010.
At this point Broward County is only
9% off its peak median price of $391,100, achieved in November 2005. Palm Beach
County is 18% off its pinnacle of $421,500, also reported that same month,
while Miami-Dade County is 16% below it’s high of $401,100, hit in May, 2007.
What’s Different This Time Around?
Why are matters looking different
this time around? There are a number of factors.
First and foremost is probably the
fact that home prices have been climbing steadily, but not unreasonably, with
periods of consolidation, which indicates a healthy market.
Take a look at the graphic below.
This is the S&P/Case-Shiller Home Price Index for the reporting area of
South Florida going back to the 1970s (compared to the U.S. Average, which is
the green line). You can see what the market did between 2003 to 2005. To be
perfectly frank, it went nuts. Some homes practically doubled in value over
those two years. Look at that spike. That’s what an impending bubble looks
like.
At any rate, we are not seeing home prices increasing by double digits annually in Fort Lauderdale and South
Florida. Historically an appreciation driven market experiencing boom and bust
cycles while continuing to trend upward, in a normal year it is not unusual for
home values in Fort Lauderdale to go up 7-9%. Coming out of the market meltdown
we had a couple pretty strong years. Median Sale Price for Single Family Homes
in Broward increased 27-30% over 2012 and 2013, depending whose statistics you
want to quote, but the following year the market consolidated, and the Median
Price showed only a modest 5.9% increase in 2014, followed by 7.8% in 2015 and
6.5% in 2016.
This was a very good sign, showing we
had a healthy market which could sustain good long term growth.
Supply and Demand
Another dynamic playing a large role
in shaping our local real estate market is supply and demand. Inventory is very
tight and sales are down.
Palm Beach County reported 1,855
closings in June, which is an increase of 2% over the past 12 months, while
sales in Miami-Dade sales were up 4%.
It was a different story in Fort
Lauderdale, however, the most desirable location in the state of Florida.
Through the suburban communities of Broward County sales were down 6% from the
previous June, marking the third consecutive month of declining sales.
“Closings were down in most of the
country because interested buyers are being tripped up by supply that remains
stuck at a meager level and price growth that’s straining their budget,” said
Lawrence Yun, chief economist for the National Association of Realtors.
“Demand for buying a home is as
strong as it has been since before the Great Recession,” added Yun. “Listings
in the affordable price range continue to be scooped up rapidly, but the severe
housing shortages inflicting many markets are keeping a large segment of
would-be buyers on the sidelines.”
According to Zillow’s chief
economist, Svenja Gudell, this lack of homes for sale nationwide is “bordering
on an inventory crisis.”
Gudell released a statement which pointed
out: “There are about as many homes for sale now as there were in 1994, except
there are about 63 million more people in this country now than there were
then.”
They’re Not Making Any More
Frankly, nowhere is this lack of
inventory more apparent than in Fort Lauderdale and its surrounding suburbs.
Broward County is not large. The whole county is about 27 miles tall, around 45
miles wide. Almost 60% of this area are waterways and wetlands, however, which
can’t be developed without cutting off our water supply, leaving only 471
square miles of developable dry land.
At this point this land is 99.99999%
developed. There are no more big chunks of pasture and scrub forest for
developers to bull doze into acres of tract homes. Even so, the population of
Broward County continues to swell. Florida recently surpassed New York to
become the nation’s third most populous state, mainly because you never have to
shovel sunshine off your driveway. Now home to $1.6 million, by the early 2020s
this is projected to over two million residents. That’s an increase of nearly
30% more people squeezing into the same 471 square miles of developable dry
land.
Connecting the dots, the prospects
for appreciation in home values in Fort Lauderdale and across South Florida
seems like pretty much a No-Brainer. Barring acts of God, asteroid impacts
and/or Godzilla rising from the Atlantic Ocean, it is difficult to conclude
property prices can do much more than appreciate significantly over the
foreseeable future.in property values seems relatively inevitable.
Additionally, whatever rate of
appreciation might be projected for the entire
county, prime real estate – waterfont homes, ocean front condos, houses
and townhomes in premier neighborhoods near the coast – should out-perform.
