Why is the South Florida Real Estate Market a Tale of Two Cities?

Depending on your perspective of the South Florida real estate market, it is either the best or worst of times, especially with everyone discussing the significance of import tariffs and its significance on the greater economy.

Buyer’s Market Conditions:

For the first time in many years, we have seen a larger selection of listed homes from which to choose. Simply put, it has become a buyer’s market, with sellers, including home builders, becoming very aggressive in attempting to sell their property.

Home builders are providing huge concessions, that the market has not seen in over a decade. While the good news is that residential prices have been dropping interest rates only recently have started to decline, having remained stagnant over the past several months. The new recent decline in interest rates is due to fears of a possible recession and people taking money out of the stock market and placing those funds in cash and the bond market.

Impact of Interest Rates:

Of course, a savvy home buyer will take advantage of the more competitive purchase prices and anticipate that they will have an opportunity to refinance as mortgage rates continue to decrease. If home buyers wait till rates drop further, they will be competing with more buyers who will then start to push prices back up.

Seller Challenges:

However, what is good for the buyer is not always good for the seller in the real estate market. Sellers are starting to recognize that the amount of equity that they thought they had in their homes was merely a short-term phenomenon which now has to be adjusted to the new economic realities. Simply put, home sellers were able to sell their homes and use their equity to buy new homes. Today, however, sellers find that they are able to purchase, with the equity that they built in their original homes, “less for more”—smaller homes for with higher price tags. But of course, these home sellers (turned new home buyers) were reluctant to enter the market knowing that they were going to have to give up their low interest mortgages.

Nevertheless, although home sellers were not listing their properties due to this “lock down effect”, as discussed in our earlier blog, because they had very attractive mortgages, life moves on for all of us and eventually people need to move. People end up taking new jobs, for instance, or have personally compelling reasons to either want or have to move. For current sellers, the “lock down effect” has changed a bit because over the past several years there has been a significant increase in real estate values that should still, in all likelihood, provide sellers to walk away with significant equity in their homes.

If you are a Realtor or somehow directly or indirectly involved in South Florida real estate you are starting to see that there is more business to be had, whether prices have fallen or not. The number of transactions is starting to increase, and that is only good news since the South Florida real estate market has been remarkably quiet for the past two years.

Condominium Market Issues:

The older preowned condominium market in South Florida, since the horrific Surfside tragedy, has been in disarray, based on various new laws that have come into effect that require condo associations to maintain adequate reserves for deferred maintenance expenses. Such expenses include new roofs, replacing elevator parts and of course maintaining the structural integrity of high-rise condominiums. Sellers have had to address the fact that the new owner was going to accept new liability and responsibility for such expenses, and that has now forced the prices of preowned condominiums to come down substantially in the past twelve to eighteen months. In addition, the cost of insurance for these associations to maintain replacement value of the buildings has dramatically increased, and, to make matters worse, lenders as well as the federal government maintain blacklists of those condo associations that do not have adequate reserves, and therefore banks are not willing to lend money to people buying in certain condominium buildings. That list is frequently called the “blacklist”. These issues do not necessarily affect new luxury condominiums that have predominately cash buyers.

So, whether you are buying or selling commercial or residential property in South Florida, we are always here guide you through these unique times in the South Florida real estate market.

From the trenches,

Roy Oppenheim