By Robyn A. Friedman
City & Shore Magazine
If you’re a homeowner in South Florida, you’ve probably been bombarded with solicitations from local real estate agents anxious to list your home. We have buyers waiting who will pay top dollar! Interest rates are still at historic lows! There’s little inventory and unprecedented demand!
But what happens when you sell your home? Unless you plan to leave the area, or to rent – and apartment rents here were up 36 percent in October, making South Florida the fastest-rising rental market in the country, according to brokerage Redfin – you’ll have to buy another home. And is now the best time to do so?
“The South Florida market is overheated,” says Ken H. Johnson, Ph.D., a real estate economist at Florida Atlantic University in Boca Raton. “It’s above where it should be based on the history of past prices.”
According to rankings by FAU and Florida International University, the average home in the Miami-Fort Lauderdale market traded at an 18.2 percent premium in October – considerably lower than the premiums paid in Boise, Idaho and Austin, Texas, the most overvalued housing markets in the nation, but still high.
“We believe we are at the top of a housing cycle,” Johnson added. “So, we’re recommending that people consider renting and reinvesting now, taking the money you would otherwise have spent on homeownership and reinvesting that into a portfolio of stocks and bonds. Our research shows that on average, renting and reinvesting actually wins more often than not.”
Over time, interest rates will rise slightly, Johnson says, and that will slow, or even stop, home-price appreciation. He suggests that people rent and then, in 12 to 24 months, restart their home search but bargain aggressively on prices.
Despite the challenges of the current market – low inventory, high prices and frequent bidding wars on available homes –many real estate agents advise their clients to buy. “It’s a great time to buy a house in South Florida – if you can find a house in South Florida,” says Senada Adzem, executive director of luxury sales at Douglas Elliman Real Estate in Boca Raton.
Adzem says that due to the influx of homebuyers from high-tax states such as California and New York, competition is intense and inventory is the lowest she’s ever seen. Buyers from pricey markets consider South Florida’s prices – even though they are at a premium – to still be reasonable, so they are paying those prices and forcing locals from the market, she said. To find homes for her clients to buy, Adzem contacts homeowners in desirable neighborhoods to see if they might be interested in selling, therefore creating off-market opportunities for her clients.
For locals who don’t want to wait, Adzem suggests looking for homes in neighborhoods where prices might be more reasonable. “Expand your parameters,” she says.
And in case you own a home and are tempted to capitalize on current pricing, think again. “Don’t sell just to sell,” Johnson says. “We are inventory-short here. When this game of musical chairs stops, you might not have a property.”