South Florida Homebuyers Bear Burden of Keeping Prices Within Reach
South Florida homes remain significantly overpriced but not as much as they were during the summer, according to a study from researchers at Florida Atlantic and Florida International universities.
Miami-Dade County is 18.51 percent above its long-term pricing trend, compared to 19.20 percent in July, while Palm Beach County is overpriced by 18.32 percent, down from 18.70 percent. Broward’s degree of overpricing fell to 16.41 percent from 17.40 percent. The analysis is based on more than 40 years of housing data from the Federal Housing Finance Agency (FHFA).
While the run-up in prices may feel “unnervingly reminiscent” of the historic housing collapse of 2006-2011, the level of overpricing and the economic climate are vastly different today, say economist Ken H. Johnson, Ph.D., and Denise Gravatt, D.B.A., both of FAU’s College of Business, and Eli Beracha, Ph.D., of FIU’s Hollo School of Real Estate. What’s more, the average home across all three counties in 2008 was roughly 65 percent above its long-term pricing trend.
“We’re nowhere near the level of overpricing that occurred more than a decade ago so another crash is pretty unlikely,” Johnson said. “Remember, the economy back then was in much worse shape, with higher mortgage rates, softer underwriting standards and a glut of homes for sale.”
The current environment features mortgage rates near record lows and a severe shortage of homes on the market, both of which help to keep prices elevated. Prospective buyers need to counteract those two forces and bargain aggressively to avoid greater degrees of overpricing, which could threaten the stability of local housing markets, according to Johnson.
“While home prices continue to rise, they are doing so at a slower rate of appreciation, which is easing the degree of overpricing,” he said. “It’s really the current crop of buyers who bear the responsibility of keeping a lid on home prices.”
In a frothy market, buyers are tempted to get into bidding wars, for fear that they will be left out, but this is the time to be the most discriminating, Beracha explained.“Falling in love with one house is the surest way to overpay,” he said. “Don’t get caught up in the emotion of the moment. Walk away if the asking price gets too high or the contract terms seem too one-sided for the seller. There will always be another property.”