Is There A Real Estate Bubble In South Florida?
Are we in a housing market bubble here in Boca Raton? And if so, when's this bubble gonna burst? When are prices gonna come down?
Hey, it's Andy with the Mandel Team at RE/MAX. And if this is your first time to the channel, this is where we go over everything there is to know about the South Florida lifestyle. Eating, living, sleeping, playing and being a South Floridian. So if that interests you, make sure you subscribe to our channel and hit that bell icon so you get notified every time we do a new video.
We get so many calls, texts and emails from people who are relocating here to South Florida from across the country and across the world, and we absolutely love it. So if you were thinking about making a move to South Florida, give us a call, shoot us a text, send us an email, we'd love to be your realtor of choice here in South Florida. "So we're just gonna wait till the market comes down, till the prices crash. You know, there's gonna be a crash anytime soon now." We keep hearing this from so many buyers, and I can understand why people would keep saying that. This market that we're in right now, reminds a lot of people of 2008. With a crazy frenzy for housing and bidding wars, and prices skyrocketing. So I could see why people are saying that. In 2020, house prices here on average, in the area that we sell, in the Boca Raton area, were up 11.4%. So prices are definitely up. And in 2021, nationwide, people are predicting on average, We're gonna be a little north of 7% because we have so much demand. This is where people are relocating to when they're moving from across the country.
If you've been looking for a house anytime in the last three or four months, I'm sure you've seen it, you show up to an open house, there's a line wrapped around the block. You know, every home has multiple offer situations. Six, seven, eight offers in 24 or 48 hours. It really is, insanity is the only way to describe it. So I can see why a lot of people are saying this has to be a housing bubble and houses have to crash. There's no way this is sustainable. Well, interest rates are just starting to tick up.
So, last week they went up about a quarter percent. I think they're going down a little bit today but they're starting to tick up. So that might take a little bit of demand out of the market which would probably be a good thing 'cause there's so much demand out there. But the real reason why people keep saying they think the housing market is gonna crash, is because of all the foreclosures. They're waiting for all the foreclosures. Waiting for the foreclosures. Well, let's talk about how that's gonna affect the market. Right now, we have one month supply of inventory. So at the current pace of sales, at the current level of demand, if no one else put their home on the market, in one month, there would be no homes for sale. And in certain cities, it's less than one month. In Coral Springs, it's about half a month. So in two weeks, none of the homes would be available if no more homes at the market in Coral Springs. It's mind blowing demand. But the government extended the forbearance period and the eviction moratorium and foreclosure moratorium until June, 2021.
So if you are behind on your mortgage, anything like that, you can still apply for forbearance, they cannot work foreclose on your property, they can't start those proceedings until the end of June. In my prediction, I don't think the government is going to allow anyone to get foreclosed on, at least until the end of the year. If I had to guess, I think they're gonna extend it until the end of 2021. So what does that mean? Well, the foreclosure process can't start until that moratorium expires. So if it gets extended till the end of the year, a typical foreclosure process takes six to 12 months anyway. So at the best case scenario, you're not gonna start seeing a big wave of foreclosures hit the market until at least the middle of 2022. At the same time, with housing prices continuing to increase. So if they go up, what we were predicting, the 7% in 2021, these people who are behind on their taxes, behind on their insurance, behind on their mortgage, prices have gone up. There is a very, very good chance they're gonna be able to just sell their home, make enough money, pay off their mortgage, pay off all their behind taxes and insurance and any of the things that they owe and they'll have to rent, but they are probably gonna be able to walk away from the house and not have to be foreclosed on.
Of all the properties in the country, that are fore, that are in forbearance, so it's 2.7 million homes across the country in forbearance, only about 15% of them, are still behind on their mortgage. Over 50% have either already sold the house, or they've paid off the loan. They've become current on their mortgage. So they paid whatever they were behind or even while they were in that forbearance period, they were still making their payments. Which means they just took it out of an abundance of caution because you never really know. So there's only about 15%, which is 400,000 homes in the entire country that are still delinquent with no plan to modify the loan or anything like that after the forbearance period ends. So 400,000 homes across the country with one month supply. In South Florida here of homes, you would need to get at least six more months worth a supply for it to even become a neutral or close to a buyers market. So if all of those homes hit the market at once which really isn't likely, they would still get snapped up very, very quickly. So our prediction while home prices are continuing to go up, we don't think this is a bubble that's gonna pop anytime soon.
Here in South Florida, this is where people are fleeing other States from. California, all, all out of the States in the Northeast. For whatever reasons they're moving. For tax reasons, political reasons, there's a million reasons to name, weather, just quality of life in general. People are moving down here. There is so much demand, that we just don't see this market crashing and prices plummeting down. There's just too much demand for that to happen. In addition to that, millennials are the biggest generation in America. There are over 72 million millennials in the country. We are the largest group and we're getting to the age where we start families, we get married. We do things that typically require houses. So you need more space for a family. All that kind of stuff, we're getting to that age where that's necessary. Only 43% of millennials currently in the country own houses. That means 57% of us are gonna be thinking about or wanting to buy houses in the near future. That is a lot of pent up demand from buyers who aren't in the market yet even. And then you got Gen Z behind us which they're gonna also need houses. We just don't have enough supply of homes across the entire country, yet alone South Florida here. We don't have enough homes to meet the demand. In South Florida if you look on a map, we're pretty landlocked here on the west side of, of these counties. From Broward, Dade and Palm Beach County, to the west of us, a lot of that is Everglades. You really can't build on that land. So because land is constrained, prices are gonna continue to go up.
So while I, you know I encourage you to do whatever you think is best for you, you're gonna continue renting, you're gonna pay someone's mortgage one way or the other. So how much is it gonna cost you? Or wait another one to three years in rent hoping that the market crashes and the price comes down five, 10%, something like that. If the market goes up in two years, another 15, 20% and then it comes down, maybe hopefully 5%. Did you really end up any better? You could have been paying your mortgage, instead of your landlords, for two to three years, it really just doesn't make a ton of sense. There is a ton of demand out there. Interest rates are super low. It's a very competitive market. It is, it is tough for buyers. So you gotta be ready to do the things that you need to do to get your offer accepted. And we'll talk about that in another video. But we just don't see the market and the housing bubble, per se, popping and prices plummeting anytime soon.
I hope that adds a little bit of insight to you. If you have any questions on the housing market down here, give us a call, shoot us a text, send us an email. We'd love to be your realtor of choice in South Florida.