South Florida Housing Market Update [May 2022]

Is the housing bubble finally starting to pop? Are these skyrocketing interest rates finally starting to bring down home prices? Hey, it's Andy Mandel with the Mandel Team at RE/MAX, and I'm here to bring you this month's May 2022 Housing Market Update video. As always, for the purposes of these videos, we're gonna be talking about single-family homes only. So no condos, no townhouses, and we're not talking about any country clubs, or 55 and over communities, we're only gonna be discussing Parkland, Boca, and Coral Springs. Those are the areas where our team does the predominant amount of our business. Now, the stats that we like to give are typically the leading indicators of what's going on in the market right now to show you what the real estate market is going to do in the next 30, 60, 90 days, not where it's been in the past. So let's get into it.

The first stat we like to look at is the number of new listings hitting the market. Now that is down on average 18% from April of 2022 compared to April, 2021. So we're seeing fewer homes hit the market last month compared to the same time this year. So we're still in this low inventory environment, fewer homes every month have been hitting the market. At the same time, we're seeing pending sales so the number of homes that are going under contract that's down 25%. So fewer homes are selling compared to the same time last year. So inventory is down, yes, but pending sales are down more so, if that continues, we're gonna see homes stay on the market a little bit longer. As of now, last month, the average days on market was nine days so that's still pretty fast, you know, less than 10 days. That's the same as it was at this time last year so homes are still selling quickly at this time.

The next stat we like to look at is the closed price to list price. So what percentage of the asking price are sellers getting? That's 101% which is up 1% from last year at the same time so sellers are still getting 100% if not slightly more of their asking price in this market.

Now, finally, the last stat we like to look at is what I think is the most important stat is the number of months supply of inventory. So what this stat shows is that if there were no more homes to hit the market, how long would it take for all of the homes on the market to go under contract and sell? Right now, that is at 1.17 months of inventory, that's up from 0.91 months of inventory last month. So a balanced market is five to six months of inventory so we are still really in a seller's market basically since the beginning of COVID, the month supply of homes has been give or take one month so we're still right there in very low inventory but it is up from last month.

So let's talk about what this means and what our predictions are for the rest of the year. I don't think the number of new homes that hit the market is gonna go up dramatically, there's still not much out there to buy and what's out there is expensive and this market really isn't giving a ton of would-be sellers any reason to put their homes up for sale besides just a very high price. The people I see selling in South Florida right now are those that own investment properties that they no longer wanna own, so they're cashing out, they have to move out of the area so they have to sell, or people who've really just outgrown their current home. Like they have three kids in their starter three bedroom home.

There's always gonna be the four Ds of real estate that cause people to have to move: death, diamonds, divorce, and diapers. There will always be people who do need to sell. However, because interest rates went up so dramatically and they're only going to continue to go up, I think a decent amount of buyers are gonna sit on the sidelines and they're not gonna buy like they originally wanted to. This may be because they no longer qualify at 5 1/2% when they did at 3 1/2% or they just don't wanna buy with these new interest rates. But historically, a healthy and normal interest rate for mortgages is in the 5 to 6% range. So we're not way above historic levels, it's just sticker shock because we've been used to 4 1/2% and less since the a housing market crashed after 2008 and much less since the pandemic. When you saw 3 1/2% 60 days ago, and now you see 5 1/2%, it's a real sticker shock. Now, this does not mean that prices are gonna come crashing down, and to be clear, I think they're going to continue to go up from here, but at a much slower and normalized pace.

There's still so much more demand out there compared to supply. We still only have one month of supply but I think homes are gonna start to get fewer offers than they were getting in the last couple of years. I'm hoping this goes back to a more normal market and I'm predicting that instead of every listing getting 10 plus offers in one day, most homes will only be getting two to three offers as we get through summer and into fall which means they're likely gonna sit on the market a little bit longer. This is much more in line with what it was pre-pandemic and it probably means that sellers are not gonna be able to drive the kind of terms that they were getting before. With fewer offers, like I said, I think homes are gonna sit on the market a little longer which while it doesn't increase the number of new listings hitting the market, it does increase the number of available homes for sale. It's gonna make it feel like there's more to choose from because if they're not selling so fast, if they're sitting on the market for even a week, two weeks, that's a dramatic change and a big break for buyers.

This market is definitely in the beginning stages of a shift, in my opinion. Now let me reiterate a shift is not a crash. It just means that this insane market that we've been living in might lose some of its insanity, and after all, isn't that what buyers really wanted. They wanted the market to cool off a little so they could buy. So if you're a buyer, take advantage of this opportunity. Don't let the fear of the unknown or the fear of change stop you from buying. At the end of the day, you gotta live somewhere and the alternative is skyrocketing rent, likely continued price appreciation, and definitely continued interest rate increases. Now, if you're a seller, what does this mean for you? It's time to put your home on the market if you've been waffling on should you do this or not? It's definitely the time and you should do it sooner than later. As interest rates continue to go up towards the summer and into the fall, it's going to continue to reduce the number of buyers that are out there that qualify for a home like yours. Every 1% increase in the interest rate is 10% less home that a buyer can afford for the same amount of money. So if you're thinking about selling, sooner is better than later, but again, I wanna be clear, I do not think this market's gonna crash. I don't think prices are going to come falling down but I know what's going on in the market right now, and it is still a good market. My crystal balls in the shop, no one can predict what's gonna happen in the future but this is still a very robust, very good real estate market and I think it's gonna be like this for a while now.