Will the South Florida Real Estate Market Crash in 2023?

The real estate industry overall is buzzing with rumors and speculation about an upcoming housing market crash, much like the Great Recession in late 2007. In South Florida, limited new supply have caused the median home value to continue increasing and buyer activity to slowdown. This leaves many local home buyers and real estate investors wondering if the Miami metro housing market is a bubble waiting to burst.

But are these fears founded, and if so, when will the South Florida real estate market crash? Read on to discover the answers to these questions and more.

Understanding the Statistics in the Southeast Florida Real Estate Market

To get a good sense of the current state of the Southeast Florida housing market and to predict how it may evolve in the future, you have to look at the current statistics for the region. Let’s do just that. Below, we’ve compiled key market data for Miami-Dade County, Broward County, and Palm Beach County.

Average Sales Price

Average sales price is a great "temperature metric" for real estate markets overall. Currently, the Southeast Florida real estate market's average sales prices are as follows:

Miami-Dade: $1,034,110, down from $1,054,421 in June 2022
Broward: $823,005, down from $823,928 in June 2022
Palm Beach: $1,066,235, down from $1,182,748 in June 2022.

As you can see, most counties in the Southeast Florida real estate market have seen average sales price decrease slightly over the last year, with Palm Beach experiencing the largest annual decrease of 9.9%.

Median Sales Price

Measuring by the median takes out any outlier transactions where a property sold at a very high or low price, this makes the median sales price a more reliable metric than average sales price. At the moment, median sales prices in the Southeast Florida real estate market are below:

Miami-Dade: $622,500 in 2023 as compared to $579,000 in 2022 for a 7.5% increase
Broward: $615,000 in 2023 from $590,000 in 2022, a 4.2% increase
Palm Beach: $625,000 in 2023 from $620,000 in 2022, a 0.8% increase

An increase in median sales price may be an indication that South Florida is experiencing a shortage of supply of lower priced homes. This will result in more buyers shifting their focus to higher-priced properties and therefore driving up the median sales price.

Average Rent Price

Of course, average rent prices also matter a great deal, particularly since many Americans are renting instead of buying because of inflation and other economic factors.

Here’s the breakdown of average rent in the Southeast Florida market:

Miami-Dade:

Miami: $3,500
Miami Beach: $3,650
Sunny Isles Beach: $5,500
Aventura: $3,625
Key Biscayne: $7,625

Broward:

Fort Lauderdale: $3,200
Pompano Beach: $2,800
Pembroke Pines: $2,800
Hollywood: $3,250
Hallandale: $3,400

Palm Beach:

Palm Beach: $11,500
West Palm Beach: $2,900
Boca Raton: $3,500
Delray Beach: $3,250

Again, Palm Beach’s property values are higher than the property values in Miami-Dade or Broward Counties. That said, these relatively high rent prices support recent reports that rank Miami as one of the most competitive rental markets in the country, largely due to recent migration trends.

In addition, recent interest rate hikes have hurt the purchasing power of South Florida homebuyers and forced many back into leasing, making the rental market even more crowded.

Home Sales

Overall home sales can inform you about the broader market activity, as well as help identify market trends, inventory levels, and seller/buyer behavior, especially when you compare year-over year. Here's a look at single family home closed sales for the month of June:

Miami-Dade: 1,004, down from 1,139 in 2022, an 11.9% decrease
Broward: 1,256, down from 1,440 in 2022, a 12.8% decrease
Palm Beach: 1,428, down from 1,472 in 2022, a 3% decrease

In every county in Southeast Florida, overall home sales are down. This is likely a result of property prices still being quite high for the average buyer, though it hasn’t stopped significant investments from other parties and individuals.

New Pending Sales

New pending sales is also valuable metric as it provides a real-time look into buyer demand and the potential for future closed sales. However, keep in mind that as a forward looking indicator, it is susceptible to market changes, particularly those concerning availability of financing for buyers. Here's a look a new pending sales for single family homes in June:

Miami-Dade: 1,064, up from 1,057 in 2022
Broward: 1,209, down from 1,363 in 2022
Palm Beach: 1,277, up from 1,251 in 2022

Median Days on Market

Lastly, you have to consider the median days on the market for listed homes. Homes spending a longer time on the market can indicate a few things including slower market activity, a shift towards a more balanced or buyer's market, market seasonality, or overpriced homes. Here's how the tri-county area performed in June:

Miami-Dade: 71 days, up from 60 days in 2022
Broward: 60 days, up from 51 days in 2022
Palm Beach: 73 days, up from 55 days in 2022

Cash Sales

Cash sales are a good indicator of investor and foreign national activity as they typically close cash. Let's take a look at the number of cash sales that took place in the single family home market in June:

Miami-Dade: 267 sales were in cash as compared to 344 in 2022 (-22%)
Broward: 328 sales were in cash as compared to 404 in 2022 (-18%)
Palm Beach: 613 sales were in cash as compared to 689 in 2022 (-11%)

Months Supply of Inventory

Looking at the month's supply of inventory helps analysts determine if the market is a buyer’s or seller’s market. A buyer’s market is one that has at least 5.5 - 6 months of inventory. The figures for Miami-metro show that we are not in a buyer’s market yet but certainly inching closer.

Miami-Dade: 3.3 months in 2023, up from 2.8 months in 2022.
Broward: 2.7 months in 2023, up from 1.9 months in 2022.
Palm Beach: 3.0 months in 2023, up from 2.3months in 2022.

New Listings

Taking a look at new listings can be useful in understanding the current state of supply and demand dynamics.

Miami-Dade: 1,241 new listings in June 2023, down from 1,939 in 2022
Broward: 1,524 new listings in June 2023, down from 2,149 in 2022
Palm Beach: 1,555 new listings in June 2023, down from 2,151 in 2022

Across the board we saw new listings decrease. A decrease in new supply can be an indicator of seller hesitation and create more challenges for buyers as they have less of selection of homes to choose from that fit their needs and budget.

Will 2023 Be a Seller’s or Buyer’s Market in South Florida?

Given the above information, 2023 could tilt towards being more buyer friendly in South Florida, but with limited new supply, sellers still hold a lot of leverage. However, we are seeing sale-to-list ratio fall across the tri-county area which means seller's are more open to negotiation than they were the same time last year.

Keep in mind that inventory for single-family homes in Miami is still low. Additionally, interest rates for a 30-year fixed mortgage have hovered in the mid 6s for most of 2023. This has created a restriction in supply as more homeowners opt not to sell in order to avoid having to buy in a higher-rate environment. This is felt more in the $1M and below market as the average home buyer in that price segment is more dependent on obtaining a mortgage.

Why Might the South Florida Real Estate Market Crash in 2023?

It’s certainly possible that the South Florida real estate market could experience a crash in 2023.

1. Priced-Out Buyers

Firstly, the average American home buyer is finding themselves increasingly priced out of worthwhile home opportunities. This will reduce the overall number of potential buyers in the market. This decreased buyer pool can lead to a slowdown in sales activity.

2. General Economic Downturn

We can't forget the general economic downturn and higher-than-average inflation currently affecting the country. Inflation and economic downturn usually have negative impacts on all housing markets.

3. Interest Rates

The Feds took a pause on rate hikes in June, which is a good sign that their measures to fight inflation are working. Some economists forecast that the 30-year fixed mortgage rate might fall to the low 6s by the end of 2023. However, the Federal Reserve have recently announced another hike as the US economy is not entirely out of the woods yet and inflation is still considered elevated. High interest rates can contribute to a market crash as it reduces affordability and as we've seen recently, restricts activity from both supply and demand side.

Why a South Florida Real Estate Market Crash is Unlikely in 2023

That said, there are several big reasons why a South Florida real estate market crash is very unlikely in 2023.

1. Low Inventory

As noted above, Miami and the broader South Florida market have relatively low housing inventory. Until that housing supply increases significantly, up to about 5.5 or 6 months' worth of inventory, a seller's market remains a strong possibility.

This is true even in places like Naples. This also makes building new construction an attraction option for investors — and for Florida realtors, architects, and home builders.

2. New Buyers

Furthermore, new buyers continue to flood the South Florida real estate market. While transplants to Florida have, in the past, traditionally been snowbirds from New England (especially New York), that’s not the case as much anymore.

Florida is drawing in a staggering number of tech and finance professionals — for the first time ever, Florida has more job opportunities than New York. Favorable economic and tax conditions are drawing both start-ups and established corporations, particularly in tech/finance.

While you still have early retirees or corporate executives shopping for a primary residence or perhaps a second home, the booming job market (a 2.3% growth in the labor force) is the trend really making waves in the Sunshine State.

A number of homes will be snatched up by foreign nationals looking to invest in valuable property. They contact Florida retailers looking to acquire new homes for real estate investing or to achieve dreams of homeownership.

3. Personalized Lending Standards

Larger banks are becoming more conservative and rigid with their lending standards in qualifying applicants based on income, which is more difficult given the high cost of debt (high interest rates). That’s why many people are turning to local private lenders who offer custom loan solutions and see value where big box lenders do not.

4. Inflation Slowdown

At the top of the year, the annual inflation rate was around 6.4%. According to the US Labor Department, the annual inflation rate for the United States was 3.0% for the 12 months ended June. The Central Bank has a target of 2% and while another rate hike may be necessary to bring down inflation further, it appears that a hard recession won't be necessary to get us there. In addition, we are seeing US consumer optimism increase and more American's feeling hopeful about the future, according to a study held by the University of Michigan.

What Are Some Predictions for the 2023 South Florida Real Estate Market?

In keeping with the trends noticed in the last half of 2022, the 2023 South Florida real estate market will likely see a decrease in sales activity unless interest rates decrease or we receive a surge of inventory. We are unlikely to see the price peaks for single-family homes, condominiums, and other types of properties that occurred in the first half of 2022.

However, ultra-luxury properties, like waterfront homes, for example, are still selling at a premium. High-end buyers looking for properties in the 10 to 20-million-dollar range are usually impervious to interest rate risk.

That said, there’s still a lot of potential for current and prospective investors. Housing prices remain high, and inventory clogs mean that demand is highly competitive. This enables those that are willing to make a cash deal to snag the right property for the right price, while buyer activity remains slow.

As inflation decreases and the broader national economy stabilizes, we may see an increase in inventory as homeowners decide to finally make their move before any sizable decrease in home values take place.

Will the South Florida Real Estate Market Crash in 2023?

Ultimately, it seems unlikely that the South Florida real estate market will crash completely in 2023. However, it’s also possible that there could be price corrections in the broader market and new inventory to build confidence for buyers and sellers alike.

Bottom Line

All in all, the South Florida real estate market is primed for yet another evolution. To make sure you are positioned perfectly for your investment goals, you should contact the knowledgeable loan officers at Vaster.

Our skilled specialists can cater to the needs of any buyer, whether you’re looking for a primary home, vacation spot, or investment property. Our local expertise (backed by Fortune International Group and the Related Group) gives us unparalleled knowledge about the South Florida real estate market.

We offer both home and commercial loans that are flexible to our clients’ unique needs and financial situations. Vaster has a range of short and long-term financing options, including super jumbo loans, blanket loans, rental property loans, no-DSCR loans, and more. Reach out to our loan specialists to learn more today.

Sources:

Miami Housing Market Cools but Is Still the Hottest Around | WSJ

Miami-Dade County Single-Family Homes 2023 Q1 Detail | Miami Realtors

Broward County Single-Family Homes 2023 Q1 Detail | Miami Realtors

Palm Beach County Single-Family Homes 2023 Q1 Detail | Miami Realtors

Miami-Dade County Townhouses and Condos 2023 Q1 Detail | Miami Realtors

Broward County Townhouses and Condos 2023 Q1 Detail | Miami Realtors

Average Rent in Miami & Rent Prices by Neighborhood | RentCafe

Average Rent in Plantation & Rent Prices by Neighborhood | RentCafe

The Great Recession and Its Aftermath | Federal Reserve History

Average rent in Palm Beach, Palm Beach County, FL | RentCafe

Palm Beach County Townhouses and Condos 2023 Q1 Detail | Miami Realtors