Q&A of the Day – Is Florida’s Real-Estate Market Really In a Buyer’s Market?
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Today’s Entry: Brian, I have a question about the real-estate report. Correct me if I’m wrong, but aren’t the already high real-estate prices still heading higher? How can South Florida really have one of the best buyers' markets with prices so high and still rising?
Bottom Line: Today’s note is in response to the just released Zillow study showing all of Florida’s largest metros currently ranking among the best in the country for home buyers. Miami, Tampa, Orlando and Jacksonville are all among the top metros for buyers right now, according to the report, with the Miami-Fort Lauderdale-West Palm Beach metro the most buyer friendly in the state. In addressing today’s question, what does Zillow’s report mean and how good of a buyer’s market is South Florida in?
It’s natural to look at the cost of Real Estate throughout South Florida, compare it to where prices were a few years ago and question whether it’s really a good environment for buyers. And yes, prices have continued to rapidly rise over the past year. In Palm Beach County, for example, the median sales price for a home in May of 2023 was $472,000. Last month the median sales price was a record $602,500! Now, with that said, the question isn’t about what has happened. It’s about what’s happening right now. The average length of time it takes for a buyer to close on a property is over 30 days – meaning that the sales reflected last month were put under contract in March and April. Another important factor is when the homes that were sold in May were listed. The average length of time on market, in South Florida in May was 64 days – meaning that the properties sold were most commonly listed in February and March. There’s a lot that’s begun to shift in the market since then.
Remember how I mentioned the median sales price in Palm Beach County was over 600k in May? The average list price was ‘only’ $519,000 during the month. In fact, the average list price peaked in November of last year and it has slowly been coming down since last fall. Here are the changes in the market since peak levels:
- Average list price: Down 9%
- Days on market: Up 28%
With list prices lower and days on the market higher it’s a given that while May produced record high sales prices, we’ll begin to see lower median prices in coming months. On that note, most recently the average price of a listed property in Palm Beach County is 5.6% lower than a year ago. In fact, the average list price is now at the lowest level since March of 2022. Now again, I don’t expect the average person to see prices north of a half million dollars for a home and inherently think – gee this is great for buyers – but everything is relative. Florida has consistently been one of the most desirable locations in the world, let alone the country, to live in. Prices reflect that reality. South Florida has consistently been one of the most desirable locations (often the most desirable) within Florida. Prices reflect that reality. But with that said, when all factors are considered, the last time South Florida’s real-estate market had conditions as favorable for buyers as the current market was November of 2019 based on supply and demand.
Zillow’s Market Heat Index is a 1-100 scale with 1 being the best possible buyers' market and 100 being the best possible sellers' market. The current heat index number for South Florida is 39.2, down from 68.9 at the peak of the market. Somewhat similarly Redfin compiles what they call their “Complete Score”. Most recently the Palm Beaches are averaging a 46 score, meaning that the market is only somewhat competitive from a buyer's perspective. While the two real-estate companies maintain slightly different indexes, they both are pointing in a similar direction that’s far more favorable for buyers than the market has been since the onset of the pandemic.
One number I’ll be watching next month is $490,000. That was the median sales price in Palm Beach County last June. While I expect May will represent the peak median sales price for the year, what I’m doubtful that we’ll see anytime soon is an outright decline in the local real estate market. There’s, of course, a natural seasonality in real estate sales and market performance is measured year-over-year. Should the median sales price for June come in over $490k that would still be illustrative of an appreciating market. I’d expect that will prove to be the case for now. For would-be South Florida buyers, waiting to buy has been a losing proposition for 13 consecutive years. The softer summer market that’s presenting itself may prove to be the best opportunity to step into the market for the foreseeable. Should interest rates come down late this year or early next year, it could recharge demand and push prices higher if South Florida remains a desirable location, which history suggests is likely.