Key highlights from this report:
- A local economist called the South Florida housing market “overvalued.”
- Homes in the Tri-County area were 20% overpriced, according to that analysis.
- The Miami housing market, in particular, could see a price crash in 2021.
- Home prices are already dropping steadily in Miami Beach.
- COVID-19 cases and unemployment claims continue to surge in Florida.
Home prices in South Florida have held up through the coronavirus (COVID-19) pandemic — so far. But recent research and housing forecasts suggest that the Miami (and broader South Florida) real estate market could see a price crash through 2020 and into 2021.
To be clear, no one can predict future economic or housing conditions with complete accuracy. And there’s a lot of unpredictability right now, largely due to the ongoing COVID-19 crisis. So we can’t say for sure if the Miami or South Florida real estate market will “crash” in 2020 or 2021.
But based on current housing trends, it seems likely that home prices in the region will drop over the next year or so.
A South Florida Housing Crash in 2020 – 2021?
Earlier this month, Florida Atlantic University (FAU) published new research and analysis conducted by one of its own professors. And it doesn’t bode well for the housing market in South Florida.
According to Ken Johnson, a real estate economist and professor at FAU, home prices in the area have become significantly overvalued in 2020, relative to long-term pricing trends.
To quote that July 2020 report:
“South Florida homes are overvalued by close to 20 percent, the highest level in eight years, although record-low interest rates still drive demand despite a once-in-a-century pandemic that eventually could pummel the market.”
Johnson pointed out that a COVID-19 vaccine or herd immunity could help the South Florida real estate scene weather the storm. But without either of those things, “the local housing market could be in for a difficult stretch,” he said.
Johnson added that the current market is best suited for professional investors who are used to evaluating and dealing with such risks. But regular home buyers might want to “sit this one out on the sidelines.”
Geography: South Florida is a collective term commonly applied to the southernmost region of the state. It’s also sometimes referred to as the “Tri-County” area, in reference to Miami-Dade, Broward, and Palm Beach Counties. Major cities in the region include Miami, Hialeah, Fort Lauderdale and Port St. Lucie.
Negative Price Forecast for Some Cities
Will the Miami or broader South Florida housing market see a major crash later this year, or in 2021? Probably not. But it seems almost inevitable that home prices will drop to some degree as we head into the fall of 2020, and beyond.
The housing research team at Zillow, comprised of several economists and analysts, is one group that expects South Florida home prices to decline over the next year or so. They recently issued negative forecasts for most cities in the region, including Miami, Fort Lauderdale and Hialeah.
Regarding Miami, the second-most populous city in the state of Florida, Zillow wrote: “Miami home values have gone up 1.7% over the past year and Zillow predicts they will fall -2.1% within the next year.”
That statement was issued in late July 2020. So the forecast side of it extends into the summer of 2021.
In the Miami Beach area further south, property prices have been falling for some time now. And they’re expected to continue dropping for the foreseeable future. According to Zillow’s research group, the median home value there dropped by -2% over the past year and is expected to “fall -3.2% within the next year.”
The Miami Beach housing market, in particular, is currently experiencing a kind of “soft crash.” It suffers from a serious supply-and-demand problem. There are tons of properties listed for sale, but hardly anyone is interested in buying them. This has created a stagnation problem that in turn has lowered home values.
Home Sales Drop as Demand Wanes
According to recent data reported by the Miami Association of Realtors, the number of closed sales for single-family homes dropped by nearly -12% in June 2020 compared to a year earlier. That’s for Miami-Dade County, specifically.
Other counties in the region also experienced a drop in home sales in June of this year. During that same 12-month reporting period, closed sales fell by -10.3% in Broward County and -12.6% in Palm Beach County, Florida.
The sale of townhomes and condos took an even bigger in South Florida. In Miami-Dade County, for example, condo and townhome sales dropped by a whopping -33% from June 2019 to June 2020.
Of course, it doesn’t help that South Florida is currently one of the epicenters of the coronavirus (COVID-19) pandemic. In Miami-Dade County, the state’s most populous county, 2,901 new coronavirus cases were reported Sunday, July 26. That brought the countywide total up to 104,755 cases, along with 1,388 virus-related deaths.
Neighboring Broward County had 49,350 COVID cases and 605 deaths, as of July 26. Those two counties alone counted for nearly half of Florida’s total case count, in late July.
An Abundance of Housing Supply in Miami Area
The Miami-area housing market currently has a higher level of supply than most similar-sized metro areas across the United States.
According to the national real estate brokerage Redfin, the Miami metro area had about an 8-month supply of homes for sale as of June 2020. That was quite a bit higher than the national average for that same month, and higher than most other metros in the U.S.
In a supply-heavy real estate scene, homes tend to stay on the market longer before going under contract. Sellers become more anxious, often lowering their sale prices to attract buyers. Over time, this kind of imbalance can lead to price erosion. In extreme cases, it can lead to a housing market crash or at least a “correction.”
The South Florida housing market — and Miami in particular — has become a lot more sluggish over the past few months. COVID-19 is the overriding reason for this trend. Citing Redfin’s data again: In June, homes for sale in the Miami area spent a median of 91 days on the market. That was well above the national median for that same time period and indicates a slow or “cool” housing market.
Further south in Miami Beach, there’s an abundance of properties for sale. Many of them have been sitting on the market for months, with few (if any) offers. Housing demand has just evaporated in that housing market. That’s partly why this market is seeing a kind of home-price crash in summer 2020.
Disclaimer: This article includes data and forecasts provided by third parties not associated with the Home Buying Institute. Real estate predictions are the equivalent of an educated guess and should be treated as such.