How COVID Has Affected the South Florida Real Estate Market

Posted On Saturday, 10 October 2020 21:08

Following months of uncertainty stemming from the global pandemic and economic slowdown, the real estate market in South Florida is starting to head up. According to reports, sales in Miami-Dade and Broward counties grew by more than 80 percent in the month of July.

The results indicate that sales of single-family homes and condos have picked up over the summer months, and this gives realtors, and sellers, a reason to think the rest of the year could see the market returning to its pre-COVID momentum.

According to statistics from the MLS (Multiple Listing Service), the market is much stronger than anticipated going into the summer. One possible reason for this is that the buyers from harder-hit areas of the U.S. have flooded, pushing sales up.

Another reason could be demographics. A growing number of Baby Boomers have reached retirement age, and this means that many are seeking to relocate.  Beyond that, South Florida could also be experiencing a similar phenomenon as other parts of the country, as renters in the city centers seek to move out to the suburbs.

If this is the case, it could signal a broader shift in the region’s real estate market as the assumption that Millennials would choose to live in cities could prove to be misguided. It is too early to know for sure.

Beyond the demographic changes, industry insiders have noted that Florida’s low-tax environment, coupled with the shift toward remote working brought on by COVID, could be a boon for the state as professionals seek to relocate for tax advantages.

While the tax benefits are not new, the one shift could be the change in the 2017 tax law, which capped the property tax deduction. The closing of offices in Boston and New York has helped speed this up as more and more executives have recognized that they do not need to be in the office to get work done.

According to data from property clerks in the area, more than 1,700 contracts for single-family homes were signed in July 2020 – compared to just under 900 contracts the year before. Most of these transactions were for homes values between $300,000 and $400,000. Meanwhile, listings for the month decreased, which points to higher sales prices in the months ahead – especially as the inventory of available homes continues to fall.

As for the condo market, sales nearly doubled, with more than 6,000 transactions recorded in July, compared to roughly 3,300 the year before. The most in-demand segment of the market was for unites priced between $200,000 and $300,000. However, demand for ultra-luxury condos (those priced above one million) also ticked up slightly compared to the year before.

While inventory for single-family homes fell in the month, available condo units did increase, especially for units priced above $500,000. Industry analysts believe this will have little impact on lower-priced units, and if anything, the condo market could split into two parts as COVID drives sales in units under $500,000. In contrast, sluggishness in higher-priced units could continue.

In terms of the outlook for the single-family market, the expected growth could drive demand for property management as many developments in the region are planned communities. According to Ardent Residential, a property management company in Miami, “education is essential to the functioning of every association,” and this could mean that new owners will force boards to rethink their approach to community management.

The wildcard in the outlook for the South Florida real estate market is what impact COVID will have on the economy going forward. While the unemployment rate has fallen from the highs earlier this year, many companies remain under pressure. 

This includes the cruise industry, which has been shut down since the virus reached the U.S. As such, the risk for tourism-related businesses remains high, and this could make it harder for some would-be buyers to get the financing they need to buy a new home.

However, continued relocation of high-paid executives from other parts of the country could offset some of the price pressure – to the extent that this class of buyers will balance out those who are no longer eligible for bank financing.

Another potential issue tied to the pandemic as that some sellers might have held off on listing their homes.  While data from the spring and early-summer point to some sellers holding off on putting their families on the market, it is too soon to tell if this will balance out. 

If sellers do rush into the market, then prices could fall quickly. While a continued reduction in inventory – especially for single-family homes and mid-ranged condos – could keep prices elevated for the rest of the year.

COVID has impacted the real estate market in South Florida as buyers from the rest of the country have flooded into the region, and those reliant on travel and tourism have found it harder to qualify for loans. If July’s results are any indication, the market has bounced back, and this could price many out of the market if prices continue to climb.

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