Study: South Florida Housing Premiums Growing Despite Slowing Rents
30 Abril 2024 - 1:00PM
Housing premiums in the Miami metropolitan area increased once
again despite rising interest rates, a potential worrying sign for
the housing market, according to researchers at Florida Atlantic
University and Florida International University.
According to the end of March data from the Top 100 U.S.
Housing Markets, the typical home in South Florida is 34.7 percent
overvalued compared to its long-term pricing trend, up 15-basis
points from the month before.
“This trend does concern me as prices are still going up in the
Miami metropolitan area, but not in the rest of the measured areas
in Florida,” said Ken H. Johnson, Ph.D., real estate economist
with FAU’s College of Business. “Price growth should be tepid
considering the slowdown in rents and rising interest rates, but
South Florida prices continue to rise despite these market
forces.”
The Top 100 U.S. Housing Markets, a part of FAU’s Real
Estate Initiative, calculates how overvalued or undervalued the
typical home is in the country’s 100 most populated metros. Johnson
and fellow researcher Eli Beracha, Ph.D., director of FIU’s Hollo
School of Real Estate, examine the difference in actual average
home prices in a city and compare it to the long-term home pricing
trend for the same city to calculate how overvalued or undervalued
a housing market is using publicly available data from Zillow.
“South Florida’s rise in premiums suggests there is a dynamic on
the supply side of the market specific to the local market that has
yet to be addressed. We want property prices for an area to closely
track the area’s long-term property pricing trend,” Johnson said.
“This allows purchases today to be worth more soon without worrying
about home prices violently swinging above and below the trend.
This is a key factor in ensuring the American dream of
homeownership. Unfortunately, this has not happened for the last
two cycles in South Florida.”
Other metropolitan areas in Florida, however, showed
positive signs of returning to their long-term trends. Measured
against the previous month’s data, Cape Coral posted a 63-basis
point decline in premium; North Port, a 48-basis point decline;
Deltona, a 32-basis point decline; Lakeland, a seven-basis point
decline; and Tampa, a four-basis point decline.
“As prices slowly make their way back to normal, it is a tossup
between renting and reinvesting monies that would have otherwise
been put into ownership and buying a home and building equity in
terms of wealth creation,” Beracha said.
Johnson disagrees slightly as “it bothers me that home prices
continue to increase despite slowing rents and rising mortgage
rates. While I do not anticipate a major crash, the area could be
in for a prolonged period of home price stagnation, making it
slightly better to rent and reinvest at this point.”
Both researchers agree that the days of rapid property price
appreciation are coming to an end sooner rather than later.
Amber Bonefont
Florida Atlantic University College of Business
5617579188
abonefont@fau.edu