The real estate market in Florida has been thriving. There has been an increase in population growth which has of course encouraged demand for rental properties as well as luxury real estate. Mortgage interest rates are going up for the first time in a while and are expected to reach 3.60%, an increase from the current rate which is 3.30% by the end of 2022. Several housing experts have predicted where they think the real estate market is headed in 2022. Here’s what they had to say:

 

Danielle Hale, Realtor.com chief economist: 

We expect a whirlwind 2022 for the housing market. Home sales are expected to increase another 6.6% and home prices to rise another 2.9% on top of 2021 highs. A gradual uptick in mortgage rates will make affordability a top consideration for home buyers, especially the 45 million Millennials aged 26 to 35 who are at prime first-time homebuyer age. Demand from these young households will keep the market competitive and fast-paced despite a small uptick in housing inventory as builders continue to ramp up production, increasing single-family starts by 5% in 2022.

 

Daryl Fairweather, chief economist for Redfin: 

After two years of unprecedented uncertainty in the housing market, we’re expecting 2022 to be just as unpredictable. We expect 30-year-fixed mortgage rates to slowly rise from around 3% to around 3.6 by the end of the year, mostly attributed to the pandemic subsiding and inflation continuing to linger. By late fall, high mortgage rates, paired with already high housing prices, will likely slow annual price growth to roughly 3%. 

This low price growth will likely discourage speculators from entering the market, giving first-time homebuyers a better chance at securing a home. 

In 2022, we also predict home buyers will start considering climate change as a major factor in their home-buying decisions, as natural disasters and extreme weather events continue to increase in frequency. Home sellers will also likely make significant investments in climate-change resilient home features to appeal to climate-conscious home buyers.

 

Keith Gumbinger, vice president of mortgage information website HSH.com: 

Home sales in 2022 should be solid overall, but high home prices will likely be joined by higher mortgage rates, tempering sales compared to this year. The outsized annual increases in home prices seen in 2021 should slow in 2022, but even so, will leave home prices at or near record highs. At the same time, mortgage rates will tend to be firmer as the Fed ends its bond-buying programs and begins to lift interest rates by the middle of the year. Pricier homes financed with higher mortgage rates will exacerbate affordability issues, and this can be expected to dampen demand from homebuyers on the margins of the housing market.

In general, housing affordability seems to be falling. The volume of inventory of homes for sale fell behind the demand of buyers seeking property to buy. A lot of locals are grappling with affordability as Florida has seen an influx of foreign wealthy Investors with low taxes who have been swooping in and snatching up available inventory.

 

“It’s not a bubble, it is about the fundamentals,” said Jenny Schuetz, a housing researcher at the Brookings Institution. “It is about supply and demand — not enough houses, and huge numbers of people wanting homes.”

The pandemic destabilized the housing market, as the job market was stalled and the supply of homes to buy has seen a drop as a result of the restrictions associated with COVID-19 as well as supply chain shortages. So buyers need to prepare ahead of time as they are entering a hot as well as one of the most profitable markets to date, it is important to research ahead of time to avoid panic buying and to stick to a reasonable budget.

“Buyers may have a little more time compared to 2021 to make a decision, but given that it will still be a seller’s market, they’ll still likely have to move fast to keep up with that market velocity, Hone in on your home buying budget so you have a firm plan of what you’re willing to spend for a property that meets your needs. Buying a home isn’t just a financial decision. It’s also a lifestyle choice. Buying a home should make sense for your personal and financial situation.”

Odeta Kushi, deputy chief economist at First American Financial Corporation advises.

After more than a year and a half, on November 8th, the international travel restrictions to enter the US have finally been lifted for over 30 countries. The US is now allowing fully vaccinated travelers from these countries to enter the US upon showing proof of vaccination and a negative COVID test.

What does this mean for an already hot real estate market?

With the ban lifted, lines began forming at the US and Mexico borders even before daybreak. International flights are surging their way to the US with even dueling flights from cities like London,  we are definitely seeing an influx of international travelers. On Monday November 8th, we saw 5,000 more arrivals than the Monday prior at Miami International Airport alone.

Though we believe many of the international travelers are here to see families after not being able to after over 19 months, we still think many are here with the purpose of investing in real estate both in this holiday wave of visitors and future waves in the new year.

International buyers in the past have made up to 5% of total sales volume in Florida. According to a report from the Florida Realtors, most foreign buyers that purchase properties in Florida come from Canada, Argentina, Brazil, Colombia and Venezuela.The report also noted that the South Florida tri-county area gets the majority of foreign buyers (approximately 52%). It is likely many international travelers will also be interested in investing in Real Estate as well. In fact, we’ve started to hear that real estate brokers and agents have already started getting calls from foreign buyers in Canada, Latin America, Europe and other countries.

However, South Florida inventory is at an all time low currently. Palm Beach County has a little over one month of inventory, a 51% decrease from last year. Broward county has a one and a half month supply, a 40% decrease from last year. Miami-Dade County also has low inventory, only a 2.2 month supply of single family homes, a 42% decrease.

Bonnie Heatzig, executive director of luxury sales with Douglas Elliman in Boca Raton said, “An enlarged buyer pool looking to purchase when the inventory is at all-time lows will likely ignite the competitive bidding processes.”

“I’ve been trying to gear up as many off-market deals in the pipeline for when the flood comes in,” said Tony Rodriguez-Tellaheche, owner and managing broker at Prestige Realty Group.

With supply limited, options will be less.  So the key question is, will foreign buyers be interested in the available real estate?

International buyers are not a “one-size fits all” type of group, instead their tastes differ.  As Ignacio Diaz, co-owner of Group P6, a firm of luxury residential developers explains, some prefer luxury homes and condos, others look for properties with a “resort-like” feel, and some go for new construction.

“It’s hard to generalize, but mainly the foreign buyer tends to go towards condos because of the convenience,” said Edgardo Defortuna, President & CEO of Fortune International Group.

With record lows of homes, condos and townhomes in South Florida, the big issue facing all buyers (foreign, out of state and local) is lack of inventory. This makes the holiday season a great time for realtors to network with their friends and family to find out who in their network is looking to sell their home, as listings are “worth their weight in gold”.

According to Craig Studnicky, principal of Miami-based brokerage ISG World, the condo market has been pretty stable for the past two to three years.  Even with many people relocating to south Florida, condo prices per square foot have remained the same.

Though the average sales price rose, according to Studnicky, that was mostly due to the fact buyers were buying larger units than seasons before.

However, Studnicky says the trends are looking to a stronger market for sellers by the end of 2021.

Dwindling Inventory

Of the 19,465 Condos that were either recently built or under construction in eastern Miami-Dade and Broward county, only 881 units (4.5%) remain unsold in the market, according to ISG World. Compared to December 2020 (1,324 units unsold), the first half of the year has already depleted the available inventory by one third.

According to Studnicky, based on market trends, local condo inventory will continue to dwindle.

Still Under Construction Almost Sold Out

New condos are mostly getting bought up before construction is even complete. 

The Elysee in Edgewater, the Estates at Acqualina, the Monaco Yacht Club & Residences in Miami Beach and many other condo buildings under construction are over 90% pre-sold.

Interestingly enough, the recent uptick in condo sales was not international buyers, but rather mostly led by domestic buyers.  This was likely caused by Covid-19 travel restrictions and the strength of the US Dollar, which reduced the amount of Latin American buyers compared to past years.

Champlain South Tower in Surfside in June.

The collapse of the Champlain South Tower in Surfside was a tragic event for all the families and friends of the victims as well as our community as a whole. This has led buyers to steer away from purchasing condos in older buildings.   Though inventory was already low, of the 12,382 units available in the tri-county area during the second quarter, almost half of them were built on or before 1990.  Currently local governments are forcing building owners to do the maintenance and restoration work.  Nonetheless, buyers are leaning towards newer units.  Which means only half the available inventory is being considered by a majority of buyers.

We, at Title Partners of Florida, write and support the real estate transaction closing, including the issuance of title insurance policies through Attorneys’ Title Insurance Fund. We also coordinate searches, title products, and a variety of other services for our clients. Contact us with any questions about our real estate closing services by phone at (844) 321-6168 or by email at titleinfo@titlepartnersfl.com.