The fact that the real estate market is hot across the U.S. shouldn’t be a surprise by now. The inventory is low – partly because of the ban on evictions and moratoriums – and prices have been increasing consistently. However, a new study brings some impressive numbers for real estate investors in Florida to take into account.
According to a study published by researchers at Florida Atlantic University (FAU) and Florida International University (FIU), homes in this state are being sold at more than 20% above their market value. “As of June 30, homes throughout the Sunshine State were selling for 21.76 percent above their long-term pricing trend, an increase from 19.24 percent in May and 17.17 percent in April,” they said in a statement.
Nonetheless, they didn’t predict a housing crash like the one that occurred more than a decade ago, when Florida homes were overvalued by 60% or more. In their opinion, this situation has been triggered by “a shortage of homes for sale, a steady influx of out-of-state buyers, and mortgage rates near historic lows.”
With this in mind, it’s crucial to notice that the pandemic changed working conditions. It made it possible for people to fulfill their responsibilities from the comfort of their homes – which don’t need to be in the same city as their companies –, and hence, encouraged people to move to other parts of the country.
And regarding the housing shortage, though NAR reported that June’s national inventory inclined 4.1% from last month (indicating some slight easing of the tight inventory condition), compared with June of 2020, inventory levels are 18.2% lower. “This would mark 25 straight months of year-over-year declines,” they warned.
Which are Florida’s most overpriced metro areas?
FAU and FIU cited Tampa Bay as the most concerning of the state’s major metropolitan areas. Homes there sold in June for a 32% premium, up from 28.53% in May and 26.14% in April. Nevertheless, here are the top 5 most overpriced metro areas:
- Tampa Bay – houses were sold in June for a 32% above market value.
- Jacksonville – houses were sold in June for a 23.07% above market value.
- Orlando – houses were sold in June for a 21.19% above market value.
- Miami – houses were sold in June for a 16.89% above market value.
- Tallahassee – houses were sold in June for a 14.38% above market value.
This situation might become discouraging for new homeowners. In fact, given the level of overpricing, researchers advised consumers that renting a home and reinvesting the money they would have spent on ownership might be better than buying a property. “While rents also are increasing, it is at a much slower pace than home prices,” they observed.
How would this situation affect real estate investors?
We should be clear about one thing: Florida real estate market doesn’t seem to be slowing down. As a matter of fact, Miami and Tampa are two of the top five hottest housing markets in the state, with a 137% and 29% increase in pending sales, respectively.
According to Forbes, in one year, Miami went from 685 pending sales in May 2020 to 1,624 in May 2021, and more than a 40% increase in new listings. For-sale inventory declined by 29.1% over the same time, and the median sale price increased by more than $60,000.
And as for Tampa, the number of new listings also increased noticeably, while the inventory fell from 2,342 homes for sale in May 2020 to 908 homes available in May 2021 (a decrease of more than 61%). As a result, home prices escalated from $273,000 in May 2020 to $320,000 in May 2021.
Therefore, this information should help real estate investors like you for several purposes. First of all, to know the market you’re working in. Second, to carefully select the best exit strategy. And third, to take the leap (if you haven’t yet), stop working with houses on the market, and start getting deals from off market properties.
Why? Because off market listings – like the ones we offer at Real Estate IQ – will ensure you a pipeline of motivated sellers whose homes haven’t hit the market yet. So, you can talk directly to them (instead of an agent) and get much deeper discounts. This way, you can either flip the property and resell it for a higher profit than the MLS could provide or opt to rent it and increase your passive income.
Disclaimer: The blog articles are intended for educational and informational purposes only. Nothing in the content is designed to be legal or financial advice.