RE: The Miami-Dade County Real Estate Markets
Dear Friends, Neighbors, and Future Neighbors,
It is the last day of July 2022 and I have been looking at a lot of market data for the first half of the year and, for customers & clients, I am currently engaged with, the month of July.
Despite the widely expected Federal Funds Rate increases, mortgage rates have eased. Many people do not realize that the Federal Reserve does not control mortgage interest rates, they can only change short-term borrowing cost(s) for the banks. This can, of course, influence mortgage rates but it does not always have to. Like any product, mortgages have margins, and those margins can expand or shrink with market demand. All of the market data of the past four months indicates there has not been a lot of demand for mortgages at 6%+ or higher, and even in the 5% range borrowing is tepid at best. Clearly, higher prices are being rejected by would-be borrowers and history tells us that inflation cannot “stick” without price acceptance. Demand destruction is evident in mortgages, and we are also starting to see it in gas prices, lumber, and some other commodities. While any administration in its political “right mind” would/will take credit for something like this, it is unfortunate that the media does not focus the public on the myriad of reasons why there are shortages in many things, especially housing. This was not a monster created by any single administration or political party, but rather is the result of decades of short-sighted policymaking and negligence on the part of ALL of our elected leaders and their appointees throughout the vast bureaucracy we call our State & Federal Governments.
I have published (below) the most recent reports issued by the Miami Association of Realtors®. In a nutshell, demand remains strong in the Miami-Dade County Real Estate Markets despite higher interest rates, and approximately 25% of all single-family home purchases & 50% of Condo/Townhome purchases in the 2nd Quarter were “all cash” transactions! While many areas of the country are seeing market corrections, Southeast Florida as a whole (but especially Miami-Dade County) continues to see investment inflows.
The reports are separated by asset class, the first being Single-Family Homes and the 2nd being a combined report for Condominiums & Townhomes.
Miami-Dade Single Family Home Sales
Report Highlights
The Median Sales Price is up almost 15% year over year, the Median Time To Contract has declined by 16% year over year, and the Median Percent of the Original List Price Received went from 98% to 100% ! New Listings remained steady with no change year over year and pending sales dropped dramatically by nearly 25%, HOWEVER, Pending Inventory and Inventory dropped nearly 35% and 20% year over year respectively; i.e: there will obviously be fewer sales if there is less inventory to sell. This should not be looked at as a sign of market weakness, in fact, the opposite appears to be true.
Below are three reports, a Q2 Summary Report, Q2 Detail Report, and a Detail Report by Location/Zip Code/City
Miami-Dade Condo & Townhome Sales
Report Highlights
In the 2nd Quarter, Closed Sales dropped by 15%, HOWEVER, Inventory dropped by 30% on a year-over-year basis! Pending Inventory dropped by over 40% and New Pending Sales dropped by just over 30%. The Number of Months of Supply of Inventory declined from 5.1 Months to 2.9 Months year over year. The Median Percent of the Original List Price climbed from 95.8% to 100%! Over 50% of all Condo & Townhome transactions were Cash Transactions, up from just over 45% the year before.
The Takeaway
Just as we saw with the Miami Single-Family Home Sales Data for Q2, despite the “slow down”, sales were very strong. I define the “Slow Down” as a result of demand destruction created by a combination of interest rates and high prices driven by an increasingly epic housing shortage. In the 1st quarter of 2022, Interest rates were in the 3-4% range. In the 2nd quarter interest rates went over 6% (and, one morning, a quick Google check revealed a 7.01% rate out there)! For every $100,000 financed, a 1% interest rate hike is an additional $321.64 per month on a 30-year fixed rate mortgage! For most people, this means that they are currently looking at an additional $640.00+/- to as much as $1,200+/- per month depending on their credit worthiness, income, and the size of their down payment; and this is based on the median sales price of $400,000 with a 10-20% down payment relative to what they would have been paying only 6 months ago! Many buyers, especially most first-time home buyers, have been priced out of the market entirely as well as many people with long-term debt obligations, usually, student loans, have seen their ability to borrow diminish dramatically.
There is also another group of prospective buyers, Ready-Willing-&-Able Buyers (despite the higher interest rates), that I believe is foolishly trying to time an alleged forthcoming real estate market crash thinking they will be getting a deal of a lifetime in Southeast Florida if they only wait a little while longer. While there very well might be a real estate market crash coming to the nation as a whole, I do not see Southeast Florida suffering all that much in this regard. In fact, there are fewer foreclosures and short sales this quarter than there were in Q2 2021! In addition, none of the factors that contributed to the 2008-2010 mortgage & real estate crisis are true today (a subject for another post). There remains plenty of demand, as of the time of this writing, to support current market prices. It is true, in my opinion, that certain Sellers had some Pie-in-the-Sky ideas of what their property was worth, but I have started seeing prices come back to Earth and I am seeing the market quickly clearing the re-priced inventory.
Finally, as we head into August 2022 I want to invite you to read the latest issue of American Lifestyle Magazine Digital Edition, one of several complimentary subscriptions Miami Beach Brokers® offers its customers & subscribers. I always find at least 1-2 articles I find especially interesting every month and I look forward to each new issue!
Have a fantastic August 2022 and I wish you all good health & happy days!
Cheers,
Christopher J. Lazaro, Licensed Real Estate Broker, REALTOR® at Miami Beach Brokers®
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