Researchers are urging Florida homebuyers to consider renting while they wait for the state’s overheated market to cool as soaring prices in South Florida hit records in June.
Statewide, they say, homes are overvalued by 21.76%. creating a risk that buyers could get stuck with overpriced homes for significant periods of time until prices eventually ease.
“The across-the-board increase in the premiums paid for housing throughout the state is very worrisome,” Ken H. Johnson, real estate economist and associate dean at Florida Atlantic University’s College of Business, said in a report released Thursday. “Trees do not grow to the sky, and neither do home prices.
“We’re nowhere near where we were at the peak of the last housing cycle, but we do need to be careful. Walking away from an obviously overvalued home may be the best thing buyers can do in this kind of market.”
The report found home prices in the Tampa area were the most inflated in the state, selling in June for a 32% premium, up from 28.53% in May. In South Florida, prices were 16.89% above their historical norms, with the Orlando area at 21.19%.
Even though monthly rents for apartments, condos and single-family homes are rising as well, they are not increasing at the pace of the home-buying market, said Eli Beracha of Florida International University’s Hollo School of Real Estate in Miami,
He said people searching for a home are better off renting and investing the money they would have spent on home ownership elsewhere.
“Our research on buy vs. rent indicates that, on average right now, renting and reinvesting is a particularly good wealth creation strategy,” Beracha said. “More people who rent and reinvest would help alleviate current pricing pressure, which is a good thing.”
In conducting their joint monthly analysis, the two professors review more than 25 years of home prices from Zillow, the national online real estate service. The numbers include single-family homes, townhomes, condominiums and co-ops.
Their warnings came as tri-county area real estate brokers celebrated another landmark month for sales prices. In June, the median price of a home in Broward County was $498,203 and $500,000 in Palm Beach County. according to the Broward, Palm Beaches & St. Lucie Realtors, a regional trade group.
“It was a monumental month for the Broward County housing market!” Karen Johnson, the group’s president, said in a statement.
“June’s market stats show that the low inventory levels aren’t deterring prospective homebuyers from jumping into this red hot market,” Johnson added. “Low mortgage rates combined with rising sale prices have everyone shopping for homes in South Florida,”
She said closed sales rose 37.3% to 1,803 in Broward, with homes “flying off the market at astonishing rates.” In Palm Beach County, closed sales increased by 43.2% to 2,117.
But nationally, the growth rate in prices is showing signs of easing, according to a separate analysis also released Thursday.
The median national home price for active listings reached $385,000 in June and grew by 12.7% over last year, lower than last month’s growth rate of 15.2%, Realtor.com said in a statement.
“This marks the second month in a row when the annual growth rate has decreased,” the online search firm said. “The slowing rate of growth of listing prices is a welcome sign that the market is moving toward some semblance of balance and that prices may not continue to rise late into the home-buying season as they did last year.”
It’s a sign that more sellers are placing their homes on the market, raising expectations that the year’s nagging inventory shortage will be thrown into reverse.