It is no secret that housing in South Florida is undergoing a period of immense change.
New homebuyers are stepping into a market full of changing rates and heightened competition. But not all are aware of this before they close deals and go house hunting. They also tend to miss one of the biggest problems facing the market today: the lack of inventory of single-family homes.
I have spoken before on the migration of individuals and families to Florida due to the COVID-19 pandemic. When those buyers set up permanent residences and COVID-conscious buyers impulse-purchased homes during the height of the pandemic, the single-family home inventory hit a massive decline. In fact, since last July, the inventory numbers have declined by 52 percent, with just 6,226 homes on the market today when compared to 12,934 in July of 2020.
Sellers in South Florida were well aware of this. Many in turn raised and refused to budge on their remaining home prices. The result? Potential buyers grew unable to afford swapping their single-family home for another single-family home. This meant a significant number of single-family home sellers who were looking to purchase another single-family home were reluctant to list due to the lack of supply. This is the market they still find themselves in today.
The question has become what they should do next.
One solution Baby Boomers and empty-nesters have found is to look east to the growing condo market. While single-family homes are sparse, condo numbers are plentiful, with 12,520 units available in Miami. What makes this market so attractive is the attached ease of living.
Unlike single-family homes which require pricey do-it-yourself maintenance and higher risk management, condos in beachfront communities and areas such as Brickell provide increased convenience, safety and beauty. The biggest draw is that these amenities come nestled within the residential development. Buyers can live resort-like lifestyles without needing to worry or, thanks to the immense amount of inventory, needing to settle for less on their purchases. The condo market is truly a buyer’s market.
Below is a new transaction analysis for single-family homes and condos in Miami-Dade, Broward and Palm Beach counties.
Total New Transactions (January-June 2020)
Single-family homes: 22,818
Total New Transactions (January-June 2021)
Single-family Homes: 23,709
For those who have not yet sold their single-family home, renovation is a popular course of action.
Mortgage rates are at an all-time low and rent prices are inflating at a steep rate. Recent booms within the kitchen and bathroom renovation industries indicate that individuals are, after checking rates, deciding to maintain what they have rather than buy new property. In fact, monthly online spending for home improvement products and appliances was, on average, 74 percent higher than pre-COVID levels, according to 1010data.
To these single-family owners, putting the extra work in and saving over time on low mortgages is the more cost-effective option. Renovations can also offer relief to Millennial homebuyers who may have been a part of the impulse pandemic buyer demographic.
Which leads back to the population boom’s effects. Condos are on pace to soon become just as sought after as single-family homes. With not much new condo inventory in South Florida expected until roughly four years out from now and only a slight uptick in single-family housing inventory expected, it is forecast that condos will slip into a sellers market by the end of this year.
The time to capitalize on these unprecedented low inventories and conditions for home sellers is now.
Craig Studnicky is CEO and Founder of RelatedISG Realty and Principal of ISG World. With over 25 years in the real estate industry, he moved from New Jersey to Miami in 1992.