The Real Estate Industry Across The Country Has Seen A Meteoric Rise In Sales, But Will It Continue?
As we enter the third quarter of the year, there is no doubt that South Florida’s residential real estate market — as well as most of the nation’s — is on fire. That said, we do see some signs of market stabilization, which is good news for a market that has set historical sales records over these past 12 months.
The brokerage community, as well as our buyers and sellers, all expected to see large percentage increases in the number of sales during Q2 2021 vs Q2 2020, mainly due to the dramatic falloff of sales in the spring of 2020 due to the pandemic shut-down throughout the majority of our markets.
For this reason, you will see in the following pages that we have included comparisons of Q2 2019 and Q2 2020 against the Q2 2021 Multiple Listing Service (MLS) data. This dual comparison makes it much easier for the reader to see the impact that COVID has had on our market inventory and sales over these past 24 months.
Including this additional Q2 2019 data makes a more compelling comparison for the strength of Q2 2021, proving that even when compared to a more stable market, we are still experiencing one of the most robust residential real estate markets in the history of our South Florida market. The triple-digit percentage increases in the number of sales for most every price range, with the exception of single-family homes priced under $500,000, are jolting to any sense of our reporting in prior years.
Few metrics prove these facts more than the year-over-year double-digit increases in the median price from both Q2 2019 to Q2 2021 and from Q2 2020 to Q2 2021. As the reports for Miami-Dade and Broward Counties confirm, these significant increases in the median price of a single-family home (33% in Miami-Dade and 23% in Broward) or a condominium (27% in Miami-Dade and 19% in Broward), reflect the fact that a much higher percentage of our total sales is now registering in the $1 million-plus segment.
For example, in Miami-Dade County during Q2 2021, of all single-family homes sold, one of every 5 was priced in excess of $1 million. That statistic a year earlier in Q2 2020 was one of every 13 single-family homes sold. The contrast of $1 million-plus sales for the same time frame in Broward was one of every 8 homes sold in Q2 2021, compared with one of every 19 homes sold in Q2 2020.
These high percentage median price increases don’t necessarily mean that every home has increased in value by double digits. They are more reflective of the fact that the mix of homes and condos which have been selling over these past 12 months have come from our more expensive inventory.
So… with median prices ratcheting up 19% to 30% across South Florida over the past 12 months and inventories at historic lows, the logical question is, “When is this going to end?”
The good news to that question is that we believe the stabilization process has begun, and that it will by no means be a stark fall, but a soft return to a more balanced market.
We have seen slight increases in inventory over the late spring and early 2021 summer months, which is providing some additional selection for buyers, albeit barely noticeable. The frenzy in Q1 2021 of almost every sale having multiple offers at prices over the list price, has begun to stabilize as well. Again, this is positive news. A balanced market has 6 to 9 months of available inventory, a bit higher in the luxury sector where 12 to 18 months is an optimum balance.
South Florida has seen both extremes, with the under $500,000 market recently hovering at less than 1.5 months of available inventory for single-family homes and 2 to 3 months for condos — a stark comparison to the inventories during the great recession, which exceeded a supply of 40 months for single-family homes and 60 months for condos in Miami-Dade County. Over the past 15 years, Broward County has generally maintained fewer months of supply than Miami-Dade in all sectors; however, during the 2007/08 period, Broward’s supply also swelled to over 30 months. Neither extreme is positive. More balance is welcomed.
The factors impacting our market our numerous. The pandemic taught us that we can work remotely and from anywhere, generally, so why not do it in state like Florida, where we have no state income taxes? This phenomenon was already in process prior to the pandemic — COVID simply accelerated it, encouraging significant industries, such as financial services groups, technology companies and healthcare providers, to move south.
As we slowly move past the pandemic, the return to normalcy will continue to bolster our market for many reasons — including the fact that a seemingly higher percentage of today’s buyers are using their newly purchased home as their primary residence. Having more full-time residents will encourage more economic activity across all business sectors.
This, coupled with the expected return of our international buyers, who have been on the sidelines during COVID, will add to our growing pool of buyers. One of the most compelling factors of our growth over the past year is the fact that it has occurred in spite of a dramatic drop in the number of our international visitors, who have been the mainstay of our residential real estate market since the mid-1970s. Once they return to pre-pandemic levels, we’ll see further absorption of existing and new-to-be-built condominiums.
We don’t see any let-up in the popularity and appeal of Florida as a whole, specifically the South Florida market. The pull-back of international buyers over these past 18 months has, in essence, presented opportunities for buyers from all across the U.S.
The pandemic has not only impacted the way we work, it has had a dramatic impact on where we choose to live. That national phenomenon has truly transformed South Florida’s residential real estate market, which we believe is making it more resilient for the future.
Ron Shuffield, President & CEO, Berkshire Hathaway HomeServices EWM Realty