The truism of “location, location, location” may no longer be the end-all, be-all of housing choice. For now—and maybe for the foreseeable future—“affordable, affordable, affordable” could be substituted as a better description of what matters most in a home, with frantic buyers watching home prices swing back up in many areas across the country.
Case in point: Florida, where neither hurricanes nor 7% mortgage rates have been able to rebalance the market. Researchers at Florida Atlantic University (FAU) and Florida International University (FIU), who have tracked so-called “overvalued” markets since early in the pandemic, say that people in high-growth metros and states should prepare for a “prolonged” affordability crisis.
“We have a huge demand coming from an influx of population into Florida, as well as more new households being formed in the state,” said researcher Eli Beracha, of FIU’s Hollo School of Real Estate. “Millennials are forming households at a nearly unprecedented rate creating significant demand for housing.”
With National Association of REALTORS® (NAR) Chief Economist Dr. Lawrence Yun declaring an end to the so-called “housing recession” last week, the good news is that markets are generally stabilizing—something that Beracha and fellow economist Ken H. Johnson, of FAU are also celebrating.
But without homes at a diverse range of prices (a recent NAR/Realtor.com report claimed the country needs 319,000 more affordable homes to meet demand), many people will remain priced out of homeownership. Other metro areas, including cities in Michigan and Ohio, have also seen their “overvalued” status creep up in recent months.
While that dynamic of low inventory and high demand seems to be true across the country, Johnson said that there are still other factors that might be providing short-term pressure on prices.
“It is hard to tell if it is the summer selling season effect, or the reigniting of price growth in (South Florida),” he said. “The difference between actual average and statistically predicted prices are remaining stable, suggesting that the rise in prices in the Miami area is probably more seasonally related.”
Even in places where seasonality is a factor, the prospect of falling mortgage rates sparking even higher demand still looms, potentially putting more upward pressure on prices. Again, while this is good news for homeowners and sellers, the long-term health of housing will require a more balanced market, with enough inventory to meet the needs of a diverse population.
At the same time, Bright MLS Chief Economist Dr. Lisa Sturtevant recently told RISMedia she is watching for an “unseasonable” surge of activity heading into the fall, driven by sellers and potentially turbo-charged by any drop in mortgage rates.
The full list of “overvalued” metros can be found here.
