What a year it has been in real estate!

It used to be that we could speak of double-digit (10% or more) year-over-year price increases as notable. Well, no more. In the last year nationally as well as in Florida, price increases have been about 20%.

And, as I have noted in these pages on numerous occasions, real estate has to be viewed not just locally but hyper-locally. You have to look at the neighborhood level, and even within neighborhoods, to get a picture on which you can act.

Recently, I have issued a new Real Estate Yearbook covering 36 neighborhoods in Broward County (in Fort Lauderdale, Wilton Manors, Oakland Park, Lauderdale-by-the-Sea, Pompano Beach, Lighthouse Point and Deerfield Beach). The median increase in value in these neighborhoods year-over-year, at the end of September, was 26%! 

But there was a wide range of increases, from a low of 9% up to 243%! Now, admittedly, the 243 is an outlier. A better measure of dispersion is the interquartile range (from the 25th to the 75th percentile). And that goes from 17% to 42%. A banner year, possibly record-breaking. 

Let’s dive into the numbers to see what is going on.

In the first place: Demand is up (measured as total sales).

Chart 1 shows the total 12-month sales ending Sept. 30, for the past five years. (Because of seasonality here in South Florida, I look at sales on a full-year basis. Quarter to quarter variations can be misleading due to higher sales early in the year and lower sales toward year-end.) Now, these are the sales for the 36 neighborhoods in my Yearbook (and presumably the neighborhoods of most interest to my readers). From 2017 through 2020, annual sales were essentially flat. But then the sales for the 12 months ending 9/30/21 took off and increased year-over-year by 40%.

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Chart 1.

In the second place: Supply is down (measured by the number of listed homes unsold during a given month).

Chart 2 also goes back to 2017 to show how that has changed over time for the 36 neighborhoods in my study. There is just a bit of volatility as you can see. But then, once we get to late 2020 and into 2021, a shift occurs and the available inventory starts dropping. Compared with where things stood last year, the number of unsold listed homes has dropped by 48%.

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Chart 2.

In the third place: The combination of higher demand and lower supply has shriveled the available inventory and led to record price increases.

Chart 3 is my estimation of inventory in months for the 36 neighborhoods in my study. The general rule of thumb in real estate (I hate rules of thumb, but hey, people use them) is that six to nine months (maybe a bit higher for premium-priced homes) would represent a balanced inventory situation that would favor neither buyers nor sellers. Double-digit months of inventory suggest a “buyers' market,” and fewer than six months represent a “sellers’ market.”

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Chart 3.

As you can see, inventory was relatively balanced for most of the timeframe. But then, as we hit later in 2020, the number started dropping. Now, most of the neighborhoods I study have three months or less of available inventory. It’s a sellers’ market of epic proportions.

What’s causing all this? What does it mean and what does the future portend?

Sometimes I am asked from where the buyers are coming who are willing to pay these prices. The available information I have suggests that most of the buyers are already in South Florida and are trading up. Interest rates remain at low levels (though not as low as they were in 2020 and early 2021) and credit is available for well-qualified buyers.

But I think we are seeing the impact of COVID on the market. People are “nesting.” We went through a period where our homes were our offices, our restaurants, our theaters, our gyms, and our schools, in addition to being our residences. To fulfill all these functions requires space that single-family homes (especially at the upper end of the market) provide.

Will it continue? Well, I don’t have a crystal ball (but my future research plans include a focus on forecasting). Recently we saw Zillow announce a $550 million dollar loss and the intent to sack a quarter of their workforce. That could suggest the market has become overheated. Yet we are now headed into high season in Florida with snowbirds coming to enjoy our year-round lifestyle. We may see further upward pressure on prices until more inventory comes onto the market. And nesting people are reluctant sellers, at any price.


James Oaksun, Florida's Real Estate Geek (SM), is Broker-Owner of New Realty Concepts in Fort Lauderdale. In addition to having degrees from Dartmouth and Cornell, he is a Graduate of the Realtor Institute (GRI).

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