Despite falling sales, South Florida’s real estate market remains strong and healthy. We have hit a record low of distressed properties since the crash almost a decade ago. In addition, the region's large reliance on cash buyers coupled with tighter lending standards creates a relatively stable market. Buyers today have substantially more equity in their homes than they did during the housing crash almost ten years ago now, which is a significant difference between now and then. Today’s buyers are in a more financially secure place whether it be the luxury buyer or upper-middle-income buyer.
According to a recent article in South Florida Business Journal, the slowing sales is largely driven by the decline in distressed sales. In April, the number of distressed sales fell below 12% a historic low. The market has stabilized. Sales are slowing while real estate values continue to rise. In Miami-Dade, condo sales dropped to 12.1% in April. The decline in foreign buyers from South America has had a big impact on Miami’s real estate.
Cash buyers continue to make up almost half the market. As a result, a large percentage of people purchasing real estate today own their home outright. A smaller number of buyers relying on bank financing is positive. This development is further secured by the fact that most buyers financing have at least 20% equity in their home and good credit. There’s a smaller percentage of buyers in a financially vulnerable position today. We’re also seeing people choose to pay cash on a smaller home rather than finance a larger one. Higher credit standards protect both the market and the individual. With interest rates at historic lows, this trend is positive. We don’t expect interest rates to rise in the near-term either. Buyers will continue to benefit from low-interest rates.
In addition, Flordia tax benefits continue to attract buyers from the Northeast. There’s a big migration from both New York and New Jersey, where high property taxes and income taxes, for many affluent people, means more than half their income is being taxed. Florida continues to attract this class of buyers to its beaches. Residency in the sunshine state is a form of wealth protection. A large number of these buyers pay in cash or are in a position to put down substantial down payments.
We expect the Miami-Dade’s slowdown to continue throughout the year, and the decline in sales to remain steady, but overall the market is healthy and stable. It’s a buyers’ market, and Palm Beach has the hottest real estate in South Florida.
Michelle Farber Ross