Its hard to believe 2013 is half over already.
If you've been following the news this year, South Florida has undergone a complete transformation real estate wise.
Whereas just 24 months ago the market was sluggish, today prices are up and homes are selling within hours or days of listing, for over asking price, and the winning offer is usually 1 of several placed on the property.
It feels like 2006 all over again.
Many have wondered if we are in another bubble. And many erudite articles by people with lots of credentials after their names have weighed in.
There is no doubt that the artificially low interest rates, fixed by the FED’s policy, are partly driving the current boom. As long as money is relatively cheap, and qualified borrowers can still get a mortgage, there will be lots of buyers.
Further, credit requirements have relaxed some, and more and more people are now qualifying for a loan.
But the key principle driving this boom is still simple Supply and Demand Economics.
Demand remains high. People continue to want to live in South Florida. That hasn't changed for 100 years. Further, rents have gone up consistently for the last 2 years, and a recent study determined that the average renter would break even in under 2 years if they purchased instead of staying a renter. This makes buying very attractive to those that qualify. So as long as interest rates remain close to where they are, there will be plenty of buyers. Add to this the continued influx of cash buyers from other countries and I see no change in this trend over the short term (12-24 months). In a nutshell, demand is up, and is staying so.
With regard to supply the picture is a bit more in flux. By all accounts inventory is still at all time lows, driving the multiple offer/bidding wars we now see every day on the ground. Banks have been slowly putting their foreclosures on the market, but there is no clear picture on how much “shadow inventory” still exists. There are however some indicators that the supply dearth is easing. This will inevitably stabilize pricing and ease some of the frenzy that currently surrounds buyer bidding.
I’ve learned the hard way not to make any long term predictions in our housing market, but by all the data I can see, we are still looking at 12-24 months of solid growth and then a leveling off.
Barring some cataclysm in the market, or in interest rate policy, I believe housing will remain strong in the near future.