All around the country, we hear stories of low inventory, but what does that really mean? Here in South Florida, it means that our housing supply is not keeping up with demand. In reality, the new listing inventory we are adding to our market is actually greater over the past 12 months compared with the previous year. So, supply is not the problem; what we really have is a situation of unprecedented demand.
Where is the demand coming from? A variety of factors are contributing to increased demand. Of course, everyone loves our weather and tax structure in Florida and those factors have been driving new buyers here for many years. Newer demand factors include a robust economy with companies relocating here from all over the country, a growing millennial buyer segment investing in their first homes, and of course low-interest rates have helped sustain the demand for some buyers who otherwise may not be able to afford our rising real estate prices.
Is there an end in sight? Cycles like this always correct themselves, but this time it might just take a bit longer than usual. The only economic factors that could potentially slow down demand in the short term are inflation and rising interest rates. We may not know for months if recent inflation fears are based on a real threat or if we are simply experiencing “transitionary inflation” due to the reopening of the economy. Whatever does happen with inflation and interest rates, it will affect the entire country, and the South Florida real estate market still stands to come out on top.
New listings added to our inventory increased in 8 of the last 12 months (May 2020 to April 2021) compared with the previous year (May 2019 to April 2020), which is a year-over-year increase of almost 12% overall. So, even the significant increase in supply during the pandemic could not keep up with the unprecedented buyer demand.
New Listings Added increased 12% over the previous year, but supply still can’t keep up with the unprecedented demand.
The following chart demonstrates how increased sales due to strong demand has quickly absorbed our available inventory. Net active listing inventory has steadily decreased over the past 6 months and it is unlikely that new units will be added to the market at a higher rate than we are currently seeing. Another contributing factor is that more sellers want to sell, but fear they will have nowhere to go or won’t be able to afford a replacement home.
March and April Closed Sales hammer already low inventory levels!
The lower-end single-family market continues to suffer the most with less than 1 month of supply below $1.5 million. Condominiums have seen the largest decrease in inventory recently as more buyers consider condos due to affordability issues in the single-family market. We expect the trend to continue and with very little new construction due to be completed in the near future we also expect continued upward pricing pressure in the resale condo market.
Inflation, increased interest rates, and affordability are the biggest threats to rising real estate prices. Rising prices are definitely not sustainable in the long term, but the question is always, “where is the top”? We can’t answer that question for you, but if you could get a certain price for your property would you consider selling? If yes, call me today at 954.701.9004.