Rising interest rates, inflation beginning to impact local area home sales
According to the Miami Association of Realtors, Broward County Florida total home sales decreased 12.9% year-over-year, from 4,006 to 3,489. Broward existing condo sales decreased 11% year-over-year, from 2,224 to 1,980. Single-family home sales decreased 15.3% year-over-year, from 1,782 to 1,509.
Sales declined because it's in comparison to a record-setting 2021 market that benefited from 2.5% mortgage rates, higher supply and pandemic-driven demand.
Broward existing condo luxury ($1-million-and-up) sales surged 17.5% year-over-year in April 2022 to 74 transactions. Broward single-family luxury transactions increased 11.4% year-over-year to 245 sales in April 2022.
Broward luxury condos have an inventory of 3.7 months of supply. There are 3.1 months of supply in luxury single-family homes. Luxury months of supply continues to trend downward for all property types because of the robust demand.
Homebuyers leaving tax-burdened states to purchase in Florida (no state income tax), new-to-market firms moving here, low interest rates, the appeal of property as an inflation hedge, rising wages and accrued savings in lockdowns, strong equity market performance, a reassessment of housing needs and lifestyles because of the pandemic and expansion of remote work are all factors driving South Florida real estate demand.
With global vaccinations rising and unstable political situations around the world, South Florida is seeing an increase in foreign homebuyers. Global buyers are coming here for the vaccine and purchasing property.
Vaccinated foreigners were allowed to resume travel to the U.S. back in November 2021 and that is leading to more international investment in South Florida - the No. 1 destination in the U.S. for foreign buyers. Global buyers purchase in Miami because Miami is a world-class global city with better real estate prices than other similar global cities. Foreign buyers feel at home with our incredible diversity and acceptance of all cultures, along with all our amenities.
Broward existing condo sales priced between $400K to $600K increased 29.2% year-over-year to 252 transactions in April 2022. Broward single-family homes priced between $400K to $600K decreased 15% year-over-year to 492 transactions in April 2022.
Rising Mortgage Rates Should Eventually Slow Price Growth Nationally, in Broward
Home prices are determined by supply and demand. Lower supply and higher demand create higher prices. Demand for Broward real estate is at all-time highs. Inventory for Broward single-family homes (1.2 months) and condos (1.3 months) are low.
Locally, the greater share of Broward luxury sales is also part of the reason for the large year-over-year increase in median prices.
To battle national inflation, the Federal Reserve has raised rates two times this year and has plans for more hikes. High inflation and the Fed's tightening policy are the main drivers behind rising mortgage rates.
Mortgage rates have risen more than 2 percentage points since the beginning of the year. The monthly mortgage payment has increased by about $520 since the first week of January, when rates averaged 3.2%, according to NAR.
According to Freddie Mac, the average commitment rate for a 30-year, conventional, fixed-rate mortgage was 4.98% in April, up from 4.17% in March. The average commitment rate across all of 2021 was 2.96%.
The mortgage rate is projected to land at 5.3% by 4Q 2022, according to NAR. That is still low compared to an all-time average of about 8% in the U.S.
Long term, the hope is higher rates will lead to more days on the market (gives buyers more choices). Higher rates will eventually lead to a moderation of the growth rate of pricing. With the growth rate of pricing cooling, total inventory could grow later. Historically, inventory expands six months after rates rise, but today's market is unlike any other.
Broward County single-family home median prices increased 20.7% year-over-year in April 2022, increasing from $464,000 to $560,000. Existing condo median prices increased 11.4% year-over-year, from $220,000 to $245,000.
More Inventory Needed for Low-Supply/High-Demand Market
Inventory tends to rise in the spring and summer and then it fades in the fall and winter.
Historically in the U.S., total inventory tends to expand six months after mortgage rates begin to rise. A new study by Realtor.com detailed that 64% of possible sellers intend to list their home by October 2022.
New listings of Broward single-family homes decreased 8.4% to 1,816 from 1,983. New listings of condominiums decreased 15.7%, from 2,282 to 1,924.
Inventory of single-family homes decreased 12.7% year-over-year in April 2022 from 2,022 active listings last year to 1,765 last month. Condominium inventory dropped 51.8% year-over-year to 2,377 from 4,927 listings during the same period in 2021.
Months' supply of inventory is down since July 2019 for single-family, reflecting strong demand. Months' supply of inventory for single-family homes decreased 14.3% to 1.2 months, which indicates a seller's market. Inventory for existing condominiums decreased 60.6% to 1.3 months, which also indicates a seller's market. A balanced market between buyers and sellers offers between six- and nine-months supply.
Total active listings at the end of April 2022 decreased 40.4% year-over-year, from 6,949 to 4,142.
Nationally, total housing inventory at the end of April amounted to 1,030,000 units, up 10.8% from March and down 10.4% from one year ago (1.15 million). Unsold inventory sits at a 2.2-month supply at the current sales pace, up from 1.9 months in March and down from 2.3 months in April 2021.
Broward Real Estate Had a $324 Million Local Economic Impact Just in April 2022
Every time a home is sold it impacts the economy: income generated from real estate industries (commissions, fees and moving expenses), expenditures related to home purchase (furniture and remodeling expenses), multiplier of housing related expenditures (income earned as a result of a home sale is re-circulated into the economy) and new construction (additional home sales induce added home production).
The total economic impact of a typical Florida home sale is $90,300, according to NAR. Broward County sold 3,489 homes in April 2022 and had a local economic impact of $355 million.
Broward total dollar volume totaled $1.9 billion in April 2022. Single-family home dollar volume decreased 4.55% year-over-year, from $1.22 billion to $1.17 billion. Condo dollar volume increased 6.61% year-over-year, from $640 million to $682 million.
Broward Distressed Sales Keep Dropping, Reflecting Healthy Market
Only 1.2% of all closed residential sales in Broward were distressed last month, including REO (bank-owned properties) and short sales, equal to April 2021.
Total Broward distressed sales decreased 14% year-over-year in April 2022, from 50 to 43. Short sales and REOs accounted for 0.3% and 0.9% year-over-year, respectively, of total Broward sales in April 2022. Short sale transactions decreased 57.1% year-over-year while REOs increased 17.2%.
Broward's percentage of distressed sales are on par with the national figure. Nationally, distressed sales represented less than 1% of sales in April 2022, down from 2% in April 2021.
Broward Real Estate Attracting Multiple Bids, Buyers Going Over-List Price
The median percent of original list price received for single-family homes was 100.8% in April 2022, up 1.3% from 99.5% last year. The median percent of original list price received for existing condominiums was 100%, up 4.2% from 96% last year.
The median number of days between listing and contract dates for Broward single-family home sales was 12 days, a 14.3% decrease from 14 days last year. The median time to sale for single-family homes was 50 days, a 13.8% decrease from 58 days last year.
The median number of days between the listing date and contract date for condos was 13 days, down 63.9% from 36 days. The median number of days to sell for condos was 56 days, a 29.1% decrease from 79 days.
Broward Cash Sales 76.2% More than National Figure in April 2022
Cash sales represented 45.8% of Broward closed sales in April 2022, compared to 38.9% in April 2021. About 26% of U.S. home sales are made in cash, according to the latest NAR statistics.
The high percentage of cash buyers reflects South Florida's top position as the preeminent American real estate market for foreign buyers, who tend to purchase with all cash as well as some moving from more expensive U.S. markets who can buy more with their profits from real estate sales.
Cash sales accounted for 58.9% of all Broward existing condo sales and 28.5% of single-family transactions.