BOCA RATON, Fla. – Aug. 17, 2018 – South Florida's residential real estate markets have climbed well above their long-term pricing trends, suggesting the need for a slowdown in the rate of increases if the region is to avoid a repeat of the market crash of a decade ago, according to a survey by Florida Atlantic University (FAU).
Ken Johnson, a real estate economist and professor at FAU's College of Business, said he found that the markets in the Fort Lauderdale, West Palm Beach and Miami areas are above their long-term trend lines by 14 to 16 percent, but they are nowhere near their pre-crash levels in 2007.
"Residential real estate cycles are relatively new, making future predictions of these phenomena rather difficult," he said. "However, it seems reasonable to conclude that if property prices start to slow in the near term, then southeast Florida property markets should be in for a bumpy landing, as opposed to the market crash that we experienced between 2008 and 2012."
Nonetheless, he said in his Southeast Florida Residential Real Estate Market Update, housing prices "are not approaching the dangerous 2007 levels that preceded the last crash of local real estate markets."
At the time, Miami was 65.4 percent above its long-term pricing trend, while Fort Lauderdale and West Palm Beach topped out at 63.4 percent and 58.3 percent, respectively.
"The motivation behind this was to give the local southeast residential real estate market a little bit more information about where we are in the real estate cycle. Is there going to be another market crash given our experiences in '07 and '08 and thereafter?" he said. "We're nowhere near where we were back in 2007."
Johnson said he does not see "an imminent correction … not in the next six months to a year."
"There are too many people moving to Florida," a place where employment levels are high and the economy is growing, he said. "I will just get more worried if the prices keep going up and less worried if the price increases are slower, meaning 5 and 6 percent rather than 8, 9 and 10."
A local analyst and two real estate agents acknowledged that while prices continue to rise, severe price declines are not in the cards due to strong demand, low inventories and the robust economy.
"I don't think we're on a bumpy landing," said Howard Elfman, broker-owner at Distinctive Homes Realty in Fort Lauderdale. "I see that it's still a seller's market. I don't see the prices jumping as quickly as they had six months ago. Homes that are turnkey are still getting multiple offers."
Longtime real estate analyst Jack McCabe, of McCabe Research & Consulting in Deerfield Beach, said he sees a "split market" between condos and single-family homes.
"I think we're going to continue to see prices going up," he said of the single-family home market. "Things are fairly unaffordable now."
He blamed land costs that are too high, construction costs that have shot up, and a continuing labor shortage that saw many workers leave the region after the crash who "never came back."
But the condo market is going to see downward pricing, McCabe predicted. "Developers are offering all sorts of incentives and concessions that they weren't offering a year ago."
Douglas Rill, of Century 21 America's Choice in West Palm Beach, suggested that home buyers in today's market are more level-headed than they were during the speculative rage of the early 2000s, particularly when banks awarded them mortgages even though they lacked the financial qualifications.
"I don't see a lot of stupid buying as we did in 2000," said Rill, who sold actor Burt Reynolds' mansion last year. Besides, interest rates are rising slowly, inventories are light and demand is still strong.
"Unless there's something catastrophic that's going to occur," he said, "I don't predict a downfall."
© 2018 the Sun Sentinel (Fort Lauderdale, Fla.), David Lyons. Distributed by Tribune Content Agency, LLC.