July 19, 2022

Summer Slowdown in South Florida

By Audrey Zheng

The South Florida housing market has been on fire over the past two years, fueled by rock-bottom interest rates and a population influx as remote work policies, sunny climes, and a friendly state tax environment made Miami one of the country’s most popular cities. But as interest rate hikes, inflation, and uncertainty in the stock market and broader economy have taken place over the past few months, there’s been a slump in the pace of transactions in South Florida, even beyond the usual summer slowdown.

Pended sales, a leading indicator of closings to come, are down 32% vs. June 2021 and down 15% vs. June 2020, and we can expect to see pending and closed sales continue to track down this summer.

Despite the slowdown in number of closed transactions, the transactions that do close are moving faster than ever. Average days on market have reached a record low in Miami-Dade county at 48 days, as motivated buyers are eager to close before interest rates go up again. 

It’s still a sellers’ market with 3.3 months of inventory, although less extreme than we’ve seen in the first half of the year. Slightly more listings have come on the market, and with fewer transactions closing, now is as good of a time for buyers who can tolerate the interest rate hikes as in the past year. A balanced market is typically marked at ~6 months of inventory, which we haven’t seen since early 2021. 

Despite the additional inventory coming to market, pricing has remained near record highs, with average price per square foot near its all-time high at $545 and average sold price at $866K. Pricing may decline slightly, particularly as additional interest rates continue to impact buyer affordability, but are not likely to drop to 2020 levels. 

The aspirational prices seen just a few months ago, however, may not be the right strategy for those advising sellers. The number of price decreases in June has nearly tripled since March, while the number of price increases has dropped significantly. In fact, in March, price increases were more common than price decreases, which is uncommon particularly in South Florida, when deals often close below list price. In June, however, price decreases made up 83% of all price changes. As the market adjusts to the new environment, rational pricing for new listings will be key in determining how successful they are in the market.

For buyers whose budgets are squeezed by inflation and interest rates, there’s been limited relief in terms of pricing. In short, there’s slightly more inventory out there, but it’s still quite expensive, and closing quite quickly. 

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