State of the housing market: Homes prices aren’t rising as fast as market slows down

High mortgage rates are placing added pressure on buyers’ budgets, despite the fact that home prices aren’t as high as they were at the peak of the market.

Overall, price growth has started to moderate and closed sales are ticking back up, as buyers and sellers become used to the new normal in the housing market.

“They know the market has changed,” said Patty Da Silva, broker with Green Realty Properties in Cooper City. “Sellers have come to the realization that they aren’t going to get the prices from last year and buyers realize that interest rates will probably not come down meaningfully soon.”

Here is where the South Florida housing market stands in terms of sales price, closed sales, inventory and rents:

The median sale price in the tri-county area posted smaller year-over-year increases, indicating that the market is returning back to normal.

For Palm Beach County, the median sale price of a home increased 6.3% to $575,000 in March, according to the latest numbers from the Broward Palm Beaches and St. Lucie Realtors.

This same time last year, the median sale price of a single-family home had increased 23% when compared to the year prior.

In Broward County, the median sale price rose 3.7% to $565,000. Last March, the median sale price of single family home posted 22.5% gains.

And in Miami-Dade County, the median sale price only jumped about 5.6% year-over-year, increasing to $570,000. The area saw almost 10% price gains last March when compared to the year before.

“Sales prices have pulled back a bit, though they are continuing to grow,” noted Scott Gerow, executive director of luxury sales with the CBG Luxury Team at Compass. “They just couldn’t sustain the 20% and 25% year over year increases.”

It’s a slight moderation from the significant year-over-year increases seen during the height of the housing boom. Prices are also significantly lower than what they were at the peak of the market — the median sale price in Palm Beach County was $620,000, while in Broward County, it was $600,000.

But for many buyers, rising mortgage rates have made it hard for them to realize that prices have slowed. Interest rates have settled around 6.55%, according to the Mortgage Bankers Association.

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“Buyers’ perception is that prices are too high, and interest rates are too high as well,” Da Silva said. “They are more concerned about what prices they can afford with these interest rates.”

Closed sales for single-family homes also started to tick up in March as the spring-buying season has taken place.

There were 1,465 closed sales for single-family homes in Palm Beach County in March, an uptick from the 975 in February and the 794 in January.

And in Broward County, there were 1,271 closed sales in March, up from the 833 in February and the 677 in January.

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Part of this can be attributed to the influx of buyers shopping for properties during South Florida’s popular homebuying season, as well as the fact that a new group of buyers have entered the market, ones who weren’t looking during the time of record-low interest rates.

“You have these new buyers coming that have never had a pre-approval based on a 3% interest rate. They’re getting a pre-approval now based on what they can afford,” said Da Silva. “It was shocking for the other buyers who were now looking at homes at $450,000 when before they could afford $750,000. The fresh buyers never saw that and it helps move sales a bit.”

While inventory levels have risen when compared to last year, it’s still not enough to balance the market or to bring prices down.

There’s about 3 months of inventory in Palm Beach County, a 166% increase from the year before.

In Broward County there is about 2.7 months, a 145% increase, while in Miami-Dade County there is 3.5 months of inventory, or a 105% increase.

“I do not think prices are going to fade significantly. I do think there is going to be strong value in South Florida because there is a supply issue here. So many people will still continue to migrate,” added Gerow.

The rental market in South Florida is still posting some year-over-year growth.

Miami is the fourth most expensive rental market, according to Zumper, with a median one-bedroom rent of $2,840. It’s a 8% increase from the year before.

“Real estate developments popping up across the region range from affordable micro-units to ‘super luxury’ but Miami’s new renters are disproportionately interested in luxury amenities,” noted Zumper in its report. “Resort-style perks like concierge services, on-site restaurants and free fitness classes are increasingly common in Miami apartment communities.”

Fort Lauderdale’s median rent for a one bedroom rose 7% to $2,100, while the median rent for a two-bedroom apartment decreased 6.7% to $2,800.

For West Palm Beach, the median rent for a one-bedroom apartment was $1,890, a 9% increase from the year before. The median rent for a two-bedroom apartment increased 4% to $2,403.

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