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Home sale prices peaked this summer in more than two dozen areas of the country, where costs are now sliding, but South Florida’s burden of overvalued properties and lean inventory remains.
Many of the cities that saw price or value drops were in Western states including California, Colorado, Oregon and Utah, according to a review by Florida Atlantic University and Florida International University of July housing prices compared to historic trends.
No Florida cities were among the 27 markets that experienced decreases.
South Florida, which includes Palm Beach, Broward and Miami-Dade counties, became more overvalued than in previous months by ranking 38th in the top 100 markets. In June, South Florida ranked 42nd. This time last year, it ranked 74th.
July’s average home price in South Florida was $467,759 as measured by the Zillow home value index prices used in the report. The expected price based on trends would be $339,742. That’s means buyers paid about 38% more than what would be expected by long-term pricing trends.
“We are moving through the pack a little too fast,” said FAU real estate economist Ken H. Johnson about South Florida climbing in the ranks of unaffordable markets. “We might see our prices come down a little but when you compare it to incomes, it will still be unaffordable.”
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Florida regions that rank in the top 20 most unaffordable include Fort Myers, Lakeland, Tampa, Sarasota-Bradenton, Melbourne and Daytona Beach.
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Boise, Idaho, which has consistently reigned as the most unaffordable in the nation, kept that title, but its average sale price and the amount by which homes are overvalued fell in July. Johnson said the dip indicates that the Boise market has peaked.
The top 10 markets in addition to Boise that have likely peaked include Austin, Boston, Colorado Springs, Denver, Detroit, Los Angeles, Madison (Wisconsin), Milwaukee and Minneapolis.
“The surprising thing, and the thing we can’t answer, is why are most of the declines starting out west?” Johnson said. “There is no economic reason we can come up with for this.”
But not all of the slipping markets were west of the Mississippi River. Boston’s premium — the percentage above long-term pricing trends that consumers must pay — dropped from 15% to 14.8% but its sale price went up by about $1,800.
Premiums can go down even if prices are increasing when the prices are growing at a slower rate than an area’s long-term pricing trend. For example, if the long-term trend is that prices increase 5% annually, but they are only increasing at 4%, then the premium is decreasing.
Washington, D.C., also saw its premium dip slightly, but prices increased by $1,600.
Florida home supply remains low
Eli Beracha, who coauthored the study with FAU and is director of FIU’s Hollo School of Real Estate, blamed a low inventory of homes for sale for Florida’s stubbornly high prices and values compared to historic trends.
In Palm Beach County, the supply of homes for sale in July was 2.7 months, according to the Florida Realtors group. While that was an 80% increase over July 2021, it’s far from a balanced market of 5.5 months.
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“There is simply not enough inventory to go around,” Beracha said. “That undersupply will keep pressure on prices in many areas.”
Higher interest rates, higher insurance costs and higher inflation are other concerns potential homebuyers grapple with.
Ronald Pietkewicz, Bank of America’s preferred lending market leader for Palm Beach County and the Treasure Coast, called the cost of homeowners insurance in Florida a “crisis.”
“If you are moving to Florida for the appeal of lower property taxes, there is a good possibility much of that savings could go straight toward a significant homeowners insurance premium,” he said.
Top overvalued Florida markets
Fort Myers, 62% overvalued
Lakeland, 59% overvalued
Tampa, 58.5% overvalued
Sarasota, 55.7% overvalued
Melbourne, 53% overvalued
Daytona Beach, 51% overvalued
Orlando, 49% overvalued
Jacksonville, 47% overvalued
Palm Beach, Broward, Miami-Dade, 38% overvalued
