As real estate agents, buyers and sellers brace for a recession, many want to know how it will affect South Florida. The region has experienced record price growth, as well as sale dollar volume and number of deals during the pandemic, but a slowdown is already underway.
Danielle Hale, chief economist at Realtor.com, isn’t seeing major signs of distress in South Florida. People continue to relocate to the Sunshine State, international buyers are returning to the market, and the destruction from Hurricane Ian is expected to bring buyers and renters to the East Coast.
Still, home sales have dropped and price growth has slowed this year, following a record 2021.
Speaking on a panel of housing experts at The National Association of Real Estate Editors in Atlanta last week, Hale and others said they expect the market to continue to decline across the country. TRD caught up with Hale following the panel to get her take on how Miami will fare. Here’s what she had to say:
What should we expect for 2023?
It’s clear home sales are going to continue at a slower pace because the market’s not great for buyers, it’s not great for sellers. So we’re just going to see less activity. If you don’t have to sell your home and give up your sub-3 percent mortgage, why would you, especially when it’s really hard to buy right now?
It’s likely to be those areas that had the biggest price run up [where prices will fall the most]. That puts Miami in a really interesting position. Because rents are up, home prices are up. We haven’t seen [softness] yet in Miami. I don’t know if that’s because it’s continuing to attract people, but I would guess that there’s also an element of international activity that sort of went away during the pandemic that’s kind of coming back and helping to offset.
What’s driving demand?
Affordability is the No. 1 driver for shoppers right now. That’s actually something that probably is working in Miami’s favor. I mean, it’s not the most affordable market in Florida. But Florida as a whole is still much more affordable than many other parts of the U.S., so I think it continues to attract people.
If there is a crash, do you think Miami is one of those markets that will suffer more?
Miami is a puzzle. The other areas make a little bit more sense. I mean, you look at the way the [bank] rules have changed. It makes what happened last time much less likely. At the same time, you look at the price gains, and you think, ‘Well, that doesn’t look sustainable.’ They’re going up faster than incomes. Even though it’s slowing, rents [in South Florida] are still going up by a lot.
You said 3.5 percent unemployment is “well below” what’s typical in a recession. But that’s where the economy is headed, right?
Even the Fed thinks that that’s likely where we’re going to go with interest rates and the way activity is slowing. Eventually the job market catches up. It’s just not there yet. The labor market is behaving very unpredictably. When we talk about how the pandemic changed things, it reset what’s normal.
There’s still a lot of talk about this mindset shift among consumers. People don’t feel good, but they’re still spending anyway. [People are now] almost more willing to make decisions that they might not have made before because it hammered home how life is short. I think people are willing to move further away than they ever were before, in part because of that reframe of the fragility of life, but also because of the flexibility that enables that.
In South Florida, we’re hearing about insurance affecting deals, especially following Hurricane Ian, but also increased demand because the storm wiped out housing on the west coast of Florida.
It’s sort of paradoxical. What happens in the short run is likely to be different than what happens in the long run. But in the long run, a lot depends on how quickly people are able to rebuild and feelings about the level of risk that they’re taking, which don’t always match what the data says the actual risk is. In Florida in particular, that’s a really interesting aspect.