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2004 State of the Real Estate Market for South East Florida

2004 has been another record-breaking year. Despite some analysts’ prediction of a slight slow down in sales volume, the 2004 numbers exceeded even the huge gains of 2003.  The decline was expected mainly due to rising interest rates.  However rates have not increased as much as expected and, in fact, have dropped the last few months. 

Prices continue to rise throughout the country - especially in Florida.  The median price in Broward Country surpassed $300,000 this year in July (up 28% from a year ago) and surpassed $400,000 in December!  The spike in December was due mostly to the sale of homes over 1 million dollars.  There were 46 home sales over 1 million in December 2004 compared to just 21 in December 2003.

Will prices continue to rise in 2005?

This is of course the big question.  Many parts of the country will likely see at least a slow down in price increases, but almost every analyst believes Florida will not be one of them.  The biggest reason for this is simply demand is much higher than supply.  And with South Florida running out of land, supply will remain tight.

What factors are affecting price?

If demand remains strong, prices can only go in one direction.  The main sources of increasing demand in South Florida include the volume of baby boomers set to retire, the Euro continuing to rise against the US dollar, and prices here are still lower than many markets including Los Angeles, Washington DC, New York, San Diego, San Francisco, and most of Europe.

• Baby Boomers:  It is estimated that 77 million baby boomers will be retiring in the coming years.  A full 40% of them have said they will be retiring in Florida.  That means a whopping 30 million retirees will be coming to our state that only has a population of 25 million right now!  There are already 1,090 people moving to Florida everyday while land is very scarce here in South Florida.  Broward County is currently producing just 4,000 new housing units a year and we are expected to get 800,000 to 1.2 million more people in the next 5 years.

• Europeans:  Housing prices have been rising as fast, if not faster, in Europe as they have here in the US.  So with the value of the Euro expected to hit $1.40, giving Europeans a 40% discount, the US is becoming a great value.  For example, a 40% discount means a $300,000 dollar condo would be only $214,000 euros.  Plus where can you find this weather in Europe?

• Compared to other US markets:  When compared to some of the other big name markets, South Florida is still low on the list.  The average price for a home in California is now a whopping $487,000.  (The statewide average price for Florida is $194,700.)  California also has higher taxes and higher living costs.  Florida can offer better weather, lower prices, no income taxes, and more oceanfront housing options.  Areas in the north like New York and DC cannot compete with South Florida’s weather, the prices are higher, and there is not much of a beach.  Also Florida is stepping up and supplying new urban center style development that allows for shops, restaurants, and other amenities within walking distance allowing for more social interaction – features both baby boomers and Europeans have been asking for.

For all these reasons and more, Florida should remain a good investment as prices continue to rise.  For now…

What does this mean to me?

If you are thinking of buying it is a good time to look while there is still some supply and before prices rise even higher.  With so many different types of housing available now, it’s a great time to find somewhere that fits your personality.  Beachfront condos, brand new townhouses or single family homes waiting to be remodeled, everything is here.

If you are thinking of selling this is the perfect time because demand is at such an all time high.  Bidding wars and quick closings are not uncommon these days.  It’s always easier to sell while buyers think the value of the home can still rise, not when they think it has peaked.  If things do start to peak, as some analysts predict, now is the perfect time to sell.  It is always better to sell too early than too late.  Furthermore, whether you are looking to upgrade, downsize or just move to a different neighborhood, you too should begin your search before supply tightens.

No one knows for sure what is in store for 2005 housing market.   But we do know South Florida is in its prime right now.  Why wait and risk missing out on such a good thing?

Additional Information

According to CNN

CNN recently came out with their list of the hottest zip codes in the country and #1 and #2 are in the Fort Lauderdale area.  The full list for South East Florida is as follows

The hottest zip codes by CNN

NEW YORK (CNN/Money) -- For each of the 10 largest metro regions tracked by Fiserv Case Shiller Weiss, here are the 10 zip codes with the largest median five-year price increases -- and their prospects for the coming year.

 To track housing performance, Case Shiller Weiss researchers look at repeat sales data for a sample of houses in each zip code, a method they consider more accurate than simply looking at changes in an area's median home price.

The firm then considers past price changes employment trends and interest-rate trends to devise a forecast for the coming year. Finally, it makes adjustments to individual areas to account for other factors that could influence an area's housing market.

Data on five-year price change is through the second quarter of 2004, while the forecasted change is for the third quarter of 2004 through the third quarter of 2005.

Source article can be found at  http://money.cnn.com/pf/features/lists/topzipcodes/index.html