Beautiful Residential Home – Courtesy: Shutterstock – Image by Mike Focus
Florida homes continue to sell for much more than what they are worth, and recent buyers who paid high prices might be seeing their real estate investments pay off much later than they originally anticipated.
According to a study conducted by researchers at Florida International University and Florida Atlantic University, as of June 30, homes throughout Florida sold for 21.76 percent above their long-term pricing trend, an increase from 19.24% in May and 17.17% in April.
More than 25 years of home prices were observed on renowned online real estate website, Zillow.
Miami, Orlando, Tampa, Jacksonville, and Tallahassee were the five cities identified with high selling prices. Of all their findings, Tampa Bay is the most alarming of the Sunshine State’s major metropolitan areas. In June, homes in the Tampa area sold for a 32% premium, up from 28.53% in May and 26.14% in April.
As previously mentioned, the overpricing of homes continued to escalate across Florida’s other major metropolitan markets, including Miami (16.89%, compared with 14.88% and 13.18%), Orlando (21.19%, up from 19.79% and 18.45%), Jacksonville (23.07%, up from 20.48% in May and 18.22% in April), and Tallahassee (14.38%, an increase from 12.95% and 10.48%).
“Citing a shortage of homes for sale, a steady influx of out-of-state buyers and mortgage rates near historic lows, the researchers are not predicting a housing crash like the one that occurred more than a decade ago, when Florida homes were overvalued by 60 percent or more,” explains a report written by FAU.
According to associate dean of FAU’s College of Business and real estate economist Ken H. Johnson, those homeowners who paid premium prices may have to wait years before they can see solid returns on their investments.
“The across-the-board increase in the premiums paid for housing throughout the state is very worrisome,” says Johnson. “Trees do not grow to the sky and neither do home prices. We’re nowhere near where we were at the peak of the last housing cycle, but we do need to be careful. Walking away from an obviously overvalued home may be the best thing buyers can do in this kind of market,” he continued.
With all that being said, what should people who are looking for homes in Florida do instead?
Rent instead of buying.
“Our research on buy vs. rent indicates that, on average right now, renting and reinvesting is a particularly good wealth creation strategy,” FIU’s Hollo School of Real Estate’s Eli Beracha says. “More people who rent and reinvest would help alleviate current pricing pressure, which is a good thing,” she continued.
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