Many of my clients have been calling me, shocked at how rapidly home prices have risen over the last year and questioning whether the South Florida real estate market is entering a new bubble. Although this graph confirms that prices have gone up, we are a long way off from the peak. Given that we arrived at inflated pricing due to speculation, easy and bad mortgages, and fraud, I think we will stay off the peak for quite a while.
The reason for our current rise in prices is due to a lack of inventory. Many homeowners who bought at the peak are still under water and will be for quite some time; foreclosures and short sales have been slow to work through the backlog; there are investors with large amounts of cash looking at real estate; mortgages are still difficult to get; and appraisals have been off of what buyers with mortgages are offering thereby keeping owner/occupiers out of the housing market. Now that builders have started to construct new homes and buildings, inventory should start to creep up again.
Based on the Miami Herald’s Economic Time Machine in the July 1 Business Monday, at the current pace of value increases, we won’t hit a new peak until July of 2018.