The real estate market is constantly changing. At any given time, buyers and sellers may have more questions than answers. In the spring of 2022, many Miami residents are wondering when the housing market will balance out.
What is a balanced market?
First, it’s important to understand what a balanced housing market looks like. Whether it’s a buyer’s market, a seller’s market or a balanced market has everything to do with the “months supply of inventory” or MSI. To determine the MSI, an individual must estimate how long a home will be on the market before it is sold or absorbed based on the homes currently being sold in the area. The absorption rate is the number of homes sold in a year divided by twelve.
In a buyer’s market, it is estimated that there is more than six months’ worth of inventory. When there is less than six months’ worth of inventory, it is assumed to be a seller’s market. A balanced market is said to occur when there is an estimated six months’ worth of inventory.
When will the Miami real estate market balance out?
Miami is currently experiencing very low inventory, as is most of the country, therefore making it a seller’s market.
“In recent years, it has become very tricky to predict when ‘balance’ will finally occur. However, indications are leading to the possibility of a balanced market by the end of this year,” says Miami Signature Homes President and top producer Mauricio J. Barba.
How has the COVID-19 pandemic affected the Miami real estate market?
At the beginning of 2020, when the COVID-19 pandemic started, national real estate experts projected that the housing market would enter into a depression. Seemingly in defiance of those expectations, by the summer of 2020, the housing market was booming. This phenomenon drove inventory down 32% when compared to pre-pandemic levels.
Locally, Miami experienced some of the highest housing cost increases anywhere in the United States, as reported by CBS4 Miami. Miami has always been attractive to Latin American and European investors, but more recently COVID restrictions in other parts of the United States, and the now ubiquitousness of remote work, have driven up costs as Americans look to relocate to the Magic City.
“They started coming to South Florida in droves,” said Jennifer Wollmann, board chair of the Miami Association of Realtors.
With buyers outnumbering homes for sale, Covid-19 has affected both supply and demand despite inflation rates. Prices in December rose by 29% in Miami-Dade, and by 18% in Broward according to the Miami Herald. Additionally, due to the high demand, buyers had no choice but to offer the listing price if they wanted to acquire a property.
Prior to lockdown restrictions, a poll conducted by Fannie Mae, showed that only 25% of homebuyers thought it was a good time to buy a home, compared to 69% who were convinced it was a good time to sell. A more recent poll showed individuals appeared certain that home prices would go up over the next year and they expressed increased concern about job stability than in the past reports.
“COVID has flipped our life upside-down, disturbed many aspects of everyday life, but the housing market had exceptional performance,” Lawrence Yun, chief economist of the National Association of Realtors, told FOX Television Stations.
Is the Russia-Ukraine Situation Affecting the Miami Real Estate Market?
Another worrying aspect for sellers and buyers is undoubtedly the situation in Ukraine and its effects on housing in the United States. The effects of the Ukraine crisis certainly are impacting oil and energy prices. Until now, we haven’t seen changes in real estate. However, if those energy prices remain elevated for a significant period, the potential effects may hit the housing market. In other words, higher energy prices could make consumers even more apprehensive about making big purchases.
Elevated oil prices, material shortages, distribution delays, and increased shipping costs, all ultimately affect construction prices. Some commodities for new home construction have reached record-high price levels, making experts believe home prices will rise by as much as 22% this spring. In addition, the lack of construction materials has created a new-home construction supply gap of 5.8 million houses as of February 2022.
Although the situation in Russia and Ukraine is creating significant uncertainty, experts are reluctant to change their forecasts for the spring housing market, as the future is more unpredictable than it was before.
“Currently, we are all concerned with Ukraine/Russia effect on our hyper-local market, but at this moment it doesn’t seem to have noticeably affected the housing market. Prices remain high and buyers are paying, generally speaking,” said Barba. “Even so, the market is continuing to change very quickly making it more important than ever for buyers and sellers to work with a real estate professional to navigate these changes.”
According to industry insiders, changes in inventory aren’t projected to change in Miami in the near future. However, interest rates are already on the rise, which will affect the market.
Speak to a High-End Real Estate Expert
Miami Signature Homes President and top producer Mauricio J. Barba has been a mainstay in Miami’s uber-competitive high-end real estate market since 1994. Respected in his native community by clients and colleagues alike; he has logged top honors for elite performance in his field. Mauricio is connected worldwide but specializes in Coral Gables, Coconut Grove, Key Biscayne, Brickell, Village of Pinecrest, South Miami, Palmetto Bay/Falls area, and the Beaches.
The Miami Signature Homes team is relatively small compared to their sales volume. That has been important in keeping relationships with clients at a very direct level. Mauricio, Tania, Vicky and Sebastian each maintain strong personal connections and professional relationships with all of their clients, many of which have been with the team for decades.
Because of this personal level of service, they are able to devote individual attention and care to every home sale or search. Assistants are great, but Miami Signature Homes makes sure their principals are the people solely responsible for returning important calls or emails 24/7, 365 days a year.
If you’re passionate about white-glove treatment throughout one of the most important financial experiences of your life, call us at 305.439.8311.