The acceleration of home values in South Florida has led to rampant overpricing, which could create instability in the market, according to a study by Florida Atlantic University.
FAU’s College of Business analyzed over 25 years of housing data and pricing trends through May from online real estate marketplace Zillow.
The conclusion: South Florida homes were overpriced by 14.88% compared to historical levels.
Ken H. Johnson, a real estate economist and associate dean at the college, said the rise in prices is not as steep as the last major increase in 2006, when South Florida homes were overvalued by 60% to 65%.
“I do get worried that as prices keep accelerating, the higher we get the further prices will fall,” he said. “We are in a bad spot not anywhere near like it was a decade-and-a-half ago.”
Population growth, low interest rates and a housing inventory shortage should keep housing prices from falling too much, and they may even flatten out, Johnson said. He doesn’t foresee a massive wave of foreclosures or a loss of homeowner equity, but people hoping for rapid value appreciation could be disappointed.
“If you buy today, you probably will be in this property a number of years before you see a noticeable return on investment,” Johnson said.
“From a global perspective, South Florida homes are not overpriced,” said Nancy Klock Corey, regional VP for Southeast Florida with Coldwell Banker. “Homes in New York and much of California are more expensive. It’s almost like we are getting into balance with what our true value is.”