research shows home sales are too expensive
LAKELAND – A shortage of home inventory and scarcity of rentals are driving up house prices in Polk County and across the country.
In some markets, such as Lakeland and Winter Haven, prices have risen so much that they may soon hit their turning point, flatten out, and then fall.
Earlier this year, Ken H. Johnson, real estate economist at Florida Atlantic University, and Eli Beracha, school of real estate at Florida International University, launched the study to identify and rank the most overvalued markets .
Rankings are updated monthly and are calculated by comparing current average prices to historical prices, expressed as a percentage. The more the percentage increases, the more the market is overvalued.
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The study is national in scope.
Four regions of Florida were among the country’s 25 most overvalued markets in October. Here’s a look at how much buyers are overpaying:
- Tampa, 37.96%
- Lakeland, 37.86%
- Fort Myers-Naples, 34.64%
- Melbourne, 34.13%
According to Demetra Hicks, a real estate sales professional in Winter Haven, a number of factors caused inventory shortages as demand increased.
“The supply chain is a problem, so builders are slow to build houses,” resulting in low housing inventory.
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Once the supply chain improves and houses are built faster, the problem should be fixed, Hicks said.
Another factor is that people are moving after being closed due to COVID-19 social distancing measures. As they start to relocate to take on new jobs, “it creates a flood of buyers.” she added.
Rental property owners also want to take advantage of higher selling prices today, forcing long-term tenants to search for new homes, and increasing demand for homes to buy as well as rentals, Hicks said. .
Johnson and his colleagues found that in Polk County, the average price for a home should be $ 188,777. However, the actual average price is $ 260,247.
“It’s a little shocking,” Johnson said.
Yet the premium paid today is much lower than the prices people paid before the mortgage crisis, when home values plummeted after peaking in August 2006. These levels were 62.4% higher than the price. that they should be today.
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“The cycles are pretty dramatic,” Johnson said. “It’s not as high as it used to be and there are signs that prices are peaking.” Prices in the western United States, for example, are “running up”, he said.
Additionally, when prices drop again, Polk County is unlikely to experience a significant drop in prices like it did 15 years ago. Johnson explained that it is highly unlikely that another mortgage crisis will occur. Mortgage rates are still low and within 10 years and within a 25 mile radius of Lakeland the population is expected to reach 1 million people, or a fifth person for every four people today.
“All of this could cushion a downturn,” he said.
In other areas, notably Miami’s No. 64 and Los Angeles No. 90, prices are rising much more slowly, producing noticeably lower premiums than during the real estate bubble that contributed to the Great Recession.
“All of this suggests that some parts of the country have learned a valuable lesson about prices, while others strongly believe house prices are skyrocketing,” Johnson said.
At the Winter Haven Chamber of Commerce, President / CEO Katie Worthington Decker said: “One of the biggest challenges we feel, as many are, is the lack of inventory of any type of housing, including rental opportunities.
“As house prices have risen due to increased demand and lack of supply, those who cannot afford to buy are turning to rental opportunities,” he said. -she adds. “Winter Haven has needed more multi-family and rental properties for years, and this gap is magnified in today’s market. ”
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Based on his own research, Johnson said he was also not worried about a big real estate crash in Polk County, with stocks so tight and demand so high.
“You have a huge inventory shortage which will help support prices going forward,” he said, “and you have really, really high expected growth.”
Laura Layden of Fort Myers News-Press contributed to this report. Paul Nutcher covers business and industry for The Ledger. He can be contacted at [email protected]