The Tides Have Shifted For South Florida Real Estate
By Ricardo Wolf
August 19, 2021
This new wave of domestic buyers, includes people from all over the country, but those doing the heavy lifting, stem from the domestic Northeast, as well as, an uncharacteristic surge of buyers, from California.
South Florida has become the new frontier for a growing number of domestic US residents, primarily those with the financial means to stake their claim on much of South Florida’s most coveted coastal properties. While South Florida is quite familiar with eras of massive migrations and uncharacteristic demand for coastal real estate, today's circumstances should not be confused with those experienced in the past.
Unlike prior boom markets, today’s is gimmick free, with no tax shelter loopholes or unscrupulous lending practices responsible for fueling demand. However, this boom did not come without reason, nor did it develop overnight. Instead, it is the culmination of several factors that have once again led the masses to our sandy shores. While these circumstances may prove to enrich many, while creating opportunities for many more, there will be casualties in this battle for South Florida’s most desirable real estate.
Today’s phenomenon involves a surprisingly unusual demographic, one that not very long ago would have never seriously considered leaving their current cities and states to become actual Florida residents. This wave of enthusiastic new buyers need not bring their passports, and many won’t even have to fly commercial. Instead, they are quite affluent and very familiar with what South Florida has to offer. They also understand real estate and have been eagerly swallowing up our most intrinsically valuable multi-million-dollar residences without batting a lash and paying in cash. These buyers have long loved coming to South Florida to escape the hustle and bustle of America’s biggest cities, avoid grueling winters, or to unwind while enjoying Florida’s beaches, the Atlantic Ocean, great weather, and the unmistakable vibe of a culturally rich cosmopolitan city that produces an intoxicating cocktail of fun, sun, and relaxation.
This new wave of domestic buyers includes people from all over the country, but those doing the heavy lifting stem from the domestic Northeast, as well as an uncharacteristic surge of buyers from California. While sales to buyers from the northeast does not seem too far-fetched, having buyers from the West Coast flock to Florida is very telling. It is a direct reflection of states that are doing things right, and those that are doing things terribly wrong. This is all occurring while conditions in counties throughout the globe continue to deteriorate, further influencing international buyers to hurry up and purchase before being completely priced out of the market.
This has placed great pressure on the market, with a buying public quickly running out of options and driving prices, and a selling public with the fear of never being able to replace what they so eagerly would love to sell. People on both ends of the transaction are somewhat overwhelmed by the conditions they have found themselves in, and both sides have very powerful incentives to do what they would have never considered doing not very long ago.
All these developments, while never anticipated, are all eagerly welcomed by anyone directly or indirectly involved with the activity being experienced, as our cities continue to grow and thrive under extremely difficult conditions. But, at the end of the day, sellers that want to sell will be able to do so, and usually at a price far above what they could have anticipated just 12 months ago, and there is nothing to indicate that will change anytime soon. Buyer’s will also be able to find their place in South Florida’s coastal market, but those with the deepest pockets and the fastest execution look to benefit most. Unfortunately, for there to be winners, there must be losers, and many times those most affected have little or no good options to consider.
For years, full time and part time South Florida coastal residents have enjoyed a healthy supply of luxury waterfront condominium units available for lease, usually at prices below the unit’s actual carrying cost. South Florida has long been known as an investor’s paradise, where one could buy a property, rent it, maybe use it sometimes, while safeguarding their wealth and speculating on the property's future worth. This is a very significant sector of South Florida’s real estate market that represents a large percentage of properties commonly found in our rental inventory. With new buyer’s now offering investors/owners a healthy profit for their properties, tenants are quickly being replaced by new owner residents and future rental inventory is quickly being diminished.
The rental market is further being exhausted due to those selling their homes, as they quickly find out that finding a great deal may take some time and that renting a condo for a while may be their only option. Unfortunately, waiting on the sidelines for the market to cool long enough to find a great deal could now cost one a small fortune, in what has become a very costly and challenging rental market, and with no assurance that great purchasing opportunity will ever come again.
Aside from very real challenges regarding how the city, county and state government is able to manage growth and mitigating the negative effects that usually accompany a boom of this nature, many will do extremely well financially due to the conditions being felt across South Florida and the State. However, it is very easy to lose sight of what you lose when you’re only focused on the prize. As for those renting a home, it is only a matter of time before you are asked to either move on or pay much more for far less. If that works for you, bravo.