Whenever we identify opportunities in the Florida real estate market, we share them on this blog and explain the reasons that lead us to this conclusion. At this very moment we understand that Florida is starting a micro-cycle, which brings opportunities for investors, but it should end soon.
Therefore, if you are thinking about buying a property in Florida, this could be a unique and very opportune moment.
The opportunities generated by the different cycles
The real estate market, in any region, goes through cycles. At the beginning and end of each cycle, imbalances are usually observed, which bring opportunities.
In the article A cycle ends, immediately before the pandemic, we explain a phase that ended in the Miami real estate market, where the high inventory of new units on the market (launches) came to an end. Builders, until that moment, needed to dump properties “off the shelf” before starting new ventures. In 2019, this cycle came to an end, as most builders had already sold out their inventories and there were no longer, at that time, large amounts of launches. Thus began a new phase where inventories returned to equilibrium levels.
Obviously, these projections did not materialize in full, since, immediately afterwards, the pandemic arrived with all its disastrous impact on the Florida real estate market. Other cycles and micro-cycles occurred during the pandemic, and with them, opportunities were created.
During the pandemic, there was a real invasion of residents from other American states to Florida, which received more than 1000 new residents per day, at the height of the crisis. Most of the property owners, who had put their properties up for sale, withdrew their units from the market, fearing an uncertain future.
Very high demand and inventory also at historically low levels have put great pressure on property prices in Florida, especially in the segment of single-family homes, which are large homes, usually with spacious outdoor areas, characteristics that are valued in periods of confinement.
The segment of apartments in condominium buildings was not as sought after, which led the inventory of this segment to very high levels.
In this blog, we come to predict what actually happened. The high demand for single-family homes had to migrate to apartments, as there were not enough single-family homes to meet the demand.
At the end of the pandemic period, Florida home prices were sky-high and all indications were that they would continue to rise as inventory remained low and demand high.
It is at this moment, with the rise in interest rates imposed by the American Central Bank (FED), that we identify the beginning of a new cycle, or micro-cycle.
The new micro-cycle in the Florida market
The micro-cycle that we understand to have started at this moment happens at a time of high demand for real estate in Florida and, on the supply side, extremely low inventory. This unbalanced situation, as mentioned, has been going on for approximately 3 years, putting upward pressure on real estate prices. A recent factor, however, tries to bring the market to the balance line: a drastic increase in the US basic interest rate.
Recently, the American Central Bank (FED) was obliged to increase interest rates, in order to control the inflationary escalation. Higher interest rates made mortgages more expensive and demand for real estate experienced a slight slowdown.
This slowdown can be seen in the increase in inventory, as buyers give up or postpone purchases, hoping for lower interest rates in the future and, consequently, less expensive mortgages.
There is, therefore, a slightly more favorable situation for buyers and investors, as they have greater bargaining power. This situation, about a year ago, was unimaginable. The same property received up to 6 “cash” proposals (in cash) in a true bidding war.
And why do we understand that this is just a micro-cycle and not a trend?
The answer is simple: This is an “artificial” situation caused by the increase in interest rates.
We understand that the FED will not maintain the upward bias in American interest rates for a long time. Once inflation is under control, interest rates may drop and, with that, the real estate market will be stimulated again.
Once the interest rates are lower, the market will heat up again, a moment that would end this micro-cycle that we projected.
This could therefore be a unique and opportune time for investors looking to buy Florida real estate.
Not only are we entering a micro-cycle, but other factors also make this an appropriate time to buylic. Learn more in the article 5 reasons to buy real estate in Florida now
About AMG International Realty
AMG International Realty is a global real estate specialist in Florida. If you want to know more about real estate opportunities in Florida, get in touch right now and chat with me via WhatsApp: +1 305 318 6968 (Heloisa Arazi).