Writer: Catie Schwartzman
2 min read March 2021 — Historically low interest rates coupled with heavy demand for homes in the Sunshine State are pushing Fort Lauderdale’s home prices way up. In fact, some think that time is running out to take advantage of the COVID-19 economy.
Ken Johnson, a real estate economist at Florida Atlantic University, is not surprised by the activity. “You see this every time you have a dramatic drop in [interest] rates,” said Johnson to the Sun Sentinel. “You see a quick run-up in price. It’s like a sugar high. It’s like an injection to stimulate the marketplace where you have this really low interest rate. ‘I’d better buy now because I’ll never see these low rates again.’”
Another change facilitated by the COVID-19 economy is that, for the first time in years, it is more expensive to rent a one-bedroom unit in Fort Lauderdale than it is in Miami, an average of $1,690 a month versus $1,600 a month. Miami’s median rent dropped by 9.1% year-over-year in January, while Fort Lauderdale’s grew by 3%.
Demand for homes in South Florida has been exceptionally high over the past year, with not as much supply on the market to match it. The environment is concerning, says PropertyForce CEO Oliver Seidler. He is worried that the perfect storm of low rates and high demand have created a housing bubble.
“I think it’s dangerous, and that every asset class is in a bubble. I don’t think it’s healthy,” said Seidler to Invest: Greater Fort Lauderdale. “I think it’s to do with low interest rates and people migrating in droves from the North and California where there are high state taxes and different restrictions for COVID. That combined with low interest rates has caused prices to go up very fast and dangerously high.”
Ralph L. Godwin, Jr., President and CFO of YMP Real Estate Management, LLC, feels he is well-positioned for any change in interest rates based on his investment strategy and diligence in refinancing properties.
“As interest rates start to increase, which it appears they will, and accelerate in that increase, I think CAP rates and overall pricing for multifamily will become more favorable and reasonable,” said Godwin to Invest: Greater Fort Lauderdale.
While some compare today’s interest rates to the 2008 bubble, Johnson of Florida Atlantic University said he ranks the chances of a market bubble as low.
“I don’t expect prices to take a major tumble,” Johnson said to the Sun Sentinel. “I expect them to go flat in the coming future because South Florida is more popular than ever before. We’re going to see an extra 1 million people move into the tri-county area in the next 10 years.”
Patrick Simm, Broward President for Miami Association of Realtors, feels Broward County will fare well through whatever is to come due to its innate attractive features.
“Right now, we have an overflow and overabundance of Northerners and Californians,” said Simm to Invest: Greater Fort Lauderdale. “We don’t have a steep tax situation, we’re vibrant for all 12 months of the year, we have a low interest rate environment, and we have an administration that is pushing to bring the economy back. The entire Northeast wants to come here.”
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