With ups and downs 2022 is over and it could have been difficult for some, especially here in Miami. So how did the 2022 real estate market start and how did it end? So here is the South Florida real estate market forecast 2023.
Let’s talk first about real estate prices in 2022.
If you remember, we started last year super crazy with the demand and the market conditions. You actually had to do everything in your power to win the offer and going back to that time in Miami Dade the median price was at $520,000 a 10.8% increase. Then it went up 15.8% all over to $579,000 in June. Decreased a little between July and August and then started to increase again until November to $550,000. And if you also remember the mortgage rates started at 3.22% on January 6th of 2022 and pretty much they almost never stopped increasing. Even though it continues increasing, 2022 was on track to be the second-biggest sales year ever.
So yes, the most well-known city in Florida has proven to be a profitable location for business people with an eye for real estate, both from abroad and at home.
And you know, there are three primary factors that we are going to discuss to evaluate our market and to answer some of the frequently asked questions of what’s been happening in the Miami real estate market recently? What does 2023 hold for the Miami real estate market? Any crash coming?
The first one is the overall market condition. A report published by Axios Miami suggests that the Miami real estate market will hold strong. However, the sales prices of houses could take a hit if mortgage rates keep surging in 2023. While Goldman Sachs thinks that many Northeastern, Southeastern, and Midwestern markets “could see milder corrections (if any correction at all).”
In my opinion, in Miami we have some demand (that we could see more now and I’ll come back to this point in a bit), we have low inventory of properties and the prices are still hot. According to many experts, this year the mortgage rates will average 6% so that could bring some buyers back that saw huge increases in mortgage rates last year.
The second factor we need to discuss is demand. The demand won’t decline. The increased in-migration makes South Florida real estate different from other US markets. We are still low in inventory. Additionally, the increasing number of inbound movers will help avoid a crash in home prices.
Like I said, we will see Miami buyers coming back since we could see mortgage rates lower than last year. Of course, not the same crazy demand or amount of sales we saw two years ago because those times were exceptional but we are going to see Buyers coming back to the market especially when the majority of real estate experts are predicting lower mortgage rates compared to last year. However, I must repeat this part, I don’t expect the same craziness in demand as the last two years.
Since Miami is Miami you can’t compare our market with other markets since domestic and international people love Miami. Investors come here for residential or commercial purposes. Office prices and demand in commercial real estate continue to skyrocket. Countries like Canada, Argentina, Colombia, Brazil, Chile, United Kingdom, Germany and others are the top countries that are driving demand to South Florida. And this is not even counting other states that are still looking for South Florida to move.
And the last most important factor we will discuss is the home price. Well, home prices are expected to increase in 2023. According to Realtor.com, housing prices in South Florida will increase by 3.4 percent in 2023 and by Goldman Sachs by 0.8% in Miami. They even expect that in 2023, “home prices barely fall in places like Chicago (-1.8%) and New York (-0.3%), while its forecast has home prices rising in Baltimore (+0.5%) and Miami (+0.8%) in 2023.” On the other hand, the volume of sales will drop 2 percent locally. I need to highlight that these stats are in line with countrywide indicators.
Now, let’s take a look at the bigger picture. The mortgage rates were increasing, which resulted in a slowed housing market in Miami last year. Now, I quoted a few moments ago what experts predict for mortgage rates. For example, Realtor.com believes the average mortgage rates will average 7.4%, NAR at 6.3%, Mortgage Bankers Association at 5.2%, Fannie Mae 6.4% and so on. I’ll say that indeed they could average the 6’s% in 2023. Additionally, rent prices are expected to keep going up and this is another factor to consider.
Can we expect a market crash in 2023?
I don’t think so. Again, it’s difficult to compare Miami with other markets because we do have so many different factors here that other markets don’t. For example, for 2023, Goldman Sachs expects double-digit home price declines in major markets like: “Austin (-15.6), San Francisco (-13.7%), San Diego (-13.4%), Phoenix (-12.9%), Denver (-11.4%), Seattle (-11.2%), Tampa (-11.2%), and Las Vegas (-11.1%)”. But these “markets are the places that the home price correction hit the hardest in the second half of 2022.” Goldman Sachs even says that these mentioned markets are overheated. On the contrary, they also state that Miami home prices will continue to increase, not at the same acceleration we saw between 2020 through 2022 but they will continue to increase this year.
We are not even taking into consideration other factors to predict a housing crash in 2023 like; inflation, banks strict rules, unemployment rate, foreclosures, etc. You and I know that the banks are stricter to approve you a loan, the unemployment rate in Miami, Fort Laud and Palm Beach area is at 2.2% as of November 2022 and Miami only at 1.5% which is below the national average with 3.6% and foreclosures are also below at 1.6%. Nationally, distressed sales represented approximately 2% of sales in November 2022.
Let me give you what I think could happen this year.
Assuming mortgage rates stay in the 6% range and the inflation rate is at a positive rate, I’ll stick to what I said a few minutes ago, buyers returning to the market but not at the same craziness. Those times are over. We are staying for a while in a sellers market with low inventory… I would say for another 6-7 months. However, not at the same market sellers conditions we saw. For the prices, we will continue with some slight increases and of course will eventually de-accelerate with the volume of sales decreasing compared to last year.
I’m very excited about what we are going to see this year and the next two or three years here in Miami and so if you’re looking for local expert to guide you to help you with the real estate process make sure you fill the form given below, or you can also schedule a meeting with me super easy and fast.
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