A new report confirms something we already know: Florida home values are drastically overpriced and the Tampa Bay area is ground zero for exorbitant price tags.
This morning, Florida Atlantic University and Florida International University released a report arguing that Tampa Bay “is the most concerning” metro area in the state for inflated home prices.
According to researchers, homes sold in Tampa Bay in June went for 32% above their long-term pricing trend, up from 28.53% in May and 26.14% in April.
While the Bay area is certainly horrifying for first-time homebuyers, the rest of the state isn’t much better. As of last month, homes are selling for a 21.76% premium, which is an increase from 19.24% in May and 17.17% in April.
Of course, in June the state’s other major metros also saw major spikes in overpricing, as well. The largest of which was in Jacksonville, which saw a jump to 23.07%, up from 20.48% in May and 18.22% in April, followed by significant gains in Orlando, Miami and Tallahassee.
The report blames the recent overpricing spikes to a shrinking inventory of available homes, out-of-state buyers and historically low mortgage rates, but it stops short of predicting another market crash like in 2008, when homes were overvalued by over 60%.
Ken H, Johnson, a real estate economist and associate dean in FAU’s College of Business, says property appreciation will eventually level out, and recent buyers are just going to have to ride out to see a solid return investment on their homes.
“The across-the-board increase in the premiums paid for housing throughout the state is very worrisome,” said Johnson. “Trees do not grow to the sky and neither do home prices. We’re nowhere near where we were at the peak of the last housing cycle, but we do need to be careful. Walking away from an obviously overvalued home may be the best thing buyers can do in this kind of market.”
Because of the drastic level of overpricing, Eli Beracha of FIU’s Hollo School of Real Estate, actually recommends potential buyers hold off from buying homes, and instead invest the money elsewhere and remain in the rental market.
“Our research on buy vs. rent indicates that, on average right now, renting and reinvesting is a particularly good wealth creation strategy,” Beracha said. “More people who rent and reinvest would help alleviate current pricing pressure, which is a good thing.”
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