Residential real estate appreciating in Florida

Residential real estate appreciating in Florida

The state of Florida has one of the highest-valued real estate markets in the United States. The area of Miami particularly has an overvalued residential real estate market, meaning that the home prices are 10 percent or more above the level considered to be sustainable long term. This part of Florida is one of 14 of the top 100 markets nationwide that are overvalued.

The biggest driver of the overvaluation of an increasing number of residential real estate markets is supply. Builders are not producing enough homes, so they are focusing primarily on the market's upper end rather than on the lower and middle ends since they are concentrating more on margins instead of scale. Also, all of this is happening at a time when the prices of homes are rapidly increasing.

During the past two years, housing prices in the United States have increased more than 11 percent to a median price of more than $189,000. In some housing markets, the appreciation of home prices has increased by over 20 percent. Home prices in Miami have appreciated by more than 15 percent since Jan. 2014 compared to more than 11 percent in 2013.

The fact that home prices are rising in Florida, especially in Miami, is particularly beneficial to sellers, who have the potential to sell their homes at higher prices. However, the fact that Florida's residential real estate market is growing may be encouraging to homebuyers who are interested in settling down in an area that will thrive and remain in high demand in the years to come. Proper legal guidance may help those on both sides of the negotiating table to successfully complete their transactions in accordance with applicable laws and regulations.

Source: marketwatch.com, "10 most overvalued housing markets in America", Catey Hill, Sept. 15, 2015