Sadly, My Prediction was Drastically Right

We all got sick. As the world entered the pandemic, our sense of normalcy was shrouded and shredded by false positives, odd runs on toilet paper, and people making breads, soups and gourmet meals at home. Gas briefly dropped to $1.50/gallon. Peloton stock was up 500%. That’s not where we are now. In less than 60 days, our view of what has value has taken a sharp turn towards reality.

During the incredible real estate run up, it seemed no one was looking to history to understand our future. While major brokers, agents and respected market makers touted this bull would still run, I said otherwise. Sadly, my prediction was drastically right.

As we enter the normally hot month of June, South Florida seems to be freezing. The market is icy for sellers and buyers. And, although no one can blame one particular thing (Fed monetary policy, Ukraine, inflation, inventory, fear, labor markets, etc.), I will illustrate clearly why most middle-class real estate markets are now feeling more like molasses than lightning.

Most homebuyers need to finance their purchase. It comes down to buying power and people’s ability to methodically afford their monthly mortgage payment. Well, unfortunately in the last 45 days, reality has rung the bell. And most people cannot continue their quest for home ownership. In short, they just can’t afford it.

Here is a real-world example of how the skyrocketing home prices and varied interest rates played out before, during and as we exit the pandemic:

Source: CNBC

Between the rise in home price and the varying interest rate, buying power basically stayed the same until just recently. And, WOW! You can start to see why the buyers have dried up. And this was using a $300,000 purchase as an example. Imagine the pain most buyers are going through in South Florida where the average price is more like $600,000.

With the dust still thick in the air, where do we go from here? I continue to predict a 10% drop in the average South Florida home. However, I am now expecting this adjustment to happen like a whiplash. From there, we will see strange volatility in pricing, both above and below the 10% prediction, but ultimately settling there at the end of the calendar year.

How can sellers and buyers navigate these changes? By using your local real estate expert who lives the journey every single day. I have helped 47 families so far this year, just like the one pictured above.