Should South Floridians buy a home now in hot housing market or wait until interest rates fall?

Many aspiring homebuyers are scratching their heads, as they ponder the South Florida housing market — record-breaking median prices four consecutive months despite plunging sales, and interest rates on mortgages have climbed to a 20-year high.

Is now really the time to buy or would it be better to wait and continue renting, perhaps as long as midyear 2024 when interest rates likely will be lower? What are the risks and rewards of buying now or sitting on the sidelines until later?

The Miami Herald spoke with four real estate professors and analysts to hear their recommendations for navigating the treacherous housing market. The advice comes on the heels of all-time high sales prices for both houses and condos in Miami-Dade County.

The July figures, the latest available, show Miami-Dade County reported a median sales price of $631,670 for single-family houses and $420,000 for condominiums. In Broward County, the midpoint price for a house was $600,000, and $280,000 for a condo. The average for a 30-year fixed-rate mortgage slipped last week for the first time in six week to 7.18%, according to Freddie Mac. A year ago, that average mortgage rate stood at 5.13%.

Not surprising, South Florida real estate experts’ predictions for the 2023 housing market have proven to be off the mark from what they told the Herald in January. They thought after two years of runaway increases this would be the year prices settle down.

Turns out as a result of slim pickings, buyers are willing to pay more for what they want in a home, consistently pushing up prices even higher.

Here is what experts had to say now on the hot topic of discussion with four months left in this year:

Buying now

▪ Set a budget and buy what you can afford before prices keep rising. How do you know what you can afford? Well, you should pay, at most, three-and-a-half times your annual income on a home.

▪ Interest rates are unlikely to drop too much. When they do retreat, it’s unlikely they’ll reach the low levels seen during the coronavirus pandemic that emerged in March 2020.

▪ Typically, demand is stronger for homes at or below the median price in Miami-Dade and Broward. Therefore, prices likely will keep increasing for that slice of the market.

▪ It’s unlikely neither the inventory of homes for sale nor prices will decline where buyers need it the most — homes carrying price tags at or below the median price in each county.

▪ Eli Beracha, real estate professor and director of Florida International University’s Tibor and Sheila Hollo School of Real Estate: “I do not believe prices will go down. I believe they will go up, as soon as interest rates go down. If you can compete in a market that’s less competitive, you have more selection and get prices today before interest rates come down, which would bring everyone out. By buying now you beat everyone, have more selection, and stable prices. There’s a lot of pent up demand. A lot of people are waiting for prices to go down.”

Stop waiting, because ...

▪ Other homebuyers are on the sidelines with you waiting for either prices or interest rates to drop. The first dip, and they’ll be hunting, too, leading to stiffer competition and an even tighter supply of homes than today.

▪ Landlords can raise your rent — and many have in South Florida, by hundreds of dollars — but buyers can gain stability with fixed monthly mortgage payments.

▪ Ana Bozovic, founder of Analytics Miami and Miami Dealsheet: “I don’t see an influx of new supply,” because homeowners won’t be motivated to sell. “Even if interest rates go down a little bit, they won’t go down to what it was at three percent.”

Save today, buy a home in 2024

▪ Buyers who purchase homes today, during a period certain analysts think is peak pricing, risk having to wait many years to see a return on their investments.

▪ The 30-year fixed-rate mortgage has averaged 7.23% in 2023, a mark not seen as high since the early 2000s. Sure, rates aren’t expected to drop to the lows seen during the pandemic, but they’re expected to fall below the bar set this summer, giving house hunters more buying power next year.

▪ Jack McCabe, owner of his namesake real estate research firm Jack McCabe Expert Services: “Prices have to go down. The key to a successful marketplace is affordability. Right now, the market is unaffordable, unless you’re coming from the northeast with a boatload of cash and high income. ... We’re going to see the slowing of migration to Florida next year. We’re going to see a difference in terms of supply and demand.”

Forget about buying today, because ...

▪ It should be a long-term investment. If you buy a home today and plan to move before at least seven years, it may be best to wait since you’re unlikely to see a healthy return on your investment if you sell quicker.

▪ Condo supply in Miami-Dade will increase over the next few months in desirable neighborhoods such as Edgewater, Brickell, Miami Beach, North Miami Beach and Midtown. It’ll tip the supply scale in favor of high-rise buyers, leading to some attractive condo deals.

Final words of wisdom

“The real estate market is impossible to time. Instead of waiting for lower prices, I suggest buy a home based on your budget and need,” said Tingyu Zhou, the Dean Gatzlaff associate professor of real estate at Florida State University. “However, if you feel like you sacrificed too much to buy a house [or condo], it is not the right time for you. For potential homebuyers, you should review your financial situation, understand what you can afford, and prioritize what you need over what you want.”