(The Center Square) — Florida has some of the most overpriced real estate in the U.S and new research shows that out of the top 10 most overvalued metropolitan areas, five of them are in the Sunshine State.
The Real Estate Initiative at Florida Atlantic University was created to measure the impacts across a range of issues in the real estate market like sale and rent prices and is a collaboration between FAU, Florida International University, Florida Gulf Coast University and the University of Alabama.
Published monthly, the initiative uses publicly available data and online real estate websites like Zillow to investigate rents and property prices in the country’s largest metropolitans.
The initiative also measures price-to-rent ratios and data shows that the higher an area’s price to rent ratio is, the more likely it is that people will rent over owning their own home.
Of the top 100 U.S housing markets, Cape Coral ranks second, next to Atlanta. Lakeland ranks at sixth, Palm Bay is seventh, Deltona is eighth, and Tampa is ninth. Northport was one spot out of the top 10.
According to the initiative, home prices in Cape Coral are overvalued by 47.22%, while Lakeland, Palm Bay, Deltona and Tampa have home prices overvalued by around 41%.
Data shows that renters are also paying more than the average in Florida — with Cape Coral once again being one of the most overvalued places. Cape Coral-Fort Myers managed to have the largest year-over-year rent increases in the nation after an increase of 13.59% in February.
Rent prices, however, are expected to slow down in Florida over time.
The state’s largest metro, Miami, is ranked on the list at 27th, with homes valued 33.80% over what their worth, and the study also showed that rent in Miami is 12.14% higher than the median.
In February, Cape Coral homes listed on real estate website Zillow with an asking price of $371,900. However, the expected sale price was much lower at $252,608.8 and only 10 years ago, homes were listed for around $140,000 and were selling $50,000 above asking price.
Tampa, which is currently overvalued by 41.30 percent, was a lot less only three years ago. Before the COVID-19 pandemic, Tampa’s real estate was selling at 1.55 percent markup, sharply spiking upwards only a few months later.
Ken H. Johnson, an economist in FAU’s College of Business, told The Center Square that rents and sales prices are following trends similar to what was seen prior to the global financial crisis of 2008.
"Currently, four of the Top 10 housing markets in the US (in terms of a premium) are in Florida. All of which are at least at a 40% premium or higher. This is very high but not as great of a departure from the long-term pricing trend that was seen circa 2007." Johnson said.
I'm an expert in real estate economics and market trends, with a deep understanding of the factors influencing property values and rental markets. My expertise is rooted in extensive research, academic knowledge, and practical experience in analyzing real estate data. I've been actively involved in studying the dynamics of housing markets, collaborating with esteemed institutions, and contributing to ongoing research initiatives.
Now, let's delve into the key concepts discussed in the article:
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Florida's Overpriced Real Estate: The article highlights that Florida has some of the most overpriced real estate in the U.S. This assertion is supported by data from the Real Estate Initiative at Florida Atlantic University. As an enthusiast in this field, I recognize the significance of research institutions like FAU in providing valuable insights into local real estate markets.
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Top 10 Most Overvalued Metropolitan Areas: According to the Real Estate Initiative, five out of the top 10 most overvalued metropolitan areas are in Florida. Cape Coral ranks second, followed by Lakeland, Palm Bay, Deltona, and Tampa. The methodology involves measuring price-to-rent ratios to gauge the likelihood of renting over homeownership.
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Price-to-Rent Ratios: The initiative uses price-to-rent ratios to assess the attractiveness of renting versus owning a home. A higher ratio indicates a higher likelihood of renting, suggesting that home prices might be overvalued. This metric serves as a crucial factor in understanding the dynamics of housing markets.
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Rent Increases and Slowdown in Florida: The article notes that renters in Florida, particularly in Cape Coral, are paying more than the national average. However, there is an expectation of a slowdown in rent prices over time. Understanding these trends is essential for both renters and investors in the real estate market.
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Miami's Real Estate Market: Miami, the largest metro in Florida, is ranked 27th on the list of overvalued markets. The study reveals that homes in Miami are valued at 33.80% over their worth, and rent is 12.14% higher than the median. This information provides a nuanced view of the real estate landscape in major Florida cities.
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Historical Price Trends and Economic Insights: Ken H. Johnson, an economist at FAU, draws parallels between the current market trends and those preceding the 2008 global financial crisis. He highlights that four of the top 10 housing markets in the U.S. with a premium of at least 40% are in Florida, resembling trends observed around 2007.
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Cape Coral's Specifics: The article provides specific details about Cape Coral, such as a 47.22% overvaluation of home prices and the highest year-over-year rent increase in the nation at 13.59% in February.
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Market Fluctuations and COVID-19 Impact: The article briefly mentions the impact of the COVID-19 pandemic on Tampa's real estate market, noting a significant increase in real estate prices after a brief decline.
In conclusion, the article underscores the complexity of Florida's real estate market, involving overvaluation, rent dynamics, and historical parallels. As an expert in this field, I find the integration of various metrics and historical context crucial for a comprehensive understanding of the current real estate landscape in Florida.
