A severe shortage of housing has plagued South Florida home buyers, helping fuel the insane real estate market.
Rising demand from out-of-state buyers and local residents have only added more pressure to a market that has been severely underbuilt for years.
Why is the region behind, and is there any hope of a more balanced market? It’s complicated.
An imbalanced market
Experts say that a balanced market (in which both sellers and buyers are on an equal playing field) should have about five months of inventory on the market. Currently, each of the three counties in our region are dealing with around one month’s supply of single-family homes, and the South Florida area has seen supply only further dwindle over the past two years.
According to a Zillow study on permits and population growth, South Florida’s deficit in homes has been brewing for years.
When they compared the number of building permits since 2008 that the area should have handed out to keep up with population growth, and compared it to the rate from 1985 to 2000, their numbers indicate that South Florida has experienced a shortfall of 142,650 homes since then.
“The implications of this shortfall are being felt now as home prices rise across the country. A limited supply of homes as demand has surged is a main driver of rapid home price growth during the pandemic,” Zillow said.
Why is inventory so low?
A lack of available buildable land, along with supply chain issues, increasing costs, and zoning laws make it difficult for developers to deliver new housing.
Supply chain issues — a ramification of the Covid pandemic — have made it more difficult for developers to get materials they need, and has also raised the cost of building, explained Nelson Stabile, the president of the Builder’s Association of South Florida.
“It’s a real challenge,” said Ignacio Diaz, owner of GroupP6 in Boca Raton of the supply chain. “It’s our business to try and build as much as we can but it makes it more difficult. Fewer projects make sense and the ones that do are less profitable, so naturally you get into less projects and fewer new starts.”
Additionally, there’s very little open land left on which to build, which only compounds the problem. According to Sun Sentinel analysis, less than 1% of the land in Broward and Palm Beach counties is both open land and zoned for residential.
Palm Beach County is 2,383 square miles, but only about 20 square miles of vacant land is zoned for residential use, according to numbers provided by the Palm Beach County Property Appraiser’s office. And in the 1,323 square mile Broward County, it’s even less: there are currently about five square miles of vacant land zoned residential, the property appraiser’s office said.
“We are pretty much running out of land,” said Alex Yokana, developer with Akai Estates. “There is really nothing left over. And one of the few remaining pockets are golf courses.”
Zoning laws can make it difficult for developers to build units as the re-zoning process for different land uses, like re-zoning golf courses to residential use, can take years.
“We can only supply housing as an industry as fast as we can approve them,” Stabile said.
Projections on future building
Numbers from University of Central Florida economist Sean Snaith indicate that building rates statewide will increase slightly in the coming years.
His research suggests that Florida should see 182,663 single-family home starts (new residential projects) in 2022, followed by 162,425 starts in 2023 and 156,911 in 2024. Single-family home starts should rise slightly in 2025 to 157,178.
Those are slight increase from projections from the years before: in 2018, they estimated that there would be 133,656 single-family homes starts in Florida, while in 2019, there would be 148,610 and about 154,958 in 2020.
But if inventory levels went up, would that have any affect on the market? Experts say in theory it should, but it’s unlikely that enough units could be built.
“You would see prices come down if the balance of inventory met the demand, but the likelihood of that happening is very small,” said Ken. H Johnson, real estate economist with Florida Atlantic University. “We need to build more units to live under and rent, and that’s really difficult for a number of reasons such as supply chain issues, labor costs, the availability of labor.”
If migration slows, will the housing market cool down?
One driver of the housing market has been migration from out-of-state buyers.
Projections show that the South Florida population should continue to grow over the next ten years. Numbers from StatsAmerica show that in 10 years, Palm Beach County’s population should grow by 12%, Broward County’s by about 8% and Miami-Dade County’s by about 5%.
Johnson says that if population growth slowed due to home prices continuing to rise, it’s likely that housing prices would moderate for a time, but he warned that population growth would start again in response to those prices, baring unforeseen factors.
“We have the inventory shortage but we have this wild influx of population. I believe that South Florida, and Florida in general will have this prolonged period of unaffordability,” he said.
New developments in the works
Developers are working to launch new projects, sometimes via rezoning open land such as golf courses, sometimes via urban redevelopment. Several have either broken down or been approved this year. Here are a few:
—Enclave at Sherwood Park: A collection of 79 single-family homes on a vacant golf course in Delray Beach from nationwide home builder PulteGroup. Construction on model homes is expected to start later this year.
—Berkeley Landing: An affordable three-story apartment complex in Riviera Beach is expected to have construction start this summer. The project will have 110 units with prices based on a percentage of the area median income.
—Mayla Pompano: Groundbreaking for this luxury apartment building happened in March, and construction is expected to be completed by July of 2023. The two-building complex in Pompano Beach should bring 355 units, ranging from studio to three bedrooms, to the market.
—Casamar- Sales have started at Casamar in Pompano Beach with ground breaking expected to start on the high end 20-story building sometime at the end of this year.
—Yamato Villas: A collection of 16 townhomes and three single-family homes were approved to be built near Yamato Road in Boca Raton.
—Cassia Commons: This 44-townhome development will be built in Lauderdale Lakes on five acres of land by PulteGroup. Sales for the townhomes are expected to start later on in the year.
—Island Cove- 60 affordable apartment are expected to be heading to Delray Beach. Rents for the most part should range between $1,200-$1,600, depending on the unit.
