Many Boca Raton locals have posed the question as to whether our robust South Florida real estate market is some kind of a bubble. They have asked, 'Is this "seller's market" actually a bubble?'
What the leading indicators (as close to a crystal ball as we can get) foretell relative to the 2021 Florida real estate market is the exact opposite of a crash - which is also not hockey stick growth.
The current market conditions are not representative of any kind of a bubble. A housing bubble is a type of economic bubble that occurs periodically in local or global real estate markets, and typically follows a land boom. 'A land boom is the rapid increase in the market price of real property such as housing until they reach unsustainable levels and then decline.'
Our last major bubble in South Florida was the result of many factors including what I call "artificial demand" which included many wealthy people from overseas buying new construction condos with the idea that they were a safe place to park money. In governments where the wealth of an individual may be confiscated or devalued at any moment, the idea of buying real estate in a stable economy was contagious. Pairing that with unpreceded inventory of new development units and lax lending climate and voila: unsustainable appreciation fueled by artificial demand.
We aren't seeing "artificial demand" in our current real estate market. There are actual people moving to the area. At present, there are over 1000 people moving to Florida every single day. This is a material shift in the demand for property in our region.
Many of these newcomers are immigrating to Florida from very wealthy parts of the country including New York, New Jersey, Connecticut, Chicago, California, among others. Demographically speaking, these newcomers are frequently high net worth and ultra high net worth individuals. The reasons for their relocation to Florida are varied and tangential to this conversation.
The impact of this influx of homebuyers has been a significant price increase in the South Florida real estate market over the last year and a reduction in inventory resulting in an unprecedented seller's market.
As is always the case, a seller' market results in increased velocity and higher selling prices. Local buyer demand is centered on beautiful, move-in ready, and, in some cases, turn-key and furnished offerings in the luxury sector. In all sectors, there is unprecedented demand resulting in record-breaking prices.
A few years ago, I sat on a panel discussion at The Residences Mandarin Oriental, Boca Raton where I was serving as Vice President of Sales. At that time, I claimed our new development options in Boca Raton as only slightly more than sufficient to meet the coming demand. At that time, we had not seen a new development project in Boca Raton since One Thousand Ocean launched in 2010.
Fast forward just 18 months and it seems that our inventory of new development offerings may be insufficient to meet the demand. Most of the buyers I have been working with are most concerned with finding luxurious accommodations catering to their elevated and full-service lifestyle preferences. Fortunately for them, we have a handful of exceptional new development options newly complete, nearly complete, and nearing completion.
