By Gay Cororaton, MIAMI REALTORS Chief Economist
Mortgage rates have remained higher than expected with the Fed opting to keep the federal funds rate unchanged. As inflation continues to wane due to slower rent growth and a cooling economy, the federal funds rate could be cut by a full percentage point in 2025 according to the Fed’s latest assessment.
With the projected rate cuts and Southeast Florida’s strong economic fundamentals, the June 2024 update of the 2024-2025 Southeast Florida Housing Outlook projects a sales recovery and sustained price growth in 2025, driven by a robust demand for single-family homes while condominium sales remain flat. Improving affordability will attract buyers at the lower- and mid-price segment of the market, while heightened investor confidence and sustained migration from out-of-state movers and international buyers will keep the million-dollar market vibrant.
- Mortgage rates will decline to 6.6% by the end of 2024 and 5.7% by end of 2025 with the Fed poised to cut rates four times.
The Miami Association of REALTORS® (MIAMI) projects that the 30-year fixed mortgage rate will decline to 6.6% by the end of 2024 and 5.7% by the end of 2025. These projections are based on the Federal Open Market Committee’s (FOMC) June meeting projection for one rate cut in 2024 and four rate cuts in 2025.
MIAMI expects that the rate cuts will come in the second half of the year rather than being frontloaded in the first half of the year as election-related demand could kick up inflation in the last quarter of 2024 and as frontloading could reignite an uptick in inflation.
- Existing home sales will decline 6% in 2024 but will increase 4% in 2025, driven by single-family home sales.
Existing home sales are likely to decline 5.5% in 2024, but falling mortgage rates, rising job growth, and improving affordability conditions will expand home sales by 4.0% in 2025.
Single-family sales are projected to rise 7.8% while condominium/townhome sales remain flat as potentially higher condominium fees and assessments from the implementation of the Building Safety Act stalls demand.[1]
Improving affordability yields 1,000 more renter households who can afford the monthly mortgage payment at a 10% downpayment.
Homes priced at $1 million or over will likely continue to gain market share as Southeast Florida continues to evolve as a finance, sports, and cultural powerhouse. Year-to-date through May, the share of million-dollar single-family homes has sharply increased in 2024 compared to 2019 in Miami-Dade (23% vs. 7%), Broward County (18% vs. 5%), Palm Beach (25% vs. 5%), Martin County (21% vs. 8%), and St. Lucie (2% vs. 0.3%).
- Single-family sales prices will remain firm, rising by 7% annually in 2024 and in 2025, and nearly 10% in the single-family market in 2025.
Home sales prices are projected to increase 6.9% in 2024 and 6.5% in 2025, with the median single-family sales price accelerating to 9.7% while the condominium/townhome median sales price rises a modest 2.5% as potential higher fees and assessments softens demand for this property type.
The single-family homes market remains a seller’s market, with 4 months’ supply across all counties as of May 2024: Miami-Dade (4.4 ), Broward (4.3), Palm Beach (4.4), Martin (4.4), and St. Lucie (4.4). In the condominium/townhomes market, demand-supply conditions are balanced, with active inventory equivalent to over 6 month’s supply: Miami-Dade (8.6 ), Broward (7.6), Palm Beach (7.0), Martin (6.4), and St. Lucie.
- Southeast Florida will continue to have strong economic fundamentals in 2025.
With a stronger economy in 2025 and sustained business confidence in the Southeast Florida economy, MIAMI projects Southeast Florida’s total employment (including self-employed) to increase to 2.4% in 2025 from 1.4% in 2024, an increase of 80,000.
The reduction of Florida’s commercial lease sales tax rate, also known as the Business Rent Tax, from 4.5% to 2.0%, starting June 1, will provide Florida employers with at least an estimated $1 billion in tax relief, making it easier for existing business to succeed and attracting new businesses.[2]
Southeast Florida is the economic gateway of Latin America to the United States. Mexico is now the US largest trading partner and Canada is second. Increased trade and investment flows from these North American countries which have a strong cultural affinity with the United States is likely to bolster global real estate transactions.
A stronger economy and the zero tax on state income will continue to sustain the migration of people from states with high tax burden and housing cost such as New York, San Francisco, and Los Angeles[3] as indicated by elevated driver license exchanges from new residents.[4] Southeast Florida is expected to continue to ascend as a finance, sports, and cultural powerhouse. Business leaders have come together through Opportunity Miami, a non-profit company, to make the Miami market area a major global city through innovation, entrepreneurship, and education. As an example, billionaire businessman and philanthropist recently made a $50 million gift to the University of Miami to fund cancer research.
Download the 2024-2025 Southeast Florida Housing Outlook below.
[1] Demetri Psarianos, “Cause and Effect of Florida’s New Condo Law | Due Diligence | Business (ufl.edu)”, University of Florida
[2] Business Rent Tax Reduction Set for June | Florida Realtors
[3] Residential-Rental-Market-Report-May-2024.pdf (miamirealtors.com)
[4] Driver License Exchanges in Southeast Florida Continue to Normalize in 2024 Q1 But are Still Higher than Pre-Pandemic Levels – MIAMI REALTORS®
