New Study Ranks Lakeland, Tampa Bay as Florida’s Most Overpriced Housing Markets

FAU Economist: When Prices Stagnate or Drop, Recent Buyers Will be Stuck

With the COVID-19 pandemic fueling a surge in home prices, Lakeland and Tampa Bay are the most exposed of nine Florida markets, according to a new analysis from professors at Florida Atlantic University and Florida International University.

While some experts predicted the pandemic would depress home prices, the opposite occurred as people took advantage of historically low interest rates to move into bigger residences that made it easier to work remotely. In many areas, homes are selling in days, and bidding wars are breaking out as buyers compete for a limited supply of properties.

“The shortage of homes for sale, continued low interest rates and an influx of new Florida residents over the next decade should keep the state from sustaining a housing crash similar to the one of 2007 and 2008,” said Ken H. Johnson, Ph.D., an economist in Florida Atlantic University’s College of Business.

But buyers paying near peak prices now risk a market downturn that would leave them stuck for a significant amount of time before they could realize solid returns on their real estate investments, Johnson added.

“While we’re almost certainly nearing the peak of the current housing cycle, it’s nowhere near as serious as it was more than a decade ago, when Florida homes were overvalued by 60 percent or more,” he said. “Still, I’m concerned about some of these markets. Prices eventually will level off or fall, and recent buyers who want to sell would be hard-pressed to earn sound returns.”

Consumers in the most overvalued Florida markets should seriously consider renting and reinvesting the money they would have spent on ownership, said Eli Beracha, Ph.D., of FIU’s Hollo School of Real Estate Beracha. Rents also are rising, but at a much slower pace than home prices.

“Renting has always gotten a bad rap because you’re not building equity each month,” Beracha said. “But our research shows that in many areas of the country, you’ll build wealth as fast or faster than owning if you rent and invest your savings in a portfolio of stocks and bonds. But you have to be a disciplined investor.”

Johnson and Beracha analyze the nation’s 100 largest metro areas using publicly available data from online real estate portal Zillow or other providers. The data, which extends from January 1996 through the end of last month, includes single-family homes, townhomes, condominiums and co-ops.

-FAU-