Did you read my predictions for South Florida Real Estate from last year? I just read them again for the first time since I posted them a year ago and I was not far off the mark. I have been thinking about 2025 a lot and here are my predictions for next year. Remember his is just for fun. Don't take what I say too seriously. Real estate investing is a long term proposition. I advocate against trying to time the market. In 10 or 20 years what happens in 2025 will have little bearing. Make your decisions based on your wants and needs at the moment. Market timers very rarely hit the peaks or valleys. The best time to buy is always five years ago and the best time to sell is never.
The Florida economy is still very strong. Construction is especially red hot. There have been a lot of new luxury condominium project announced recently. However, population growth in the Miami metro area has plateaued. Most of the Florida population growth is happening along the I-4 corridor from Tampa to Orlando.
I think interest rates will head down by years end, but only slightly. In early Dec 2024 interest rates were just above 7%, which is up from a year ago. The Fed has signaled some minor cuts in the near future, perhaps as soon as this month. The most recent Fed cuts had no effect on mortgage rates. Inflation remains a big problem and still well above the target of 2%. Watch the yield on the 10 year T-Bills. If they go higher, mortgage rates won't drop even with lower Fed rate.
By this spring I think inventories will balloon to heights we haven't seen in a long time. There are currently 15,000 active listings in Broward county. Most of the inventory growth over the past year has been new condominium listings. I see that continuing. New increases in condo dues go out this time of year and unfortunately, a lot of condo owners will be priced out of their homes or vacation properties. Investors will be squeezed too because it has become harder to raise rents. Watch for some big assessments for the older buildings.
Stagnation in values is a strong possibility for 2025. Demand for South Florida real estate won't see significant increases in 2025 from the current low activity. Foreign buyer activity has dropped partly due to the strength of the US Dollar. The South Florida market is very dependent on foreign investment. The Canadian Dollar hasn't been this low in more than 20 years. Affordability, the gap between earnings and home values is, and will continue to be, a big hindrance to sales volume during 2025.
Foreclosures won't be factor in 2025. They are still barely above the pandemic lows. Thanks to all the appreciation in values lately, even homeowners that are struggling to make their mortgage payments have a lot of options still. I do think homeowners will go back to using their home as a credit card to maintain their current lifestyles, like they did 20 years ago. Watch for big increases in home equity loans and cash out refis even at much higher interest rates.
Florida is saturated with vacation homes listed on Airbnb and VRBO. Owners will struggle to be profitable in 2025. It is near impossible to make money if an owner is paying a management company and today's higher interest rates. There are a ton of owners who bought after 2021 in this situation. I see a lot of homes that never should have been vacation homes in the first place that are now listed for both sale and for rent. A lot of people just got caught up in what I think is a fad kind of investment. Winter is make or break for them. Many more of these properties will revert to annual rentals or be sold if they aren't filled in the coming months.
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