Houses are vastly overpriced in Jacksonville, and it could be a long time before recent buyers can sell their homes at a profit, new research concludes.
But that doesn't mean the market will collapse, according to research released Tuesday by Florida Atlantic and Florida International universities.
Homes were easy to find when the market crashed in 2007, wrote Eli Beracha of FIU's Hollo School of Real Estate. "So when prices began to fall, there was nothing to catch them, and we witnessed a monumental crash. The current shortage of homes for sale will help put a floor under just how far prices can fall this time around."
Still, homes in Jacksonville are selling for 39.37% more than they should, based on past pricing trends, the study says. That's higher than a month ago, when homes were overvalued by 36.16%.
Rising mortgage rates have not tempered the trend. The average rate on 30-year mortgages hit 5.28% week, the highest level in 12 years, according to a survey of large lenders by consumer website Bankrate.com.
The remarkable demand for homes has put today’s buyers at a major disadvantage, said Ken H. Johnson, an economist in FAU’s College of Business.
“Just to have an offer accepted, buyers have to outbid a host of other competitors, but that means they’re wildly overpaying in many areas," Johnson said. "When the music stops, and it will, it could be a long time before recent buyers will be able to turn around and resell the home for an acceptable profit.”
Places like Florida and Texas could fare better than other areas, though. The waves of people moving to the Sunshine State will limit price declines, although it could mean a prolonged period of unaffordable housing, Johnson said.
Cities like Memphis and Detroit, with limited population growth, will be more exposed.
“Essentially, you have to pick your poison,” Johnson said. “Is it better for you to live in an area with major price declines so housing is more affordable again or in an area with modest or very small price declines that keep homes out of reach for many middle-class Americans?”
The study found that Jacksonville is the 31st most overvalued market of 100 U.S. metro areas — worse than South Florida, which ranked 53rd, but better off than Tampa, which was 14th, and Fort Myers at No. 11.
Homes in Greater Jacksonville sold for an average of $345,220 in March, far higher than the $247,703 that economists would expect based on historical trends, the study said.
The Northeast Florida Association of Realtors believes the local housing market is moderating, despite the price increases.
New listings were up 14% in March, which is typical for spring, the association reported this month. The trend should continue over the the next several months, which will make it easier for buyers to find homes, said association president Mark Rosener.
Many older millennials are looking to upgrade or upsize from their current homes, which results in more entry-level homes on the market, Rosener said. Younger millennials are snapping up those homes.
The median sales price of single-family homes, townhouses and condos in Northeast Florida reached $350,000 last month, 25% higher than last year but only a 4.5% increase from February, the Realtors association said.
The moderate monthly increase "is more evidence that pricing in our market is beginning to return to a more stabilized level," the association said.
