FAU Warns: Bidding Wars Hurt Boca Raton, Delray Beach Housing Affordability

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STUDY: Palm Beach County Real Estate Remains Significantly Overpriced

BOCA RATON, FL (BocaNewsNow.com) (Source: FAU College of Business Advisory Verbatim) — South Florida homes remain significantly overpriced but not as much as they were during the summer, according to a study from researchers at Florida Atlantic and Florida International universities. 

Miami-Dade County is 18.51 percent above its long-term pricing trend, compared to 19.20 percent in July, while Palm Beach County is overpriced by 18.32 percent, down from 18.70 percent. Broward County’s degree of overpricing fell to 16.41 percent from 17.40 percent. The analysis is based on more than 40 years of housing data from the Federal Housing Finance Agency (FHFA).

While the run-up in prices may feel “unnervingly reminiscent” of the historic housing collapse of 2006-2011, the level of overpricing and the economic climate are vastly different today, say economist Ken H. Johnson, Ph.D., and Denise Gravatt, D.B.A., both of FAU’s College of Business, and Eli Beracha, Ph.D., of FIU’s Hollo School of Real Estate. What’s more, the average home across all three counties in 2008 was roughly 65 percent above its long-term pricing trend.

“We’re nowhere near the level of overpricing that occurred more than a decade ago so another crash is pretty unlikely,” Johnson said. “Remember, the economy back then was in much worse shape, with higher mortgage rates, softer underwriting standards and a glut of homes for sale.”

The current environment features mortgage rates near record lows and a severe shortage of homes on the market, both of which help to keep prices elevated. Prospective buyers need to counteract those two forces and bargain aggressively to avoid greater degrees of overpricing, which could threaten the stability of local housing markets, according to Johnson.

“While home prices continue to rise, they are doing so at a slower rate of appreciation, which is easing the degree of overpricing,” he said. “It’s really the current crop of buyers who bear the responsibility of keeping a lid on home prices.”

In a frothy market, buyers are tempted to get into bidding wars, for fear that they will be left out, but this is the time to be the most discriminating, Beracha explained.

“Falling in love with one house is the surest way to overpay,” he said. “Don’t get caught up in the emotion of the moment. Walk away if the asking price gets too high or the contract terms seem too one-sided for the seller. There will always be another property.”

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2 thoughts on “FAU Warns: Bidding Wars Hurt Boca Raton, Delray Beach Housing Affordability

  1. What was the point in me investing in buying my home in Boca Raton if people want to hinder me from profiting off my investment? I came here from California because this same type of thought was discussed. Guess what, only the uber wealthy can afford to own a house. Let the free market decide.

  2. Boca Raton is not overpriced, it’s built out and out of land. What’s overpriced is a 1800 sqft. home on Long Island 50 yrs old with taxes at 15k . So now that NY has figured out the Hamptons is a 3 hour drive and 10gs a week. Crowded and played out. Some bright light figured out Palm Beach County is a 2.5 hour flight for$250.- rt. and the weather is great year round. Let’s see I can buy a 4500 sq ft home in a Boca Country club for 6-800k add 75k for the membership with dues and taxes I’m at 30k annual. Play golf and enjoy boating all year, dine in 5* restaurants. Shop in the best boutique and design shops. At a fraction of what it costs to be in the Hamptons.
    Boca Raton is a bargain. Within 5 years every major player will have established bases in Florida. Because the quality of life is so superior to NY, NJ, CN. if they want talent and brains for employees they’re going to have to be here.

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