What’s the future of South Florida real estate for 2022?
Trying to predict what will happen in the residential real estate market in 2022 is a bit like trying to forecast the weather months in advance, but while the future of home sales and development has become increasingly unforeseeable, real estate professionals continue the work of advocating for their clients.
We spoke with South Florida real estate leaders to learn what they see coming down the road for the industry. While buyer preferences for more space — both inside and outside the home — remain and supply chain issues continue to stifle home construction efforts, other factors, such as the potential increase in interest rates, are expected to change the game in 2022. Check out our Q&A with some of South Florida’s top players to learn more about what they’re planning for over the next 12 months.
* Veronica Cervera Goeseke, CEO, Cervera Real Estate
* Jeremy Collett, executive director of capital markets, Guaranteed Rate
* Eric Fordin, senior vice president, Related Group
* Julian Johnston, broker associate, The Corcoran Group
* Dan Kodsi, CEO, Royal Palm Companies
* Mike Pappas, president and CEO, The Keyes Company
* David Siddons, executive director of luxury sales, David Siddons Group – Douglas Elliman Real Estate
* Craig Studnicky, co-founder and CEO, International Sales Group and RelatedISG
* Sebastian Vallejo, managing director – Miami Beach, Brown Harris Stevens
Will residential real estate have a good 2022? Why?
Johnston: I expect South Florida real estate to have an amazing 2022. For many people, Miami and the surrounding communities were previously known as places to invest in a second home or vacation property. However, this mindset has changed in a huge way.
Increasingly, South Florida is a region that large numbers of high-net-worth individuals want to call home.The area has seen a significant uptick in enrollment at primary and high schools, both private and public. We have also witnessed many companies in the technology and financial industries moving their corporate headquarters to Florida. This doesn’t seem like a trend that will end anytime soon. Many people may have moved because of the tax advantages, but they are staying for our unparalleled lifestyle.
Corey: Demographics, interest rates, strong demand and favorable taxation are drivers that have established a strong and favorable market.The sheer numbers of millennials, Gen Zers and baby boomers who are active or ready to be active in the real estate market is beneficial for real estate. We continue to see very attractive and competitive interest rates, and Florida remains a “no state income tax” state — only one of seven in the U.S., and we have good homestead laws.With remote work becoming more popular, living in Florida is more of a possibility rather than a dream.
Pappas: Yes — demand will remain strong and inventory will remain low for the first part of the year. There are 5 million millennials turning 34 over the next three years — the average age of the first-time homebuyer. Hopefully, with the strong 30%-plus appreciation over the past two years, this will encourage more owners to put their properties on the market and give us more balance. The luxury market has been on fire due to high-net-worth individuals accelerating their moves due to the COVID restrictions.
Studnicky: Yes, our resale residential market will continue to have a positive year. With the leveling off of pandemic migration, this means a more level playing field for local buyers who have been priced out of an extremely competitive market by “COVID buyers.” They will now have a seat at the table and more homes to choose from. They should, however, set their expectations — it will still be a competitive market, and single-family home prices will continue to hold steady at levels that are becoming the new normal.
Vallejo: 2021 has been a remarkable year for real estate for South Florida. Take a city like Miami, for instance. Miami’s real estate has always revolved around foreign investors (from other U.S. states and other countries) who look for a second home, a vacation spot or a safe place to park their money in an accessible location from overseas. Due to this, the stronger forces that usually drove the Miami market were linked to external, more than local, factors. After COVID, people realized they could work remotely and finally decided to move definitely to places like Miami, with a better weather, open beaches and parks, lower taxes and less expensive housing than New York or California. Miami’s real estate market now includes stronger local forces, with a steady demand of an incoming growing population. With still low interest rates, the trend will continue in 2022. Added to this, many countries have seen their currencies lose power to the dollar. The Argentinian, Brazilian, Mexican, Colombian and many strong Latin American countries’ currencies have weakened and keep losing power, which should drive many capitals from people wanting to protect their money in a real estate market that is appreciating, and in a currency that stays strong. 2022 should be an extraordinary year for real estate.
Siddons: I think in terms of dollar per square foot and performance the market will show positively. Volume of sales will go down however, simply because there is not a lot of product. You can’t sell what you don’t have. We have experienced that the people who moved to Miami do not want to move away, so it is getting increasingly hard to get hold of product.
What changes have you made to the way you do business since the onset of the pandemic, and what changes do you anticipate making in the coming year?
Studnicky: 2020-2021 was a perfect time for everyone to regroup and restructure. We began 2021 with a new rebranding campaign, expanded our marketing department and added an in-house commercial division. We will continue to hold monthly focus groups with our general real estate agents to ensure our agents have the tools they need to continue to succeed in this active real estate market. The results of these changes resulted in a net gain of 80 agents. At ISG World, we just announced our strategic partnership with Dagrosa Capital partners. We have many new, exciting things on the horizon and will soon be announced.
Pappas: Digital communication and marketing exploded — virtual tours, virtual events, 3D photography, zoom meetings and Facebook Live. Our entire process from lead to close is now digital and online. Our systems support our agents and help them focus on high functioning activities which enhance their productivity. This coming year is all about engagement and connection with our agents and their clients utilizing our platform and systems.
Siddons: Marketing-wise, I started to be more focused on buyers from the North and California, and we started to cater more to relocation buyers. For the next year we will focus our efforts more on the rest of the world such as the European and South American markets. I will also focus more on capturing listings and product to sell rather than focusing on buyers. The key for 2022 is to hold listings.
Goeseke: The pandemic has emphasized the importance of home and family highlighting where we want to live and space we want. Miami has been a top choice. At Cevera, we have a tradition of 1-to-1 relationship building with our customers. With the shared worldwide crisis we have all faced most of us have reconnected with past customers. Conversations have centered around how they are weathering the pandemic and the new lifestyle changes within their family housing needs. Often the telephone calls have been initiated by past customers who remembered the warmth of our services.
Cervera has invested in the newest technology applying it to the personal way we do business. As I often tell our agents, Cervera has big tech but only to enhance our business, never to replace the trusted confidence that comes from the human touch.
Corey: Luckily, we have a set of great tools and technology to support our communications and business needs, which we were able to use as we pivoted our efforts onto digital platforms when the shutdowns occurred. We had to find the most effective strategies to stay connected with our affiliated agents and clients, make sure that they were comfortable and felt knowledgeable about the technology at their reach, and continue to engage and inform our agents at the same level that we always had before the pandemic. With this inevitable shift, we saw many agents creatively and effectively adapt to using technology and digital platforms to communicate with their clients and market their business, via social media, Zoom, blogs, etc. Moving forward, we’re making sure that we continue to support our affiliated agents in developing their digital media and marketing skills and make our services and support virtually accessible to the agents and clients who may still prefer to conduct business in this manner.
Vallejo: Our whole industry is about having the ability to effectively connect buyers with sellers and landlords with tenants. For almost 150 years, our company has been known for being highly effective connecters. As a matter of fact, one of our strongest slogans is “Connect with the Well Connected.” Then the pandemic hit us. Fortunately, we were ready. We accelerated many of our updates in technology and platforms that allowed us to remain connected. So that didn’t stop us. Then we found our biggest challenge: fear. The uncertainty levels about everything were so high that people’s aversion to risk was on an all time high. So we paid attention. We focused on one of our strongest platforms which is data analysis. We started to study data in order to provide the best possible options for our clients in order to anticipate the probable outcomes of the lockdown and the surging pandemic. And it paid off spectacularly. We were able to offer our clients the right kind of investments and to advise them on letting go of those risky ones in a timely manner. We plan on continuously improving our capacity to read the market through data in order to maintain our relevance as highly structured consultants, so our clients can make the most educated and opportune decisions.
What can agents do to succeed in 2022?
Pappas: They need to have a clear vision of what they want to accomplish. Then, break down the activities that need to be accomplished on a daily, weekly and monthly basis. Local knowledge and expertise is key — along with providing relevant information to their clients in a consistent manner. Communication and marketing is the key — phone/text, print and mail, social and digital/email, along with in-person networking, door knocking and open houses.
Vallejo: Agents need to become an efficient combination of highly versed in technology and profound “connoisseurs” of their market. 2022 is going to be a test that grades on the success at that combination. If an agent is a walking encyclopedia on their market but fails to use technology to analyze data, communicate with peers and clients, promote their business and brands, and streamline their transactions, then they need to hire someone to do it for them, or connect with a company that allows them to do this. If an agent is proficient with technology and knows how to promote their listings and how to capture more business, then they need to focus on the ins and outs of their markets, on the needs and wants of their clients and on the strengths and threats of their competition. If they fail to do this, their business model will lack the substance that is needed to stand out from the crowd and prevail and will soon be overtaken by technology and platforms that already do that for them.
Corey: More than ever before, it’s crucial to stand out from the competition and prove your value to consumers. Agents must be equipped with the knowledge and skillset to succeed in the fast-paced, multifaceted real estate market in South Florida, but they also need to communicate their value with confidence and expertise. The quality of an agent’s marketing and the influence of their network are key components in growing their business — and a proven track record is the best testament to an agent’s capability and their success.
Our affiliate agents can leverage our comprehensive, high-quality marketing program, Listing Concierge, that utilizes state-of-the art technology and reaches consumers across all spectrums, which has helped our agents shine. With the elevated number of out-of-state buyers and the reemergence of international buyers who had long been waiting to return to the market, our affiliate agents also benefit from being part of a global network of over 96,000 agents.
Goeseke: Success in 2022, as in the past years, comes when knowledge, vision and opportunity, combined with hard work, come together. It’s no coincidence that success comes to those who put in the necessary time and then execute.
Siddons: Easy one, the key is to get more listings
Where will the hottest communities and neighborhoods be next year?
Siddons: To be honest, all of Miami’s markets are hot markets (they just have different degrees of insanity), but I believe the single-family home market will continue to thrive — especially the primary markets around the good schools will continue to do extremely well. There is also an emergence of brand-new condo projects, of which we haven’t seen many in the last few years. These new condos will certainly attract many buyers and become a hot commodity.
Corey: The hottest communities are always those that are positioned to meet the demands of the consumers.Those demands are specific to the customer whether it is walkability, views, proximity to services such as schools, shopping, community events and buildings and activities such as boating, sports and opportunities for physical fitness. Every area and every property is adapting, from in-home offices and gyms to expanded balconies for better outdoor living in condos, residential properties of all types are modifying to meet the specific needs of the new pandemic/post-pandemic era.
Goeseke: Coconut Grove has become the epicenter of chic. The homes to Miami’s first mansions, has once again emerged as the place to live but this time with mansions in the sky.
Vallejo: We have seen the single-family home market rocket, due to migration and to the need to have larger and more private spaces. Once availability became scarce and prices stormed up, we saw the condo market benefit from this trend. With so many selling their homes and others not being able to secure one, rents were the next to boom up. This shows the elasticity in the decisions people make. People adapt to availability. With all options under pressure, the only next choice is the nearest possible place to the initial target. Take the beach market for instance. Those who initially wanted to stay within Miami Beach, but saw prices go beyond their budget, have started to look at Edgewater, downtown or even higher north on the beach such as Hallandale, Hollywood and further up to Fort Lauderdale. We see next year’s market as one with continuous heat in the single-family home and buildings along the water but warming up in those communities that are developing friendly and walkable experiences around them.
Pappas: All of South Florida is hot! Sun, surf and fun! Location, location, location — strong communities will get stronger — as demand continues to grow. The South American market will increase as COVID fades. There is also intense migration north into Martin and St. Lucie counties. New construction both in single family and in vertical neighborhoods will be in strong demand.
How will tech ramp up in 2022?
Johnston: There are countless stories that confirm that Miami is slated to become the next tech epicenter in the United States. High-profile Silicon Valley transplants have set the trend as well, buying up homes — in cash. Their industry friends and colleagues have followed suit.
Everyone has heard about the now famous tweet from Mayor Francis Suarez that sparked the “Miami Movement,” when Delian Asparouhov, a venture capitalist in San Francisco, posted, “Ok guys, hear me out, what if we move Silicon Valley to Miami,” and Suarez, lying in bed at home in Coconut Grove, replied, “How can I help?”
Additionally, Miami’s mayor expects planning documents for a tunnel with Elon Musk’s Boring Company to be ready in the upcoming months. Softbank VCs are moving to Miami to run a $100 million fund and are determined to make Miami a new tech hub.And can you blame them?Our business-friendly climate, warm weather, culture and unparalleled recreational opportunities are an unbeatable combination.Who wouldn’t want to work from paradise?
Vallejo: Tech is evolving at a tremendous speed. Solutions for clients, agents and brokers will keep making our lives easier. Those platforms designed to accelerate our business will have huge reception. Marketing automation and transaction processing will have the biggest share.
Pappas: We had the platform and the tools — COVID moved our agents to usage and competency. Technology will be used to leverage relationships.
Siddons: There is going to be, or at least there SHOULD be, more focus on effective analytics. I have launched three proprietary softwares to analyze the South Florida market in the last few years, and more great tools are in the making. It has been proven that with such a volatile market it is essential to provide accurate analytics. Up-to-date and transparent information is key in moving forward in such a volatile market. Zillow’s iBuying is now gone and their Zestimates are always off. Localized ,specific tech is going to be far more relevant than mass tech with mass data.
Goeseke: Miami is the new tech hub, thanks to Mayor Suarez, and a welcoming community will contribute to the growth of the city. This will bring a new wave of ingenuity and creativity to our city.
Corey: Technological change is very much a part of our landscape in our business.Real estate agents adapt quickly to the many new platforms and engaging technology that presents itself in our sector and in others as well.We have incorporated artificial intelligence, merged platforms to provide efficient service, virtual selling at all levels from presentations to showing to closings, mobile notaries/closings, WhatsApp, Tik Tok, Slack and fully integrated cars for a mobile business that doesn’t stop during travel time. The key to success, however, is the ability for a real estate professional to use technology effectively to lean in on personal service. Texting, messaging, DMs and every other platform does not take the place of picking up the phone, returning the call and going face to face with a customer.
What growth do you expect for your company next year? Do you expect your business to thrive, decline or remain stable? Why?
Goeseke: At Cervera we say, “We are local with a global outreach.” The Leading Real Estate Companies of the World is the most successful networking group outselling any other affiliation. Cervera is a member. I just returned from Dubai from a meeting with our European affiliates, and Miami is very much top of mind for them. With Europe now open after a prolonged shut down, demand is increasing. We are in the process of bringing to market the fabulous products we are accustomed to selling.
The flow of international investors is an upward trend. The quality of life (clean air etc.) continues to attract the international investor and more and more we find them to call Miami home.
Pappas: The past 18 months, our market has been on steroids. We believe 2022 will be strong but may be a little off in the number of transactions, due to the limited inventory. Volume should be a 2021 repeat due to rising prices.
Studnicky: We expect continued growth in both RelatedISG and ISG World next year. We are expanding our staff, agents and regions we cover for all of our companies. We have restructured our companies to accommodate the changed Florida economy.
Vallejo: We doubled our operational income in 2021 compared to 2019 (to leave the pandemic out of the question), and we still have a lot of room to grow. Our presence in the northeast has always been huge, and our focus is now to increase our presence in the southeast. With a market with such difficult access, people understand the value of working with knowledgeable and well-connected firms like ours. We are consolidating our connections within and outside of our company, and we foresee an extraordinary 2022 for our business in all of our markets.
Siddons: 2021 was such an incredible year.I expect my business to remain stable, but there might be a small slowdown in the market as we are really dealing with limited supply.If we find the supply, the market will continue to thrive.
Are you seeing continued migration to the suburbs, or is that beginning to reverse? What does it mean for sales?
Corey: A combination of shifting homebuyer and lifestyle trends, limited housing inventory and the increased opportunity for remote work continues to influence the exploration and move to suburban markets across the region. But there continues to be a demographic of buyers who are interested and want to invest in the city. Buyers from the Northeast, especially, look at the condo market as a great opportunity to live in the city and still get more space than they were accustomed to in their previous homes.
Pappas: The southern and northern borders of South Florida — Homestead and Port St. Lucie are on fire — due to their price point and being able to get more for your money. We have seen condominiums bounce back and actually outperform single family homes for the same reason — affordability. With the potential of rising interest rates, affordability will be a stronger concern in 2022.
Studnicky: The suburbs are still seeing record-breaking pricing. However, the demographic has shifted. There are not as many people migrating now that all states are open. We are seeing, though, a continued demand in the local market given that inventory is still low. Currently, it is and will remain a seller’s market for all of 2022.
Vallejo: In our particular market, migration to the suburbs has not only been triggered by the pandemic (with people wanting to exit big cities) but also from people being pushed out form these metropolitan areas due to high prices and low inventory. With an ongoing demand and with steadily increasing prices the migration to other suburbs will keep its course. This should allow for agents to have a much broader set of options to be able to deliver for their clients.
What will be the biggest challenges and opportunities for agents, lenders and brokers in 2022?
Pappas: Shifting and pivoting to a post-COVID market. Refinances will drop significantly as interest rates rise — thus creating a more competitive mortgage environment. The agents who control the inventory will thrive – but it will take more work and focus to obtain the same number of listings. There may be more frustration from sellers as their aspirational pricing may be challenged by the buyers.
Siddons: For lenders it will be effective appraisals according to current market values. For agents and brokers it will be listings or product to sell. Also hyperinflation will be a challenge for our economy, as it will affect interest rates.
Johnston: The biggest challenge for agents in 2022 is simple. Inventory. With increasing numbers of people choosing to relocate to South Florida, there’s a lack of places to put them!
Corey: Limited housing inventory continues to be the biggest challenge. As a company, we’re regularly checking in on what consumers need so that our value proposition is a direct response to that. We’re committed to continue providing our affiliate agents with the tools and resources to meet the needs of their clients and help them work as efficiently as possible. For example, we’ve seen success with RealVitalize, which offers home sellers with home improvement resources with no upfront costs. Now, the agents can extend a service that the clients would have had to seek elsewhere, creating a smooth and efficient real estate experience for consumers, and it’s also designed to take the coordination efforts and heavy lift off the agent’s plate so they can focus on selling the home. Or leveraging a tool like RealSure, a program offered through Coldwell Banker which provides home sellers with a guaranteed cash offer for their home, while they test the market with a real estate agent to beat the cash offer. It allows the home seller to bid with confidence on their next home while marketing their current one — a response to the concern of home sellers worried about finding their next home in this hot market.
Vallejo: Dynamism. The rate of success will be measured by the level of access to information and the velocity in their transactions.
Is the work-from-home trend changing the way people are shopping for homes? How are buyer preferences changing beyond wanting more space for a home office?
Studnicky: Yes, those looking for single-family homes are still interested in larger spaces and home offices. Although we are transitioning back into office and our commercial division has seen an uptick in demand, there are still a lot of companies allowing for employees to be nomad workers. The pandemic created huge demand for single-family homes to manage social distancing. Now, people have rediscovered the pure joy and privacy a single-family home offers.
Vallejo: Working from home has completely changed the way people shop for homes. The need for extra rooms, den or even larger bedrooms become an undeniable trend.
Siddons: Behavioral changes have already happened and they might continue in 2022, but we do not expect anything new. The work environment has changed and there is more mobility in the work force. We won’t see a return from that now as everyone adapted a new mindset.
Do you think the number of new people getting real estate licenses will grow in 2022?
Siddons: Probably yes. This is the type of market that attracts new agents thinking it’s easy money. People often think this business is easy and money is earned in an easy way. Nothing is less true, but it will attract many new Realtors looking for opportunity.
Corey: An increase in real estate licenses always occurs when the market is robust. What most new licensees do not understand is the time, investment and challenges in the business.Those who do and embrace the learning and growth will succeed.
Pappas: Now that the economy is back open, there are a lot of employment options for individuals, so I believe we may see a drop in new licensees in 2022.
Vallejo: With such a hot market, some agents are doing anywhere between 30% more and up to triple the income they were making in previous years. This is very attractive to anyone looking for a profitable industry to make part of, so yes, the number of new licensees will grow in 2022. What will happen is that also the number of people exiting the market and becoming inactive will grow, once they realize the challenges.
What do you see happening with home prices in 2022?
Studnicky: In the last four years, the average price of a single-family home in Miami-Dade, Broward and Palm Beach counties has doubled. I think we will continue to see a steady increase, but the numbers for single-family homes will start to stabilize. The average price difference between a typical house versus a condo has never been greater. We’re expecting significant price increases on condos in 2022.
Johnston: Single-family home prices are continuing to rise due to the high demand and low inventory. Pricing for older condos has remained stable, while select newer high-rise buildings in the luxury space have seen an increase in pricing and are quicker to sell.Everyone wants the “latest and greatest” and top product in desirable locations always carry a certain cache that many buyers find appealing.
Corey: Prices are determined by buyers. Even though it always appears that the sellers drive pricing, it is really the preferences and tolerance of buyers that determines the pricing in any given market. With a continued demand for limited inventory, the buyers will choose whether to buy, wait or buy in an alternative area. With the attractiveness of our properties, lifestyle and amenities, it would appear that we continue to be a strong choice for consumers and that they are willing to continue to pay for what they want.A consumer who is selling high and buying high is still trading at a reasonable margin, and if buying trends continue, that will raise pressure on pricing.
Siddons: Home prices are most likely to stabilize, although there might still be some increases in emerging markets. Peripheral areas like south Miami or some areas west of US1, outside of the core neighborhoods, are still likely to see its prices increase. Most of the crazy deals are behind us, we won’t see as many as those anymore and we will see less outlier prices or crazy flips.
Pappas: Simple economics will continue to drive prices higher — lower inventory and stronger demand.
Vallejo: As long as the interest rates remain accessible and we are not met with any sudden unforeseeable externality like the COVID-19 pandemic, the demand for housing will remain high, and prices should keep going up, yet in more reasonable proportions. Unemployment numbers are also gradually dropping, and this should scare away any fears of massive foreclosures, especially in the more affordable ranges.
How will you add inventory in 2022?
Kodsi: We’re launching multiple projects across the state of Florida — both multifamily for rent projects as well as for-sale condominiums.
Fordin:Related is firing on all cylinders, with $13 billion under active development and each department experiencing its busiest and most productive periods to date. Our condo division is especially driving unprecedented activity, with the past few months showing record-breaking interest and some of the most robust sales seasons in Related’s history. As such, Related’s team of developers is operating at lightning speed to meet buyers’ needs while continuing to push the envelope in terms of world-class design, amenities and technology. In Miami, we recently launched Baccarat Residences Miami and District 225, now 60% and 90% pre-sold, respectively. With demand still skyrocketing, we are actively eyeing opportunities in Bal Harbour, Downtown Miami, Pompano Beach and various other pockets across South Florida and beyond.
Diaz: There is too much capital and very few good projects, but we are confident that with our depth of relationships in key markets in Florida we will be able to unearth some outstanding new projects for 2022.
How is your company responding to low inventory?
Diaz: We are making sure we get the value we want from the inventory we are currently carrying.
Kodsi: To address low inventory, we are expanding our development platform and partnering up with several smaller developers for joint-venture projects in an effort to deliver more units in a low-inventory market.
How will you deal with supply chain issues next year? Will this continue to be an issue for builders?
Kodsi: We believe that supply chain issues will be a short-term challenge. We think it will stabilize in 2022. In fact, we are already seeing certain products either stabilize or the lead times are being reduced. We are confident that the supply chains will catch up.
Diaz: We believe supply chain issues are temporary and a simple and expected consequence of the COVID shock. We expect supply chain issues to ease next year.
How important will agents be to your business in 2022?
Fordin:Simply put, as developers, we can’t do our job without agents. Related’s projects are selling at an incredible pace, where our active condos are nearing sellout prior to groundbreaking. That’s a direct result of our talented team of brokers, and of course, the unparalleled caliber of Related buildings.
Diaz: Our relationship with agents is always very, very important to our business and we will continue to foster great relationships with the Realtor community.
Kodsi: Real estate agents are always crucial to our business — they help us market and sell our product, and we don’t see that changing in 2022. We will always use agents to sell our properties, and, if anything, we will be adding more agents in 2022, especially for in-house sales.
What do you expect to see in the mortgage lending industry in 2022?
Collett: In 2022, we’ll see a continued focus by the industry on growing purchase market share. I expect interest rates to rise, which means refinance activity will fall. We’ll also see lender profit margins get squeezed, which could result in an uptick in consolidation within the industry. I expect the Government Sponsored Enterprises (GSEs including Fannie and Freddie) to focus heavily on affordable housing. In addition, we’ll likely see a slew of new products and energy poured into expanding home ownership opportunities to communities traditionally underserved by the market.
Will interest rates remain low next year, and what should homebuyers be watching for regarding mortgages?
Collett: While interest rates may move slightly higher, I do believe they will remain at historically low levels, maintaining an advantageous environment for homebuyers. Professionally, I’ve been through about 6-8 rising rates cycles, and they always fall short of expectations; I simply don’t think the markets can function on significantly higher rates.
What will be the most popular loan types?
Collett: I think conforming and jumbo 30-year fixed-rate mortgages are here to stay. With a couple of rate hikes expected by the Federal Reserve in the 2022, we will likely get a flatter yield curve, which doesn’t bode well for adjustable-rate mortgage products. With tighter profit margins, lower origination volumes and the sharp focus on affordability by the GSEs, we’ll likely see credit widen a bit.
How will tech change for loans in 2022?
Collett: With lower volumes, we’ll probably see additional resources poured into mortgage technology, which we are certainly doing at Guaranteed Rate. Lower profit margins means lenders will have to continue figuring out how reduce the cost to originate a loan. We should see the GSEs focus more heavily on mortgage tech as well; some of those initiatives lost focus under the previous administration, whose goal was to de-risk the agencies and move them out of conservatorship.
Will the flow of international investors in the South Florida market increase or decrease in 2022? Why or why not?
Corey: With global savings rates at or near all-time highs and the pent-up demand, we’re seeing international buyers and investors make their way back to the market as travel continues to open across the world. Again, the challenge will be inventory levels as it continues to be across most markets, especially since we cannot leverage new construction as a viable solution for the strong demand that the market continues to experience.
Pappas: As international travel continues to open up — we will see an increasing improvement of investments from our South and Central American friends and our Canadian and European investors.
Vallejo: We see a strong Latin American flow of investors coming into the South Florida market in 2022. Even though it will be expensive for foreign investors due to their currencies’ loss of purchasing power to the dollar, the need to counterweight their inflation and currency devaluation rates make this market a very appealing investment destination, having the chance to generate a monthly stream of income in dollars and betting on properties that are headed to appreciate.
Siddons: It will increase as the travel ban is lifted. The market is hot, and people have been waiting to get into town. I have many Canadian buyers, U.K. buyers and Latin buyers lined up to buy Miami real estate. Miami has always attracted foreign buyers, and this year will not be an exception to the rule, especially with the market having such a great momentum.
Kodsi: While 2021 saw a slight decrease in international buyers especially due to COVID, we expect a significant increase imminently — mainly because international clients realized that their country’s infrastructure and hospitals weren’t capable of handling COVID. These inefficiencies literally affected livelihoods. So, these buyers are going to look at places like Florida because even with high COVID counts, our state never got overwhelmed and we remained open. Many of our international buyers come from LATAM, and when those countries open back up in November, we expect an even bigger demand for properties in Miami as well as the rest of the state.
Fordin: As remaining travel restrictions lift, we’re anticipating international sales to increase significantly. For context, when the pandemic first hit, there was a considerable uptick in domestic sales as Miami welcomed buyers from other parts of the country that were seeking a lifestyle change. This led to our condo division seeing 80% domestic/20% international sales, but over the past few months, we’ve evened out to a 50/50 split. District 225 and Baccarat Residences Miami are specifically driving international interest, with large percentages of buyers coming from Mexico, Colombia and Argentina. Going into 2022, we’re expecting international buyers to make a major comeback and to see a return from countries like Brazil and Venezuela.
Diaz: It will increase as many countries in Latin America and other regions are going through political and economic crisis, and South Florida has always been a refuge for the flight of these capitals.
What impact will environmental concerns, particularly hurricanes and flooding, have on the south Florida real estate market in 2022?
Kodsi: Hurricanes are always something we need to be aware of, and I believe that we have addressed those concerns with building codes and hurricane preparedness practices. Rising sea levels are something we are going to have to contend with. But that is more long-term and will be addressed on a case-by-case basis. Most developers, myself included, are leaning into building much more environmentally-friendly more energy-efficient buildings by utilizing better technology, sustainable materials, green roofs, solar and the like.
Vallejo: Insurance has gone up and reinforcements needed to stay up to code have increased, along with the price of labor and materials. This has an effect on buyers, both end-users and investors, as the upkeep cost of condos and houses increases to offset the environmental concerns. 2022 shouldn’t be yet highly affected by this as demand keeps surging, but the way both climate change and local regulations are addressed will certainly have an effect in the long run, possibly driving people away from coasts and flooding areas.
Pappas: Our Achilles heel has been the rising insurance rates in South Florida — and access to good carriers. This will continue to be difficult until our state government addresses the issues.
Siddons: Only if there is one and we have not had one for a very long time. The potential of these disasters should still be front of mind, but people don’t think too much of it. It does not seem to be too much affecting our buyers. We noticed, however, that insurance premiums are important to track, because we are experiencing high insurance rates at the moment. I have seen cases that the insurance came back much higher than I have previously seen.
Corey: South Florida has been attentive to hurricane and flooding issues for decades, primarily influenced by the damage after Hurricane Andrew from wind damage and local flooding issues during high tides and super moons. The cities have responded by elevating roads and dealing with specific areas that are prone to water pooling or water rising.Building codes have strengthened and compliance through permits and inspections have helped to elevate the ability for properties to withstand the impact of hurricanes.Roofs have hurricane straps, a good number of people have hurricane impact windows and or/hurricane shutters.Fortunately, hurricanes come with a lot of warning so in the worst-case scenario, residents have time to prepare and evacuate if necessary.
Diaz: We may get a hurricane or not, but we do not see that as a big market changer.
What impact has the Surfside condo collapse had on the real estate market, and what changes do you see coming in 2022 as a result?
Vallejo: Compliance. People are now more conscious about building codes and associations’ compliance with regulations. This has created an increase in potential up and coming assessments, and that has had an effect in the pricing and sales of older condos, especially those with low reserves. Risk mitigation assessments and HOA fees are on the way to offset the negative impact that this tragic event has had in the general public’s will to buy older condos.
Diaz: Buyers are more wary of older/resale product and are placing more value in new construction and products built with the latest construction design and construction codes.
Pappas: Surfside has made every condominium association in South Florida conduct an internal assessment of their structures. There will be an increase of maintenance for these condominiums and, therefore, higher assessments to pay for this work.
Johnston: Some buyers are more wary when it comes to investing in an older condo. In addition, many are more conscious now to check the 40-year recertification that older buildings go through.However, if anything positive came out of this terrible tragedy, it is that the city will be more diligent about setting up protocols that will serve to protect the safety of its residents.
Siddons: It did not change the appetite for the condo market. What it did change is that new regulations came into place for the older buildings. This will make it tougher for older buildings that are now more often or better assessed, which can have an effect on the HOA fees. The effect might also be that it drives more buyers towards the newer condos.
Kodsi: I don’t think we’ve seen the full fallout of the Surfside condo collapse, yet. I suspect that building codes will be tightened for older structures and that the 40-year structural inspections will be shortened. I also seen that the construction of new buildings will be monitored even more closely to ensure that any construction on the new property site doesn’t impact the surrounding existing structures negatively. In our experience, we have definitely seen the city’s review process slow down—especially when it comes to foundation permits.