2005 Articles

Real Estate Market Fundamentals in South Florida

Bibish IV, John E.; Keenan, Jesse M.

From 1992 to 2005, six factors
contributed to the U.S. housing boom:
mortgage rates decreased to generational
lows; financing innovations lowered
homeownership costs; home listings were
centralized on the Internet (to minimize
transaction costs); lenders gave priority to
minority homeownership; demographic
influences strengthened housing demand;
and real estate was perceived as a safe
haven for household wealth compared to
the stock market, which offered poor
investment returns.
These factors, combined with record volume
home sales, increased home appreciation,
record homeownership rates, and
sizable increases in mortgage originations, have lead many economists to the conclusion
that there is a national housing boom.
Industry economists recognize that price
gains have been unusually strong in recent
years because of robust housing demand
and increasingly stringent supply constraints
in some areas, which have boosted
price appreciation above the rate of
income growth. A stable relationship
between income and house prices over
time suggests the absence of a nationwide
housing bubble, especially when placed in
the context of a national unemployment
rate below 6 percent, extremely low mortgage
rates, and the acceleration of a broader
economy.