Here’s how many homes are ‘underwater’ in South Florida

Some South Floridians now owe more than their house is worth as prices dipped this year — but the majority of this year’s buyers still are seeing their home values hold strong.

Of the mortgages that were issued in 2022, only 1.6% of homes in South Florida were “marginally underwater” at the end of the third quarter, according to a new analysis from Black Knight, a mortgage technology and provider company.

“With home prices in South Florida holding strong so far in the face of rising interest rates, negative equity — even among more recent home purchases — has been limited,” said Andy Walden, VP of Enterprise Research and Strategy at Black Knight.

And home prices have remained high in South Florida for the most part. The median sale price for a home in the area is around $461,000, a 9% increase from the same time a year before, bolstered by still-low levels of inventory and demand from out-of-state buyers, according to data from RedFin.

Compared to the rest of the country, South Florida has some of the lowest rates of homes purchased this year that are marginally underwater.

“The market isn’t going down as quickly as the Great Recession was and it will probably come out a little bit quicker. And you are seeing the cycle not being as dramatic in Florida to begin with,” said David Druey, Centennial Bank Florida regional president.

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Black Knight analyzed mortgages originated this year to see how many homeowners would be considered “marginally underwater,” amid a slowing market and slight price declines seen nationally.

They found that 8% of purchase loans originated in 2022 are considered “marginally underwater” on a national level, a term the data company defines as when the total debt for the home is only slightly more than the home is worth.

The state of Florida itself falls under that: About 4.5% of loans originated this year could be considered marginally underwater.

About 250,000 people who borrowed this year to get a home are underwater, the company found.

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Many of these homeowners purchased when the market started to slow, the report noted, adding that the rates are far below historic averages.

“The pull back in values has revealed pockets of equity risk, with the majority of that risk concentrated among mortgage holders who have purchased their homes in the last year,” the report noted. For homebuyers who purchased during the pandemic or in 2021, the risk is far less for them.

[ RELATED: Frustrated homebuyers wait for the market to crash ]

One thing working in homeowner’s favor has been the severe lack of inventory, which has kept prices from declining steeply across the nation.

The marginally underwater loans in South Florida aren’t a sign of an incoming housing crash, such as the one in 2008. Not only has South Florida had a record two years of price and equity growth, the factors that led to the housing bust in 2008 aren’t happening in today’s market, said Jeff Lichtenstein, founder of Echo Fine Properties in Palm Beach Gardens.

“You always have ups and downs in the market,” he added. “2008 was a market where we went into it with too much inventory, there was speculation in the market, you had more land available and people that weren’t qualified for loans were still getting them. You don’t have that now.”

For current homeowners worried about potentially losing value in their homes, it’s likely that in South Florida prices will continue to rise due to population growth and low inventory.

“Over the long haul, prices are going to continue to go up because of the demand of people moving here, and we don’t have the supply of land,” Lichtenstein said. “For most people, it won’t be much of a concern. It’s going to be a concern if you are going to need the money for something or if you are in an at-risk situation where a life event could occur.”