Beautiful and vibrant Miami, Florida. Quintessential coastal beauty, a cosmopolitan and dynamic city, and one of the unfortunate totems of the recent housing boom and bust.
Miami, like so much of the country, has experienced its ups… and well, its downs when it comes to housing.
As one of the most developed regions during the boom’s height, hardly a report is filed on housing that doesn’t allude to the harsh housing fallout felt in Miami and throughout South Florida. Yet there are glimmers of hope for this iconic beach city, suggesting that for some, this may be one of the most enticing times to dive into Miami’s real estate market.
The challenges for Miami’s real estate market echo those of cities across the country:
- With a preliminary unemployment rate of 11.1 percent in April, 2011, according to the Bureau of Labor Services, the Miami area is unlikely to reach housing stability until it can amend its low hiring numbers and anemic employment growth.
- In tandem with faltering employment, house prices in South Florida, which saw a terrific run-up during the housing boom, have plummeted over 50 percent since their 2006 peak. This has spurred massive foreclosures, and some estimates peg over half of all South Florida homes with a mortgage as likely to be underwater.
- As the most populous of Southern Florida’s counties, Miami-Dade has also borne the brunt of the foreclosure crisis. While the Cape Coral area has a higher foreclosure percentage (1 in every 208 houses in foreclosure as of May, 2011), Miami-Dade’s 2,768 foreclosures in that same month far outstripped the numbers seen in any other Florida county.
- That onslaught of foreclosures in the Miami area is bound to suppress prices for years, until the REO inventories can be cleared. As of April 2011, distressed properties are making up 40-50 percent of the single-family homes market.
Yet the unique characteristics of Miami have created a complex real estate dynamic, in which stagnating real estate prices fail to reflect growing buyer demand:
- As one of the nation’s hottest vacation cities, Miami has recently been undergoing a “condo boom,” fueled by intense international investment interest. Falling prices, coupled with a weak US Dollar, has property throughout South Florida at fire-sale prices for overseas buyers, and the Miami luxury condo market is enjoying one of its best years since 2005.
- While the news on housing is poor in general, Miami has reached at least a plateau in its massive housing price crash, with a meager but optimistic 1 percent gain in house prices from April 2010 to April 2011, according to Zillow.com.
- The price stabilization is likely tied to a shrinking home inventory, which, as of June 17th, was at its lowest number since 2008. While foreclosure moratoriums and paperwork problems are playing a part in the inventory declines, nearly 50 percent of transactions in South Florida were either REOs or short sales, suggesting that buyers are beginning to soak up excess inventories.
- As another positive, the drop in home prices has made Miami one of the most affordable cities in the country in which to buy, according to Trulia.com’s 2Q 2011 Rent. Vs. Buy index. In fact, affordability in Miami is at its highest since 1975, which could prove a powerful incentive for ongoing population growth, which is vital to Miami’s economic prospects.
Overall, the outlook for Miami is troubled in the short-term, but most local experts remain bullish on Miami’s long-term potential. Endowed with exquisite natural beauty, a pro-growth economic agenda, and an affordable housing market, both new and established Miami residents are likely to encounter a local housing market that is slow to regain its footing, but on a road back toward equity and growth.
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