Whether cash buyers, loan takers, or anyone in between, it helps to know exactly what you may be getting yourself into before you settle on any kind of real estate market decision. Are you buying into a balanced market? What do the home prices look like? What do you have to think about where environmental factors are concerned?
The meticulous approach goes double where buying an investment property is concerned. The idea is likely to purchase one to then rent to potential tenants. Now you need to consider what the rental market looks like alongside thinking about the purchasable prospects.
Miami is one city that could potentially see lucrative real estate investing. That family home in Miami-Dade county may be just what you needed to attract the right tenants.
Before you get there though, it's a good idea to explore some of the insights about the location. Below is a collection of data on what is one of the major markets in the United States.
Miami Housing Market Trends for 2022
Starting simply, here's a collection of data covering the most notable trends real estate investors would want to know about in Miami for the 2022 period:
- 566.8 homes were sold, which is a 26.6% decline year over year
- The median home value was $556,582.
- There were 779 new listings, which represents a 15.9% decline year over year
- The 1-year appreciation rate was 27.4%
- The median list price was $549,667, which is indicative of a 24.9% increase year over year
- There were 25.2 weeks of supply, representing an increase of 8.1 year over year
- 54 was the median number of days on the market, which is a 0.9 increase year over year
- The price-to-rent ratio was 22.62
- The total number of foreclosures was 3,327
- 11,901 active listings were present, which is a 9.6% decline year over year
What Factors Affect the South Florida Real Estate Market?
Whether it's the Miami metro area or otherwise, the prices of homes aren't just autonomously moving for no reason. Several factors go into the movements that you'll see, which are covered below.
Miami home prices, like others in the country, will be shifted somewhat based on the current state of the economy. Remember that investors like yourselves aren't the only ones looking to buy property.
Some local and foreign buyers are looking for investment opportunities, while others are simply looking to buy homes to live in.
Economic elements such as GDP, unemployment rate, prices of goods and services, manufacturing activity, and more, will affect the purchasing power people have to buy homes.
The government has different programs and policies that will affect the willingness and the capability that people have to buy homes. Examples of these include subsidies, deductions, and tax credits.
Paying attention to demographics is one of the best ways to get a feel for the kinds of properties that are in demand.
For reference, demographics speak to how the population is composed based on certain common factors that subsections of it may share. These could be income-earning capacity, race, age, spending patterns, and more.
Mortgage Interest Rates
Naturally, mortgage rates would significantly impact the state of the housing market. The Miami Realtors Association will tell you that closed sales, for example, took a big hit in 2022. November paints the picture especially well, showing a 38% decrease year on year in closed sales.
While this could be for a series of reasons, one of them is the extent to which potential buyers were simply priced out of the market.
The cost of obtaining a mortgage for some is just too high. Even above-average earners are often unable to buy.
Will the Miami Real Estate Market Ever Crash?
This is an interesting question and one which can't be factually answered since you can't tell what the future will hold. Be that as it may, nothing is wrong with a little speculation on the part of economic experts, especially since their insights are based on industry experience and could paint the real picture.
The current belief is that while the market will slow down, it's not expected to crash. Why is that? Consider the reasons put forward below.
New Construction Concerns
While the number of new developments may not go back to the levels they were before 2007, the current state of things isn't favorable. It's not that there are none, but the number is too low to stabilize inventory levels right now.
New Buyers in the Market
It's no secret that different demographics are stepping into the market looking to acquire homes. Millennials, for example, are in their prime buying years. This contributes to the current demand being so much beyond the supply.
Almost two decades ago, you could say that lending standards were non-existent, which is why just about anyone could have a mortgage, regardless of down payments or credit checks.
Most of the parties who can access mortgages today must meet high standards, one of which is usually excellent credit.
Low Inventory Levels
This one goes without saying. The ongoing scarcity of homes is one of the biggest drivers behind the kind of "crazy pricing" that you are seeing. It's why you'll find that buyers are being forced to effectively bid up prices just to be able to secure a home. It's the definition of a seller's market if you've ever seen one.
Reduction in Foreclosures
Homeowners today have way more equity in their properties than those of times past. Having balance sheets that are so much stronger means there isn't a looming threat of a foreclosure crisis, which is one of the challenges that would result in a market crash.
Miami Housing Market Statistics
From median rent to sales and other factors, you'll realize that while there are variances in the specific numbers, the behavior of the Miami real estate market has kept pace with the national outlook. Here are some of the trackable statistics that you want to keep your eye on.
- Since the Fed decided to use higher interest rates to tackle the matter of investments, the average commitment rate has appreciated on 30-year fixed-rate loans. The 2022 mark for mortgage rates is 7.08%, representing a jump of more than 100% in 2022.
- This means that buyers have seen an increase of thousands of dollars in home prices. Worse even, there are macroeconomic signs that indicate the current trend of higher rates will continue to take shape to manage the inflation problem.
- For the better part of a decade, Miami has continued to see higher property values. Within the pandemic years, the biggest spike would've been seen. The good news is that sellers are slowly losing their power based on some of the more recent Fed decisions. So, while there is expected to be some level of constant appreciation in 2023, it should start slowing down.
- The 11,901 active listings available put the supply at 25.2 weeks. Mind you, this is a greater inventory than most markets in the country. However, it's still not enough to match the overwhelming demand for homes that are out there. With the interest rate challenge though, mortgage applications are slowing down.
- However, supply is a lot less than demand. Inventory, therefore, is moving to a state of balance, but it won't happen overnight, so the Miami real estate market will need some time.
- Flipping was one of the most viable exit strategies that investors in the market were using. However, the price appreciation problem meant that profit margins were taking a serious hit.
- Does this mean that flipping can no longer work? No, but what it does mean is that it's not very viable. Economic indicators will tell you that the best strategies right now are along the lines of long-term investment options such as rental properties.
Miami and the Luxury Real Estate Market
Knight Frank LLP, a real estate agency based in London, states that Miami is expected to be the second overall city as far as luxury real estate markets in 2023 go. There has been an overwhelming amount of real estate investment interest in the city, as well as in neighboring areas such as Boca Raton, Pompano Beach, and Fort Lauderdale.
Much of this is coming from the Latin American market, including Argentina, Mexico, Brazil, and Peru.
Corporate relocations, as are the migrations of high net-worth people, are expected to South Florida. Both of these mean that the real estate market is expected to grow from a profitability and importance perspective.
2022 saw the expansion of almost 60 companies into Miami, and approximately 1x50 are expected to do the same within the next few years.
To put some numbers to this, the Miami Beacon Council expects Miami-Dade County to see recurring economic gains of over $800 million.
The expectation is that homes under $1 million are expected to slow down since both sellers and buyers should be more rate sensitive. However, on the side of luxury homes over $1 million, things are expected to amp up, especially since those in this bracket are cash closers.
What Are the Predictions for One of the Hottest Real Estate Markets?
This is another good time to say that predictions in any real estate market are speculative at best. Sure, given the backgrounds of many of the experts who put them forward, they are likely to come true, but this doesn't mean that you shouldn't expect any kind of variation in reality.
With that said, here are some of the expectations for the Miami real estate market in 2023:
- The Miami real estate market has stayed robust even after the extreme purchasing patterns that defined 2021 and 2022. Some may expect inventory levels to balloon upwards, but this is not going to happen. There are still many cases of sellers being in more advantageous positions.
- Across effectively 90 submarkets, less than 10% are showing signs of an excess inventory on the horizon.
- There isn't too much of a difference in the number of active buyers. However, quality inventory has diminished. That doesn't mean that the demand for quality housing has wavered. This is one of the ways in which inventory can increase since sales will inevitably slow down.
- The desperation that buyers may have shown before is no longer there as they are content with not compromising. Waiting rather than settling is the name of the game here.
- A drop in prices isn't expected, just because of what inventory levels look like across most markets. As indicated before, while there is a steady increase, the quality of the products is not always high meaning, that the number is technically inflated. You find that quality housing goes pretty quickly.
- Pricing is expected to stabilize, but the market still has the potential to trend upward.
- Affordable housing is a continuous concern and that is not expected to change in 2023. Entry-level housing starts at about $2 million, with new construction properties often starting at around $6 million. Since the inventory is low, it doesn't create a situation where pricing will adjust anytime soon.
- Even the condo market is a concern. If you look at areas such as Miami Beach, it's dominated by high-end, luxury properties that are highly-priced.
- Older homes tend to stay longer on the market and that trend is expected to continue. They bear higher renovation costs, which means that the remodeling is harder, and they become as expensive as their newer counterparts.
The Bottom Line
Even though the performance of the Miami real estate market is not too far removed from that of the national trends, you can see that it has been performing relatively well for the better part of a decade.
The pandemic didn't mean that Miami stopped being a hot commodity. If nothing else, the landscape is now perfect for landlords to invest in rental properties since long-term holdings are an incredible profit strategy in the area.
Don't forget about the Miami real estate market predictions. 2023 is expected to deliver much of what 2022 did, with a few exceptions and this could be your time to capitalize.
Frequently Asked Questions
Is Extreme Weather a Concern in Miami?
Miami can be affected by the Atlantic hurricane season, which runs from June to November. The government has attempted to minimize the impact with a couple of recent projects since hurricane threats, floods, and climate change are serious challenges.
Until now though, it doesn't seem like these concerns are causing the market to slow down by any stretch of the imagination.
How Common Are Renters Vs Homeowners in Miami?
The current state of things sees a lot of people renting instead of making any down payments on any properties. Much of this is down to the sheer pricing of homes.
Additionally, a lot of retirees and young professionals prefer the condo lifestyle. Ares such as Edgewater, Miami Beach, and Brickell are expected to see more condos, which should help to meet that demand.
What Are Miami's Top Neighborhoods?
Several Miami neighborhoods have seen home value increases, thanks to their cultural diversity, beach proximity, waterfront views, and more. These include:
- Coconut Grove
- Little Havana
- Key Biscayne
- Coral Gables