Miami Realtors Presented State of the Market event
MIAMI – (RealEstateRama) — After eight years of record or near-record residential sales, the Miami real estate market is normalizing with steady growth, various prominent local market experts said during a recent MIAMI Association of REALTORS® (MIAMI) event.
The fast-sales growth of Miami mid-market properties, the continued high-percentage of all-cash buyers, preconstruction condo inventory in the rapidly-growing Downtown Miami area and South Florida’s overall population and job increases are boosting the market, experts said during the recent Real State of the Miami Market event at the Biltmore Hotel.
“2013 and 2014 were extremely strong for the Miami market for fundamental reasons,” said Anthony M. Graziano, the event’s keynote speaker and the senior managing director of Integra Realty Resources. “One of the reasons was pent-up demand. When we look at our numbers today, we are getting back to normal. It’s OK that our market is not growing 15 to 20 percent every year. In fact, it’s a good thing. I want to grow 5 percent a year because at some point our wage growth can’t keep up.”
Edgardo Defortuna, the president of Fortune International Realty, applauded MIAMI for hosting the event in the wake of several unbalanced and inaccurate media articles.
“One thing that affects our market the most is perception because eventually perception becomes reality,” Defortuna said. “We need to change the perception. We need to combat the negative headlines because the reality of our market is completely different. When people say Miami (preconstruction condo) developers are reducing their cash deposit requirements from 50 to 30 percent; it’s taken totally out of context. These buildings are reducing deposit schedules because they don’t need the money anymore. They are already 80, 90 percent sold and close to completion.”
Mid-Market Property Sales on the Rise
Single-family homes priced between $200,000 and $600,000 saw a 5.8 percent year-over-year increase in April, growing from 685 to 725. The sector represented 63.0 percent of total Miami single-family home sales in April 2016.
Existing condos priced between $150,000 and $300,000 saw a 2.7 percent-rise in sales in April, increasing from 485 transactions to 498. This sector represented 39.2 percent of total existing Miami condo home sales in April 2016.
Miami bargain prices compared to other world-class cities and the lack of available land are also key factors in today’s market, experts said.
A 120-square meter condo in Miami-Fort Lauderdale-Miami Beach cost $149,900 on average, according to the National Association of REALTORS® (NAR). Prices for the same condo in London ($960,840), Hong Kong ($776,280), and New York ($1.6 million) are at least five times higher.
The lack of Miami-Dade County available land means the value of local single-family homes will rise and more residents will purchase multifamily units.
Preconstruction Condo Market in Better Position than Last Cycle
Most Miami preconstruction condo developers require a 50-percent cash deposit on new units. The deposit is not only one of the highest in the United States but is significantly higher than the 20 percent required during the last real estate cycle. The large all-cash deposits are a strong sign home buyers are committed and invested in the Miami market.
The majority of new construction is happening in Downtown Miami, and developers are being cautious not to overbuild. About 85 percent of condos under construction in Downtown Miami are sold, according to Integra Realty Resources and the Miami Downtown Development Authority. Downtown Miami has about 7,200 units under construction, a 61.2 percent smaller inventory than the 18,500 units under construction in 2006.
About 78 percent of new construction Downtown Miami units closed all cash in 2015. About 64 percent of all resale inventory closed all cash in 2015.
“The reason downtown Miami is important is because it is what is leading Miami in the marketplace. It’s our urban core,” Graziano said. “Downtown is the poster child of what is happening in the market.”
While noting preconstruction sales have normalized compared to the previous record-activity, Graziano believes developers are taking a break and doing site plans before announcing future plans. The overall percentage of all-cash buyers (48.6 percent) remains double the national average. In hot submarkets such as Brickell in Downtown Miami, the all-cash percentage is 82 percent.
South Florida’s Population, Job Growth
South Florida’s growing population will continue to fuel more home sales, experts said. The Miami-Dade, Broward and Palm Beach metro area recently became the eighth-most populous region in the U.S., eclipsing 6 million residents for the first time, according to new U.S. Census Bureau data. South Florida gained almost 500,000 new residents in the past five years.
Another strong indicator for housing is job growth. The number of employed Miami-Dade County residents increased 2 percent, growing from 2.13 million residents in 2013 to 2.18 million in 2014. The percentage of Miami-Dade residents earning more than $75,000 a year increased 4.1 percent in the same time period.
The local population is also getting more educated, a key factor in a growing economy. The share of Miami-Dade residents with graduate degrees increased 7.5 percent from 2013 to 2014. The population has seen a 12 to 17 percent growth in associate, bachelor and graduate degrees.
Downtown Miami is the epicenter for population and wage growth in South Florida. Downtown has grown from 40,466 residents in 2000 to 80,000 today, according to the Miami Downtown Development Authority. Brickell has seen the largest increase, growing from 12,904 residents in 2000 to 32,489 today.
The Future of the Market
The remainder of the 2016 will see fewer sales than last year and pricing will be hard to predict, Graziano said. Waterfront properties or other unique projects will outperform. The pricing for properties below $1 million will remain strong but inventory expansion should be watched.
The overall average pricing remains strong in South Florida. Sellers should expect to see more competition as buyers become more selective. South Florida’s economic growth and population increases will play key roles in the direction of 2016 residential pricing.
“Miami is one of the fastest growing cities in the world and I don’t see that slowing down,” Cervera Real Estate Managing Partner Alicia Cervera Lamadrid said during the recent MIAMI event. “One of the great things that is happening is we are being connected by All Aboard Florida rail. We are now becoming a commutable tri-county, which is so important. I think we will see more of that connectivity.”