The 2017 Miami Real Estate Outlook
The 2017 Outlook for Miami Residential Real Estate Markets
EWM just released their 2017 Outlook report on the Miami Residential Market. As EWM/Christies agents we would like to share with you the latest information on the Miami real estate market and the most important take-aways.
The 2017 Miami Real Estate Outlook.
Below is a summary of the 2017 Miami Real Estate Outlook. For the entire report please click on the picture on the right hand side or click here to download the full report.
The Inventory Levels in the Miami Residential Real Estate Market
Looking back at 2015 and 2016 we see those were adjustment years. Years in which the inventory rose substantially and sales began to decrease, especially on the high end of the market.
For the 2017 outlook we are looking at the Months of Inventory. Months of inventory is one of the most important indicators in a real estate market and quintessential to look at when predicting future behaviour of a market. We enter 2017 with a lot of inventory and reduced sales, especially in the higher ends of the market. Please have a look at the below graphs to see the meaning of months of supply and the current months of supply in the Miami market for condos and homes
Months of Inventory: Our Number 1 Metric
The two graphs below show you how we evaluate the Months of Inventory or Supply in Real Estate. As you can see the $1M+ market uses another standard than the markets below $1M. A low supply or a sellers market is a market in which prices are likely to rise while a buyers market indicated prices will need to come down
Properties below $1M
Condos in Miami Dade have 12 months of supply vs 4,5 months of supply in homes. Comparing Q4 of 2015 with Q4 of 2016 we see an 11% inventory increase in homes and a 45% inventory increase in condos
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Properties above $1M
Condos in Miami Dade have 55 months of supply vs 26 months of supply for Single Family Homes. Comparing Q4 2015 with Q4 2016 we see a 19% inventory increase in homes and a 69% inventory increase in condos
Click on image to enlarge
High Inventory Levels creates downward pressure on asking prices
The higher levels of supply especially in the higher end of the market and reduced levels of demand creates an environment in which sellers will have to reduce their prices in order to sell. In the past few years many properties sold above market price and the sky was the limit. Many sellers now come to the realization that prices need to come down in order to sell. It is not the time to “test the market”, not with this inventory.
The Effect of Currency Rate on Foreign Buyers
The amount of foreign buyers has decreased considerably compared to the past few years mainly due to currency rate changes.
Two years ago we still sold 32% to foreign nationals. In the $2M dollar+ market this was even 42% of all properties while today these numbers decreased to 25% and 34% for the $2M+ market. That is a large percentage of lost buyers. Although a large part of the demand is now taken over by national buyers (attracted by Florida’s advantageous tax climate and affordable prices) there is still a gap in the supply vs demand curve that needs to be overcome by reduction of price levels.
Rising Interest Rates; What it means for buying power
Interest rates are expected to go up slightly and have already gone up in the last few months.
As a simple example over a $100,000 mortgage the difference between a 4% and a 5% interest rate is a difference between $477 and $537 per month, which is a 11.1% decrease in purchasing power. When you pay 5% interest over $100,000 you pay the same amount of monthly payments as someone who has a $112,000 mortgage and pays only 4%.
As interest rates are expected to rise, many buyers are pulling the trigger to buy a property. They are locking in their deal now to be able to profit from affordable interest rates (and higher mortgage amounts). Obviously buyer’s purchasing power affects the sellers as well. Those sellers who want to profit from eager buyers need to price their property right in order to close a deal before interest rates go up and buyers loose purchasing power.