What are the Miami Real Estate Market Trends and Predictions for 2022? In our second episode of the “Better Decisions” podcast, David Siddons interviews fellow top agent Ben Moss about the state of the Miami luxury real estate market and what factors can or will influence the market in the months to come. They look back at the market before and after Covid discuss the influence of mass media as rising interest and inflation rates affect buyer behavior. They also talk about the newest developments and trends in the market and predict what will happen in the months to come. If you want to know the latest real estate market trends in Miami, this is the blog article for you!
Chapters in this podcast: 01:40 A look back at the Miami real estate market in recent years | Pre and Post Covid. 06:35 Miami is becoming more and more of a primary and world class market, 08:55 Latin American investments are an important driver for the Miami real estate market, 10:25 Buyer psychology and behavior regarding Interest Rates and Inflation, 14:20 The very latest developments in the Miami real estate market, 18:50, The effect of the media on mass psychology, 20:30 Portfolio diversification drives more and more investors to real estate, 22:45 Supply and demand in the South Florida luxury real estate market, 30:20 An increasing South Florida wealth gap, 31:25 The need for liquidity, 33:50The investment value and scarcity of unique South Florida properties.
We came from a crazy two years in which both the condo market and housing market increased tremendously in value. The condo market had a rough time during the first months of Covid and then quickly caught up while the already strong housing market kept increasing in strength and prices not seen before.
We are now at an inflection point in the market. We are seeing high levels of inflation as well as rising interest rates. As of June 2022, the Fed announced a 0.75 rise in interest rates, the largest hike in 30 years. The rule of thumb is that a 1% increase in mortgage rate results in a 10% decrease in purchasing power. This factor affects the lower end of the market and the markets up to $4M. These are the buyers that are now hesitant or back out of deals. They think it might not be the right moment to buy now. For that reason, we are starting to see price reductions and fewer pending deals. At the same time, more homes are for sale as many owners realize the window to get top dollar is closing.
Considerations of a National Recession
The media are warning of a recession which creates a sense of fear. The person who was going to make an offer might now think twice and decide to pull out. Although South Florida is unique, we get domestic and international buyers, and negative psychology, as seen in all cities is a factor.
In Miami, especially in the luxury real estate market, buyers close with cash and then finance the deal afterward. In the past months, the rates were so low that financing made sense, allowing these buyers to offer above asking prices. Although families and businesses are still moving down here, the willingness to pay above asking or those record deals is now behind us.
The primary markets will slow down, but in a sense that we do not see the same extreme movements anymore. The times of offering 5% to 10% over asking might soon be over. Flipping properties within two or even one year for a 30% to 50% profit will also be behind us.
Picture Source CNBC.com. Sell high, buy low! With the condo market being at a peak and the stock market going down investors might step out of the condo market now to hold on to their cash until another opportunity arises.
Primary vs Secondary Markets / Market Trends and Predictions for 2022
The primary markets, where people live all year round, such as Coral Gables or Coconut Grove, are less likely to be affected by interest rates as buyers will always need a primary family home. New buyers might take the heat out of the market by not overpaying for properties, but the demand for this product is high. The Miami housing market is a necessity product with a supply and demand curve that will make it unlikely for this market to go down below a price point.
The secondary markets are another story. An investor-driven market is not built around necessity, and this market might be more affected by high-interest rates and a shaky stock market. Investors are more likely to hold back in times of economic instability.
Cash Flowing into Miami
Although there is still a lot of cash, there is a need for liquidity, albeit for the short term. The condo market is cyclical, and those who bought in recent years have seen their values rise tremendously. They realize the market is at an all-time high. These owners are more likely to step out of the market and hold on to their cash until another opportunity arises. If the stock market keeps going down, they might use that cash to pick up stocks for cents on the dollar. Investors are out for opportunity when one market has reached its perceived peak, and they prefer to invest their money elsewhere for a higher profit.
For the condo market, the Latin American market plays an important role. The ongoing social and political instability in Latin America ensures an ongoing flow of money into the US and the Miami real estate market. Owning property in Miami is a haven for many of these foreign investors. This Latin American capital ensures a buffer for the Miami real estate market, especially the condo market.
Miami Real Estate Market wide-lens view | Miami as a Primary and World-Class Market
Miami is becoming more and more of a primary and world-class city. While Miami was known for eternal summer and tourism, its real estate was more cyclical or volatile with second homes and investment properties, most of which were purchased with Latin American flight capital.
These days, Miami is becoming more of a world-class city. Since the start of Covid, people have been migrating to Miami for more reasons than just the famous tax-related matters. These relocation buyers are also attracted by the Miami lifestyle and sense of freedom. More and more families and businesses are settling into Miami. While our city has always been the hub for South America, it is now attracting hedge funds, private equity, the crypto community, and the tech sector.
Real Estate as a Solid Long Term Investment
People are looking more and more at real estate to diversify their portfolios. Nobody wants to sit on cash, the stock market is making unstable moves, bonds are down, and crypto crashed.
Within the Miami real estate market trends we study the systematic housing shortage. Unless you go outside Miami, the land is limited, and there is almost no more empty space to build. New construction homes are limited, and the cost of building is higher than ever. A limited supply of homes will create a buffer for the drop in real estate values, and home prices are unlikely to drop below a certain point. A crash is unlikely to happen in the Miami housing market, given the high levels of migration we are still experiencing.
Good quality product is scarce and appreciated. Unique, well-finished, well-located properties tend to be bulletproof. These unique homes will not always come up, especially not in this market. These homes always have the highest appreciation.
Trees do not grow to the sky, and no market cannot go up forever, but if you have a long-term perspective of real estate, investing in Miami real estate is solid and still the best hedge against inflation.
These are the most commonly asked Google Real Estate Related questions
2. What is the best New Construction Condo in Fort Lauderdale?
In our opinion, the Residences at Pier Sixty-six are certainly the most interesting and unique. Already well underway this 32 Acre project will be home to the first of its kind Marina where owners will be able to anchor up vessels up to a staggering 400 ft! For specifics of this project see our independent review of this project.
3. How can I compare the new luxury construction Condos to the best existing Luxury Condos in Miami?
Our Best Luxury Condos in Miami article will prove to be very useful to those looking to compare the existing to the new. You may also want to watch this video which shows the performance of the best Condos in Miami over the last 15 years!
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