The 2024 Midyear Miami Housing Market Report & Forecast David Siddons Group

The 2024 Midyear Miami Housing Market Report and Forecast

Miami Housing Market: The Current State & Q3/Q4 predictions

Today, we are once again joined by Ana Bozovic. Like myself, Ana is an economist, demographer, and analyst who is highly involved in the Miami real estate market. With extensive experience and data-driven insights, we provide buyers and sellers with unbiased, real-world market analysis to guide their decisions. Our track record of accurate market forecasts is built on understanding not just what is happening, but why it is happening.

Introduction to this Q3 and Q4 Miami Housing Market Report

Firstly, I have been writing these reports for nearly ten years. Although this report reflects on Q1 and Q2, we take a longer-term view of Miami and reflect on the backstory of 2023, 2022, and 2021 data to explain the patterns and trends we are currently seeing.

As a ‘demographist,’ we greatly look at the human behavior driving these trends and unravel the current market psychology and how it plays out. Our reports, unlike most, include real-world applications and experience. With one of the biggest real estate teams in Miami, we observe buyers and sellers at a granular level every day. So when we get into the numbers of each neighborhood market, we explain not only what some of these trend lines reveal but how they came to be and most likely where they may be going.

The Bottom End of the Market is Disappearing

The Miami real estate market has undergone a major shift. Price leaves are soaring and many buyers are being priced out of the market. In addition, the entry-level segment is disappearing. In the most desired residential areas around Coral Gables and Coconut Grove properties are rarely available for less than $1 or $2 million.

The cost per square foot has increased significantly. For prime properties and new developments, prices are surpassing $1,000 per square foot. This increase is due to scarcity and the desirability of locations near schools, banks, and offices. In 2019, $1,000 per square foot was the ceiling for dry lots, and $2,000 was for waterfront properties. Today, $1,000 per square foot gets you a well-maintained home in areas like Coconut Grove or Coral Gables, but not a new build or a home on a large lot. The entire market has shifted dramatically.

The Top End of the Market is Shifting
We see more homes trade at $1,000 per SF+

Top Sales Per SF	Q1 2024 Transaction Volume	2019 Transaction Volume	Change
$1,000-$2,000 per SF	113	15	650%
$2,000+	18	2	800%

The Top End of the Market is Shifting
We see more homes trade $10M+

Top Sales	2022	2023	Q1 & Q2 2024
$10M+	84	68	70+ Sales
$25M+	19	25	10
$50M+	1	3	5

The Market is High, Can it Go Higher?

Buyers are now perceiving property prices as exceedingly high compared to previous levels. The fact that prices in Miami are now comparable to those in NYC or LA is causing a shift in perception, leading to buyer hesitation. Both buyers and sellers are contemplating whether to wait. The market is adjusting to the new reality, but not everyone has realized this new reality yet. Buyers keep looking back at 2019 prices and sellers keep looking at 2021 prices. The rapid price increases however are slowing down, which is a normal part of the adjustment process.

While inventory is up, this isn’t necessarily alarming. Typically, an increase in inventory would raise concerns, but that’s not the case now. The upper end of the market is moving slowly as people are becoming more cautious about their purchases. Sellers aren’t always pricing their homes reasonably, hoping a wealthy buyer will pay top dollar for their property. In addition, many sellers do not know where to move to next, while looking at higher interest rates and taxes.

Property values have surged due to limited supply and a growing population. Florida besides seeing the highest amount of new residents of all US states is attracting high-value taxpayers. The influx of wealthy individuals is not just driving population growth it is driving population replacement. With a population that keeps growing and becoming wealthier, there is a lack of good-quality single-family homes. Although there is a substantial amount of condo and multi-family home construction, single-family homes are scarce. Miami is bordered by water and the Everglades so the amount of land is finite. The high demand for quality homes and the limited supply makes it highly likely that this market will continue to grow, especially those markets close to the urban core and the top private schools.

Long-Term Market Views

As much as some media like to refer to an upcoming market crash, market crashes typically occur when underlying assets can’t support debt. Florida’s market, however, is primarily supported by a strong foundation of cash transactions and high equity, rather than speculation. While there are concerns about talent and wealth leaving the state, we believe this trend is unlikely to reverse due to ongoing political and social issues in feeder states, with ongoing efforts from our local government to attract these HNWIs.

South Florida has entered the global stage and this movement is closely linked to Florida’s robust job market. Currently, Miami is the sixth’ hottest job market in the U.S., based on key metrics such as unemployment rates, labor-force participation, employment changes, labor force size, and wage trends. While many companies have announced their move to Florida, the process takes time. Of all the future large corporate relocations, two-thirds have yet to complete their move. Limited office space and school availability are slowing the transition.

In addition, Florida’s office market is thriving. Vacancy rates are significantly lower than pre-COVID levels and muchlower than in cities like San Francisco and New York. For instance, Brickell has a vacancy rate of 7-8%, compared to over 30% in San Francisco and low 20s in New York. This trend underscores Florida’s growing appeal and the permanent nature of this economic and demographic shift. The market is stabilizing around a new normal, with new upper and lower ends of the market.

The market is stabilizing around a new normal and this is happening during a period in which we see high interest rates and sales prices. However, as mentioned in one of my previous podcasts by Craig Studnicky and by Barbara Corcoran in a panel, if rates were to drop to 6%, we could expect a 10% increase in home prices as buyers seize the opportunity.

Markets to watch in 2024

New properties aimed at higher-end buyers are anticipated to see increased demand. However, due to rising construction costs, prices for these new properties are expected to increase accordingly. Constructing new properties at $1,500 per square foot and selling them at that price is not feasible.
For prospective homebuyers, it might be advantageous to explore areas beyond primary locations like around Schenley Park or Glenvar Heights. These regions offer newer homes with untapped potential for appreciation. Their values have not yet peaked, providing buyers with an opportunity to benefit from future growth.
Homes priced under $2 million are in high demand, often sparking bidding wars. You don’t have to sell but keep in mind that many of these homes sit on smaller lots. These homes have a limit to how much their value can increase. Homes on larger plots offer more potential for appreciation since there’s limited space for new construction.

Who Needs to Sell in 2024?

Certain properties, such as investment properties, older homes, or those in flood-prone areas, may experience declines in value. Rising HOA fees and insurance rates are likely to widen the gap between older and newer properties. Buyers should be cautious, as what seems cheap now might become costly later. Sellers need to act swiftly before their properties become unsellable or are valued only for their land. For more information about the risk of older properties check my podcast on the rising problems with flood insurance.

Older condos are a hot topic. With high HOA fees and rising insurance rates, many owners can no longer afford them. At the same time, they are becoming increasingly undesired by buyers for the same reasons. With a large portion of the condo market being 30 years or older this will become an issue. just refer to Craig and Podcast Hugo for more details.
Homes in flood-prone areas are becoming increasingly difficult to insure, leading owners to put them on the market. Despite their appeal, these homes are often compared unfavorably to newer properties which are selling for high prices. While older homes may be aesthetically pleasing, these homes are not easily renovated and are essentially valued for their land. Despite reluctance from owners to admit it, investing more in these homes may not yield significant returns, especially considering rising insurance costs and uncertain insurability in the future.
For property owners, the value of rental properties is closely tied to the rental market. Growth in the rental market has eased, which was necessary after the previous spike in rents. The recent drop in rents is a healthy adjustment, especially considering we saw a 68% increase in one year. This stabilization is beneficial as more inventory becomes available, leading to more reasonable prices. At one point, rents were consuming 45% of tenants’ incomes, which is unsustainable. If rental values decline, so will the property value. Given the current maintenance and insurance costs, it’s crucial to evaluate your rental property’s performance within your portfolio. If it’s not yielding the desired results, it might be time to reconsider your investment strategy. Click here for more information on whether you should sell your rental property in 2024.

Schedule Time with David to Discuss the Miami Housing Market

Sources

https://www.cbsnews.com/miami/news/high-earners-priced-out-of-south-florida-housing-market/
https://www.miamiherald.com/news/business/real-estate-news/article273842400.html
https://www.miamiherald.com/news/business/real-estate-news/article286929020.html
https://www.zillow.com/home-values/12700/miami-fl/
https://www.macrotrends.net/global-metrics/cities/23064/miami/population
https://finance.yahoo.com/news/why-miami-75-more-millionaires-110000353.html
https://www.buysidehustle.com/complete-list-of-finance-firms-in-miami-florida/
https://www.miaminewtimes.com/news/miami-condo-is-most-expensive-us-home-sold-in-2024-first-quarter-19648356
https://www.wsj.com/real-estate/luxury-homes/two-buyers-strike-deal-for-132-million-waterfront-compound-in-miami-beach-3f008a77
https://therealdeal.com/miami/2024/03/08/shore-club-ph-in-miami-beach-in-contract-for-over-120m/
https://nypost.com/2024/03/08/real-estate/a-miami-beach-penthouse-is-in-contract-for-more-than-120m/
https://www.mansionglobal.com/articles/two-buyers-strike-deal-for-132-million-waterfront-compound-in-miami-beach-062fdc3e
https://www.dailymail.co.uk/news/article-13364237/America-NEW-wealthiest-enclave-Ritzy-neighborhood-Coral-Gables-Florida.html
https://southfloridaagentmagazine.com/2024/05/08/100-million-penthouse-mandarin-oriental/
https://www.dailymail.co.uk/news/article-13364237/America-NEW-wealthiest-enclave-Ritzy-neighborhood-Coral-Gables-Florida.html
https://taxfoundation.org/data/all/federal/latest-federal-income-tax-data-2024/#:~:text=The%20top%201%20percent%20of%20taxpayers%20paid%20more%20than%20%241,to%2045.8%20percent%20in%202021
https://www.wsj.com/economy/jobs/utahs-tech-hub-powers-americas-hottest-job-market-wsj-ranking-finds-e67d0171
https://fortune.com/2024/04/28/big-tech-billionaires-migrate-florida-miami/
https://www.wsj.com/articles/wall-street-moves-to-florida-nyc-real-estate-11614020268
https://cw-gbl-gws-prod.azureedge.net/-/media/cw/marketbeat-pdfs/2024/q1/us-reports/office/miami_americas_marketbeat_office_1q2024.pdf?rev=5db9cb3ef29e4b6cb3951df99587889e
https://www.wsj.com/real-estate/miamis-office-market-was-red-hot-now-its-tallest-planned-tower-cant-fill-its-space-b43b42ea
https://www.axios.com/local/miami/2024/01/02/rent-down-2024-real-estate-forecast
https://www.bloomberg.com/news/articles/2024-05-09/sternlicht-says-miami-is-hamstrung-by-impossible-school-access
https://www.entrepreneur.com/business-news/barbara-corcoran-says-it-is-the-best-time-to-buy-a-house/463768

Call us for personalized assistance
+1 (305) 508-0899

The 2024 Midyear Miami Housing Market Report and Forecast

Miami Housing Market: The Current State & Q3/Q4 predictions

Introduction to this Q3 and Q4 Miami Housing Market Report