Is it really too expensive to buy a home in South Florida?
It depends on what you’re looking for — and where you’re coming from.
For locals, especially those without advanced degrees, soaring home prices and stagnant incomes make finding your dream home a stretch. It’s been easier for foreign buyers who are wealthier and have benefited from a weak dollar. Foreign buyers also know that prices in Miami compare favorably to other major cities.
Three new factors are working in the favor of local home buyers: The dollar is strong, the boom in home prices is slowing down, and incomes are finally growing. But inventory remains alarmingly tight for the sweet spot of South Florida’s market (between $250,000 and $600,000), where most sales happen.
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If you can find a good deal, take it, brokers say.
Like many fast-growing regions, the gap in South Florida between how much people make and how much an average house costs is daunting. In Miami-Dade County, the median household makes $43,000 per year. In Broward County, it’s $52,000.
Using a back-of-the-envelope calculation favored by housing experts — that you should spend no more than 3 1/2 times your income on housing — a typical Miami-Dade buyer should spend roughly $150,000 on a home. A Broward home buyer should spend $182,000.
A look at the median
How does that compare to the median sales price? It’s not pretty.
In Miami-Dade, existing single-family homes sold for $305,000 and condos for $210,000 in December. In Broward, single-family homes went for $320,000 and condos for $150,000.
That prices out many middle-class families.
The math gets better for a typical two-income, college-educated couple in Broward but still leaves them coming up short in Miami-Dade. That couple’s median earnings qualify them for a $288,000 dollar home in Miami-Dade and for a $320,000 home in Broward.
Most new construction is built at the luxury level for out-of-town buyers. And more people keep moving to South Florida — Miami-Dade, Broward and Palm Beach counties added 500,000 residents over the last five years — meaning greater competition for existing homes.
A study by Bloomberg ranked Miami as the eighth hardest major metro area in the United States for first-time home buyers because of the gap between incomes and home prices. The other cities in the top 10 were all in California, except for Honolulu.
“We had a sales meeting, and I said: ‘Put your hand up if you think the middle of the market is going to be less active next year,’ ” said Mike Pappas, president and CEO of Keyes Real Estate. “No one did.”
Even as the number of overall existing home sales falls in South Florida, the middle of Miami’s residential real estate market is booming.
In Miami-Dade, the number of sales for homes priced between $300,000 and $600,000 soared 27 percent year-over-year in December, according to the Miami Association of Realtors. Inventory is falling as high land costs restrict the ability of profit-conscious developers to build affordable product.
The number of listings in that mid-market price range has dropped nearly 20 percent over the past two years, according to Keyes. Buyers are snapping those homes up at a fast pace: Mid-market homes are staying on the market for 57 days, compared to 79 days in 2014.
There are now only 4.6 months of supply available for those homes, putting the mid-market firmly in seller’s territory. (A healthy market generally has between six and nine months of supply.)
The luxury market is going the other way, especially for condos.
In mainland Miami, there are enough luxury condos on the market to last an eye-popping 53 months, according to a fourth-quarter report from Douglas Elliman and Miller Samuel. Condos are spending 127 days on the market, compared to 56 last year.
Inventory and time on the market are also growing for single-family homes, although not to the same extent.
“Sellers have realized they have to lower their asking prices,” said Ron Shuffield, president and CEO of EWM Realty International.
The big problem for the luxury market is a strong dollar pricing out foreign buyers. For Argentineans, buying a condo in Miami became 24 percent more expensive over the last year because of currency fluctuations, EWM found. For Venezuelans, Miami condos are now 58 percent more expensive.
But compared to other global centers, Miami remains a good deal, especially with a growing arts, music and fine-dining scene.
In South Beach, an average 1,300-square-foot condo costs roughly $1.1 million, according to property analysis firm Gridics. In Brickell, that condo would go for about $545,000, Gridics found.
A similar apartment in some of the world’s most desirable cities far exceeds that price. According to Global Property Guide, an average 1,300-square-foot apartment in a prime downtown neighborhood costs $4.1 million in London, $3.1 million in Hong Kong, $2.2 million in New York and $1.9 million in Moscow.
“New Yorkers see this as a bargain,” said Alan Kleber, managing director of commercial real estate firm JLL. “And you’re on the water.”