Regardless of where you travel today, the mention of “Miami” elicits an outpouring of positive comments. Scores of people from every corner of the globe already have a firm stake in South Florida, with many also owning a piece of our tropical paradise. It’s no wonder.
When compared to other cities of international renown, Miami’s prices look inexpensive. For example, on average, a buyer can purchase six condos in downtown Miami/Brickell for the same price of one flat in central London.
And to that point, for the second year in a row, Christie’s International Real Estate, the world’s largest luxury real estate brokerage network, has included Miami on its Top 10 list of global luxury residential markets. Other cities on the list include London, Paris, Hong Kong and New York.
This movement has drawn worldwide attention to Miami because of its cosmopolitan lifestyle. Whether seeking real estate, fashion, music, art, or any array of high-profile activities, the Miami brand is one of the most recognizable and sought after among the world’s top labels. The Christie’s Report is but one of many respected organizations that now post Miami among the globally elite.
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While Miami-Dade’s million-dollar-plus residential sales have soared to record numbers during 2014, to an average of 190 closed sales per month, the reality is that South Florida is a collection of many real estate sub-markets.
Sixty-one percent of the single-family homes and 69 percent of the condominiums in Miami-Dade County are selling for prices under $300,000.
The median price of a single-family home in Miami-Dade for the three months ending July 2014 was $251,000, compared to $162,000 for the three-month period ending July 2011 — a 55 percent increase in 3 1/2years.
The median price of a condominium in Miami-Dade surged even higher during the same 3 1/2 year period, from a 12-year low of $98,000 in January 2011 to $189,000 in July 2014, representing a gain of 93 percent.
Even though median prices today are higher than at any time in the past six years, the median price of a single-family home in Miami-Dade at the end of July 2014 was still 34 percent less than the peak median price of $382,000 in July 2007.
For the same seven-year period, July 2008 to July 2014, the median price of a Miami-Dade condo was valued 29 percent less than the peak median price of $267,000 in July 2007. Distressed property sales still account for one-third of Miami-Dade’s sales, but that percentage is continuing to decline from a high of over 60 percent in 2010.
The quickest snapshot of the health of any real estate market shows the number of months of inventory remaining to be sold. Miami-Dade’s inventory levels for all price properties have been within the industry optimum six-to-nine-month range for the past 36 months, confirmed by the healthy increase in residential values since 2011. This metric is a simple analysis that yields the number of months of remaining inventory by dividing the current number of units in inventory by the average number of current sales per month.
For the three months ending July 2014, Miami-Dade had an available supply through the Multiple Listing Service equal to 4.3 months of single-family inventory and 7.1 months of condominium inventory. During this same three-month period, the median price of a single-family home rose 10.1 percent compared to the same three-month period in 2013. The median price of a condominium rose 3.8 percent over the same period.
As to where we go from here, continued positive job creation and increasing wages are key factors to consumer confidence, an important driver for individuals deciding to buy a home. After several years of tightening mortgage credit, it’s good news that we’re now seeing an increase in the flow of new mortgages. In a fast-moving market, where cash transactions tend to be king, a pre-qualification is more important than ever.
The continued strengthening of the high-end residential market this year will be the 2014 year-end real estate story. This boutique market has little connection with traditional real estate values, being more aligned with high-end retail/consumer products, which by no coincidence are also booming in Miami. To that end, we expect continued growth within this buying group, which closed on the purchase of 1,330 properties valued in excess of $1 million each during the first seven months of 2014, for a total of $3.1 billion.
While we can be certain that our home values and our overall economy will continue to ebb and flow over time, history gives us the assurance that our long-term South Florida future is set in a positive direction.
Ron Shuffield is CEO of EWM Realty International, a Berkshire Hathaway affiliate.