South Florida’s residential market is booming, with a string of recent home sales eclipsing the $10 million mark — and beyond — as our region becomes an attractive destination for the world’s wealthiest residents and investors.
A disproportionate number of these residences are luxurious homes and condominiums selling for all cash. In fact, 50.6 percent of the sales completed in Miami during the second quarter of 2015 were all cash transactions, compared with 24 percent of home purchases in the United States overall, according to the National Association of Realtors.
With so much emphasis on high-end housing product in recent years, we’ve seen the gradual depletion of our region’s inventory of market-rate housing, leaving middle-market buyers with few options. And because buyers are willing to spend record-level sums on homes, many developers are left with little incentive to build for the middle class.
This dynamic is putting a strain on a large swath of our resident population. A recent market report by Trulia found that South Florida’s middle-class residents spend upward of 70 percent of their income on housing related costs, such as commuting and utilities.
One solution to South Florida’s affordability challenge lies in the development of single-family homes, which can be developed at a cost basis far below that of luxury condo towers. These savings can then be passed along to buyers, creating new opportunities for middle-class home ownership.
Although purchases of multimillion dollar condos are often contingent on buyers paying with large sums of cash, middle-market single family homes can often be paid for through traditional financing. This creates a lower barrier to entry for first-time home buyers and middle-income families.
At Central Parc community in Broward County’s Tamarac neighborhood, our firm is trying to fill a void in the market by building more than 250 single family homes with prices starting from the mid-$200,000s. Rather than targeting investors, we are building for end users. To date, approximately 200 of our homes have sold, and new buyers are touring the development every day — a clear sign of growing demand for well-priced, well-built single family homes located in close proximity to employment centers.
Several factors are fueling this demand for moderately priced homes. For starters, South Florida home prices are up an average of nearly 45 percent since 2012 while local wages have remained largely flat, leaving consumers with less buying power when it comes to making a purchase.
Second, financing for single-family home purchases is still readily available through traditional loan sources, requiring a smaller amount of cash up front. This has had a particularly positive impact on young professionals and first-time home buyers who have steady jobs but might lack significant cash reserves after years of renting.
Quality-of-life factors also come into play when weighing the benefits of home ownership. Many single-family home developments are situated in suburban neighborhoods where available land is plentiful, offering residents access to quality schools, parks and other community amenities.
Though there’s no silver bullet for narrowing South Florida’s affordability gap, expanding access to middle-market homes is an important part of the solution. By creating new options for home ownership among the middle class, we can diversify our region’s housing inventory and help ensure families are on sound financial footing.
Emy Soza and Alle Krever are members of the brokerage team at Central Parc, a new development in Tamarac by Central Communities, the home-building division of 13th Floor Investments.
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