Miami’s million-dollar communities dipped in home values in 2019. Here’s why
The wealthiest neighborhoods in the Miami metro area remain on a list of U.S. cities with average home prices over $1 million while others elsewhere landed on the cutting floor.
But with a dip in home values, could Miami be next on the chopping block?
Seven areas in South Florida have an average home value over $1 million — five in Miami-Dade and two in Palm Beach County. The Miami-Dade areas — Indian Creek, Fisher Island, Bal Harbour, Key Biscayne and Pinecrest — held their ground on the list of million-dollar U.S. cities, according to the 2020 Zillow annual report.
Home values averaged $14.32 million in Indian Creek, $3.01 million in Fisher Island, $1.23 million in Bal Harbour, $1.09 million in Key Biscayne and $1.02 million in Pinecrest in 2019.
The study analyzed home values from 2018 to 2019 based on the Zillow Home Value Index, or the median valuation the company gives based on a geographic area. California’s San Jose, San Quentin and Lexington Hills and Hawaii’s Laie fell off the list after home values dipped below $1 million for the first time in four years.
“What stands out to me is that San Jose, San Quentin, Lexington Hills and Laie are places with income taxes,” said Danny Hertzberg, a sales associate for the Jills Zeder Group. “That speaks to the trend of people moving from high tax to low tax areas.”
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Although cities in Miami remained on the list, values declined from 2018 to 2019 for those in Miami-Dade County. Values dipped by 11% in Indian Creek, 8.3% in Fisher Island, 5.3% in Bal Harbour, 5.9% in Key Biscayne and 0.4% in Pinecrest.
The decline is due to sales prices in the $1 million to $3 million price point range softening with a decline of foreign buyers and the growth of domestic buyers, Hertzberg said. Where buyers from South America, Central America and Europe once made up 45% to 50% of the buyer pool five years ago in places like Key Biscayne they now represent about 25% of the buyer pool.
“That’s why you see this pullback in appreciation,” Hertzberg said. ”U.S. buyers moving here for tax reasons are buying $10 million-and-plus homes.”
The amount of supply and type of supply also influence appreciation, said Douglas Elliman Florida Brokerage CEO Jay Phillip Parker.
“If there is more supply, there is a slowdown in sales,” Parker said. “Pressure in pricing could be impacted by sales volume.”
The type of supply in the market also influences sales activity, appreciation and average home values, said Parker. “There are different product types,” Parker said. “Take Fisher Island, one apartment might be brand new and another will need renovations.”
Sales thus far in 2020 are strong, according to Hertzberg and Parker, and both predict a steadying of prices, if not an increase.
One aspect not influencing home values yet? Climate change, Hertzberg and Parker said.
When it comes to the luxury market, said Matthew Eby, executive director of the Brooklyn-based research and technology nonprofit First Street Foundation, “We saw that people with luxury homes on the waterfront see tidal flooding as a nuisance that they can afford to deal with.”
But the attitude of buyers will likely change over time, Eby said, as climate change is a growing concern for the real estate industry.
First Street Foundation studied home value stagnation from 2005 to 2016. It found that homes in areas with increasing tidal flooding — the highest annual tide — appreciated at a slower rate than those not impacted by tidal flooding. In fact, the county lost a total of $465 million in potential real-estate market value in that time.
This story was originally published January 21, 2020 at 7:00 AM.
