Miami-Dade housing gets hotter in February. Will interest rate bumps slow the market?
Vanessa Alvarez, 48, decided last year to follow the tech trail from the West Coast to Miami after last spring immersing herself in the technology industry emerging here. She viewed Miami as the perfect location for her company Nexme that uses an app to help prospective homebuyers search for houses.
“Miami has always been the vacation destination,” Alvarez said. After her trip to South Florida, the former Amazon and Microsoft product manager and engineer said, “I thought there’s more to it than just that.”
Alvarez spent four months searching for a condominium, feeling the heat of a sizzling housing market. She lost out to higher offers on two units.
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Seeing prices rising every month, Alvarez stepped in with a $255,000 cash offer for a condo in Miami Beach, blocks from the water. She successfully closed the deal.
For buyers like Alvarez it’s not getting easier: The median sales price of single-family homes in Miami-Dade County increased to $536,000 in February from $525,000 in January, according to a report released Friday by the Miami Association of Realtors. That’s almost a $100,000 jump from a $450,000 median price a year ago.
One-fifth or 20.5% of the 1,093 homes that sold last month were cash deals, continuing the trend of a significant number of cash buyers.
In Broward County, single-family home prices rose to $519,000 last month from $500,000 in January, and $433,000 in February 2021. Cash purchases in Broward were similar at 20.6% of the 1,243 closed home transactions.
Home availability remains tight in Miami-Dade, which last month had 1.7 months of supply of single-family homes and 2.6 months of condos for sale. Broward has a 1.1 month supply of houses and 15 months of condos. Typically, in a balanced housing market there’s four to six months of inventory available for sale.
Real estate broker Anthony Askowitz thinks the single-family home prices dipping in January in the Miami market was a fluke and foresees prices continuing to inflate into fall.
“I had a client call me who is building a house and he asked me if in six months he’ll make money,” Askowitz said. “(I said that) even in six months he’ll be happy.”
Askowitz noted that while interest rates just started rising for the first time since the pandemic began in March 2020, it is too early to see if they will have an effect on homebuyer behavior. He does not expect the rate hikes anticipated this year to alter the frenetic buying habits.
The interest rate for a 30-year fixed mortgage increased to 4.47% for the week ending March 18, prompting more questions about the affordability of homes in Miami. When Hamilton Home Loans CEO Pat Sheehy began his finance career in 1982, he remembers mortgage rates at 18% and so is not concerned about current levels even with the predicted upward trajectory announced by the Federal Reserve Bank to try to quell inflation.
“If you look at the long-term history of mortgage banking, even though interest rates are going up, there will still be a strong demand for housing,” Sheehy said. “There’s a stronger relationship between household income growth and home purchases than interest rates and purchases.”
ONE Sotheby’s International Realty President Daniel De La Vega said rising interest rates will level out the high prices in the Miami-area housing market. It remains to be seen how more of the migration of tech companies like Alvarez’s will affect the regional housing market and economy later this year. He thinks housing prices in Miami are finally catching up to those of other key domestic and international destinations.
“What’s always happened traditionally in our market of Miami, is that we’re a major metropolitan city and prices were one third of (those in) Manhattan, Singapore and Monaco,” De La Vega said. “We’ve finally discovered that our prices have jumped to where we felt the prices should be.”
Meanwhile, Florida Atlantic University economist Ken H. Johnson said Miami-Dade housing prices overall are 23% higher than they should be based on historical trends.
He doesn’t expect the area’s housing market to crash like it did in the mid-2000s, despite the protracted inventory shortage due to South Florida’s appeal. Although cautious about pricing growth, and he doesn’t see much improvement that’ll alleviate the ongoing home affordability crunch that’s blocking large swaths of middle-class people from buying houses.
“Rent and home prices are separating from their long-term trends,” Johnson said. “That’s not good for affordability. I (foresee) an affordability crisis, as homes just aren’t going to be very affordable and it’s going to be a long-term problem.”
This story was originally published March 18, 2022 at 6:30 PM.
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