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South Florida housing market barrels toward unaffordability

Video: South Beach apartments sell for record-breaking $59 million

Fifteen working-class apartment buildings in South Beach just sold for $59 million. The new landlord plans to renovate the units and raise the rent by as much as 50 percent -- that means many tenants will be forced out.
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Fifteen working-class apartment buildings in South Beach just sold for $59 million. The new landlord plans to renovate the units and raise the rent by as much as 50 percent -- that means many tenants will be forced out.

The South Florida housing market is barreling toward an affordability crunch, a report published Thursday shows.

Despite homes being more affordable during 2016’s first quarter, which runs from Jan. 1 to March 31, compared to levels dating back to 2005, median home prices continue to outpace wage growth, according to a home affordability index crafted by RealtyTrac, a service that aggregates national housing data.

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In Miami-Dade, median home prices in 2016 jumped 9 percent year over year, while wages have grown by a mere 4 percent.

In Broward, median home prices rose even greater, 11 percent higher in 2016 than the previous year, and wages rose a paltry 3 percent.

“While [South Florida] markets are still affordable by their own historic standards, they’re headed in a direction of becoming not affordable,” said RealtyTrac senior vice president Daren Blomquist.

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The index, which looked at 456 counties across the United States, measures affordability based on the percentage of average wages needed to make monthly house payments on a median-priced home with a 30-year fixed rate mortgage and a 3 percent down payment, including property taxes, home insurance and mortgage insurance. The 3 percent down payment represents a national average for first-time homebuyers.

By that metric, Miami-Dade earned a score of 111, while Broward scored 116. These are well above the index’s baseline of 100. (Scores below 100 indicate reduced affordability relative to “historic normal levels.”) By comparison, New York County, in Manhattan, scored 89. Other cities with scores indicating decreased affordability include San Francisco, Denver and Brooklyn.

Unfortunately, South Florida’s apparent affordability is artificial.

“It’s mostly because of interest rates coming down. That has helped somewhat mitigate the affordability crunch,” said RealtyTrac senior vice president Daren Blomquist. “But it’s not going to be a long-term solution.”

If the trend continues, the American dream of owning a home will be inaccessible in South Florida, said Ali Bustamante, economics professor with Florida International University’s Center for Labor Research Studies.

“It’s a vicious cycle for would-be buyers,” said Bustamante. “They’re going to have to have a lot more time of savings and renting before being able to jump into the real estate market than they would have in the past ... and the longer they sit out of the market, the higher the real estate prices will grow. So it’s really a game of catch-up.”

According to the index, 9 percent of housing markets across the U.S. analyzed for the report were less affordable than their historic normal levels, a 2 percent increase from 2015.

Blomquist pointed out that the index is not meant to compare affordability across counties.

“Though the raw percentage is good to compare different places, what the index is specifically designed to say is, ‘Is this market affordable by its own historic standards?’” he explained.

By its own historic standards, Blomquist said, the situation in South Florida is “bleak.”

Follow Debora Lima on Twitter @dtdlima

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