A cooling luxury market isn’t helping middle-class homebuyers in South Florida, a new study from real estate website Zillow shows.
Prices for homes in the middle and bottom tier of the market are way up. That’s because local developers have focused on building pricey homes for foreign buyers at the expense of less-profitable starter homes. The glut of new luxury construction coupled with low wages has made Miami one of the least affordable housing markets in the country.
Zillow found that values for homes in the middle tier of the market (between $175,200 and $337,750) grew 10.3 percent annually in May. Homes in the bottom tier ($175,200 and below) grew 12.5 percent.
In contrast, luxury values ($337,750 and above) were up 6.1 percent year-over-year, still healthy growth but well below the double-digit gains of previous years.
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10.3 percentAnnual value growth in South Florida homes priced between $175,200 and $337,750
The study looked at Miami-Dade, Broward and Palm Beach counties. The median home value in South Florida is $234,300, according to Zillow.
Here’s what’s changed: A strong dollar has eroded the purchasing power of Latin American and European buyers who drove the luxury boom. That’s bad news for Miami’s economy in general.
And the slowdown isn’t helping homebuyers looking for a deal. Competition for entry-level homes remains high.
Sales for homes priced between $200,000 and $600,000 grew 5.9 percent in Miami-Dade last month, according to the Miami Association of Realtors. Meanwhile the rest of the market is struggling: Overall, home sales fell 10.4 percent during the same time.
It’s a tale of two housing markets, said real estate analyst Jack McCabe.
“The problem is most of the developers can’t figure out how to pencil out a profit [on starter homes] because of high land, labor and construction costs,” McCabe said.
Responding to the changing market, some developers have switched gears: New rental buildings catering to working professionals are set to open across downtown Miami.