Miami real estate market overvalued nearly 20%, economist says
Coronavirus hasn't stopped upward market trend in South Florida
Coldwell Banker CEO and President Ryan Gorman says the real estate market is strong, especially outside of the urban core, and has returned much more quickly than many had anticipated.
Buyers looking for a home in South Florida may need to be wary as prices are inflated to their highest levels in eight years.
Homes values in Miami-Dade County are 19.2 percent higher than their long-term pricing trends, according to Ken H. Johnson, an economist at Florida Atlantic University’s College of Business. Similarly, home values in Palm Beach County were 18.7 percent overpriced and Broward County homes were 17.4 percent overpriced, Johnson found in an analysis of Federal Housing Finance Agency data.
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It’s “the strangest housing market in 40-plus years,” Johnson said in a statement.
As of May, home prices in Miami had appreciated for 102 consecutive months, according to the Miami Association of Realtors. The median price of a single-family home in Miami-Dade County was up 4.4 percent year over year, and up 0.7 percent in Broward County.
“Normally, a health crisis of this magnitude would introduce all kinds of uncertainty, which is bad for prices,” he said. “So far, the market is holding up, but consumers should be careful. Strange things happen at the extremes of a market cycle.”
Beach goers walk along the shore on Miami Beach, Florida's famed South Beach, Tuesday, July 7, 2020. (AP Photo/Wilfredo Lee)
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Miami real estate experts have told FOX Business that the market there has been boosted by wealthy people fleeing high taxes in other states. And despite the coronavirus pandemic – which has sickened more than 301,000 people and killed more than 4,500 in Florida – the market has continued upward.
Population growth in the region appears to have continued during the pandemic, according to Johnson’s analysis.
Still, the South Florida real estate market may remain strong. While homes were overvalued by nearly 20 percent in the counties Johnson highlighted, local markets were up more than 60 percent leading into the 2006-2011 housing crash, he said.
This waterfront estate in Miami Beach sold for $14.2 million earlier this year. (Chad Carroll/Douglas Elliman)
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The market is also benefiting from “stronger incomes, low interest rates and sound credit” compared to the crash, Johnson told the Miami Herald.
“Government stimulus is causing mortgage rates to stay at record lows,” he told the Herald.
The time it takes to develop and distribute a COVID-19 vaccine could end up playing a role. But as long as mortgage rates remain low, Johnson said “the housing outlook is good.”
“However, without an effective way of dealing with COVID-19 in the near term or if mortgage rates rise, the local housing market could be in for a difficult stretch,” he said in the press release. “This is a time for professional, risk-taking investors. Most others would be best served to sit this one out on the sidelines.”