Miami Real Estate Market Predictions & Trends In 2021

by Than Merrill | @ThanMerrill
Published on Thu, Oct 7 2021

Miami Real Estate Market Predictions & Trends:


The Miami real estate market is nothing short of impressive. Located on the Southeast tip of the Florida peninsula, The Magic City has developed a reputation for pristine white-sand beaches, great weather, even better food, and eclectic culture that can’t be found anywhere else. However, it is worth noting that such regional offerings have given way to one of the hottest real estate markets in the country.

The Miami housing market is the primary beneficiary of a highly desirable location for commercial and residential aspirations. Due, in large part, to a strengthening economy and growing confidence in the housing sector, local inventory has become a commodity for anyone with their finger on the pulse of real estate investing. There are many reasons for buyers, sellers, and investors to be interested in the Florida city, which begs the question: Is Miami real estate a good investment? Better yet, is it a good time to buy real estate in Miami?

Foreign and domestic real estate investors, in particular, have found that Florida’s most famous city can serve as a lucrative backdrop for savvy entrepreneurs. However, it’s not enough to invest in Miami real estate without a plan; you need to listen to what the market is saying in the wake of the pandemic and translate each fundamental indicator into a viable action plan.

Let’s take a look at some of the many reasons someone might want to invest in Miami real estate and the various exit strategies that prove most useful to their efforts.

Miami Real Estate Market Overview 2021

  • Median Home Value: $423,793

  • Median List Price: $466,633 (+16.2% year over year)

  • 1-Year Appreciation Rate: 13.9%

  • Median Home Value (1-Year Forecast): 14.5%

  • Weeks Of Supply (Metro): 20.1 (-7.1 year over year)

  • New Listings (Metro): 958 (+2.6% year over year)

  • Active Listings (Metro): 12,395 (-27.2% year over year)

  • Homes Sold (Metro): 778 (+28.8% year over year)

  • Median Days On Market (Metro): 53.8 (-21.3 year over year)

  • Median Rent: $2,186 (+13.7% year over year)

  • Price-To-Rent Ratio: 16.15

  • Rental Vacancy Rate: 6.8% (+2.0% year over year)

  • Delinquency Rate: 4.8% (-4.8% year over year)

  • Unemployment Rate: 5.6% (latest estimate by the Bureau Of Labor Statistics)

  • Miami-Dade County Population: 2,716,940 (latest estimate by the U.S. Census Bureau)

  • Miami-Dade County Median Household Income: $51,347 (latest estimate by the U.S. Census Bureau)

Miami housing market trends

Miami Real Estate Market Predictions 2021 – 2022

Miami real estate news has kept pace with the national industry. However, in light of the Coronavirus, markets across the country may start to act independently. While it is too early to tell exactly what real estate in Miami will look like for the foreseeable future, it is possible to interpret the pandemic’s impact in a meaningful way. Here is a look at the Miami real estate market trends which are most likely going to have a lasting impact:

  • Buying a house in Miami will get more expensive: The median house price in Miami has increased nearly fourteen percent over the last year. The increase was directly correlated to more competition, less inventory, lower interest rates and bigger savings accounts. That said, there’s nothing to suggest the same indicators won’t drive prices higher over the next 12 months. Inventory isn’t expected to ease anytime soon and more people will want to buy before interest rates jump, which could lead to an additional 14.5% increase in local home values.

  • Miami foreclosures will increase: Foreclosures in Miami are lower at this point of the year than they were last year. If for nothing else, government aid and moratoriums prevented lenders from starting the foreclosure process on delinquent owners. However, the moratoriums are set to expire and owners will be expected to come current on payments. A select few will keep up with their obligations, but a large majority will most likely fall into foreclosure. It’s too soon to tell how many will remain delinquent, but an influx of foreclosures is expected.

  • Rental properties will be the most viable investment strategy: Home price appreciation has detracted from profit margins, effectively making rehabs less attractive to investors. However, the same indicators that lowered profit margins on flips made rental properties more attractive. In particular, rents have increased at nearly twice the rate of home values in Miami. Perhaps even more importantly, rents should continue to increase as long as home prices do. With more people being relegated to the renter pool, landlords stand to benefit immensely.

Miami Housing Market Trends 2021

The most prominent Miami housing market trends directly reflect national trends in the wake of the pandemic. In particular, the market in Miami has become prohibitively expensive since the onset of COVID-19. That said, real estate in Miami isn’t just expensive; it’s very expensive.

According to the October 2021 Housing Affordability Index report by RealtyHop, the Miami housing market is the second most expensive market in the country. “Miami overtook L.A. as the second most expensive housing market in the nation, even though the price decreased slightly since our last report. A household in Miami should expect to pay $2,653 per month toward homeownership costs, or roughly 81.55% of median incomes,” said the report.

In addition to the same indicators that increased prices everywhere else, Miami’s desirable location attracted everyone who no longer needed to live within close proximity to work due to COVID-19. Everyone from snowbirds looking to escape the frigid temperatures in the north to tech companies looking for better tax shelters looked to call Miami home. Unfortunately, however, Miami is in no position to keep up with the added demand. As a result, prices increased dramatically, and should continue to do so for the foreseeable future.


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Miami-Dade County Housing Market Trends

Miami-Dade County housing market trends can be broken down as follows:

  • Sale Price: $410,000 (+15.5% year over year)

  • Sale $/Sq. Ft.: $291 (+24.4% year over year)

  • Total Homes Sold: 2,600

  • Under List Price: 2.8%

  • Down Payment: 14.9%

  • Days On Market: 73

Broward County Housing Market Trends

Broward County housing market trends can be broken down as follows:

  • Sale Price: $350,000 (+14.8% year over year)

  • Sale $/Sq. Ft.: $237 (+19.1% year over year)

  • Total Homes Sold: 2,953

  • Under List Price: 1.8%

  • Down Payment: 12.7%

  • Days On Market: 52

Palm-Beach County Housing Market Trends

Palm-Beach County housing market trends can be broken down as follows:

  • Sale Price: $367,000 (+14.7% year over year)

  • Sale $/Sq. Ft.: $228 (+21.3% year over year)

  • Total Homes Sold: 2,679

  • Under List Price: N/A

  • Down Payment: N/A

  • Days On Market: 47

Miami Foreclosure Statistics 2021

According to ATTOM Data Solutions’ Midyear 2021 U.S. Foreclosure Market Report, “a total of 65,082 U.S. properties with foreclosure filings — default notices, scheduled auctions or bank repossessions — in the first six months of 2021. That figure is down 61 percent from the same time period a year ago and down 78 percent from the same time period two years ago.”

The number of foreclosure filings has decreased over the last year, and there’s no doubt that the entire Florida real estate market contributed to the drop in some way. Foreclosure filings in Florida are down nearly fifty percent from the first half of last year to the first half of this year. Despite the decrease, however, Florida still has one of the highest foreclosure rates in the country.

“States with the highest foreclosure rates in the first half of 2021 were Delaware (0.10 percent of housing units with a foreclosure filing); Illinois (0.09 percent); Florida (0.08 percent); Ohio (0.08 percent); and Indiana (0.08 percent),” said the latest Foreclosure Market Report by ATTOM Data Solutions.

As one of the largest cities in Florida, Miami has likely played a significant role in the state’s poor ranking. What’s more, foreclosures are expected to rise across the country, and the Miami real estate market won’t be an exception.

“The foreclosure moratorium on government-backed loans has virtually stopped foreclosure activity over the past year,” said Rick Sharga, executive vice president of RealtyTrac, an ATTOM Data Solutions company. “But mortgage servicers have been able to begin foreclosure actions on vacant and abandoned properties, which benefits neighborhoods and communities. So it’s likely that these foreclosures are causing the slight uptick we’ve seen over the past few months.”

Miami foreclosures will increase; it’s not a matter of if, but rather when. The expiration of government assistance will all but guarantee an increase in delinquencies. As a result, real estate investors in Miami need to start lining up financing now. Doing so will simultaneously enable them to help distressed homeowners and secure deals.

Miami Median House Prices 2021

The median home value in Miami is $423,793; that’s a significant departure from where it was approximately 10 years ago. In the fourth quarter of 2011, when the market was clawing its way out of the last recession, the median home value in Miami was somewhere in the neighborhood of $201,000. Since then, house prices have increased—on average—by 110.8%. However, it is worth noting that new indicators introduced by the pandemic contributed to some of the biggest gains in that time.

Over the last 12 months, the Miami median house price increased 13.9%. The last year of appreciation was largely the result of more demand, less inventory, and lower interest rates. If for nothing else, the Fed’s decision to lower borrowing costs served as a catalyst for many http://getzonedup.com homebuyers who happened to have larger savings accounts from government stimuli and fewer reasons to spend money over the last year. It didn’t take long, however, for the demand to turn into competition. With only 20 weeks of supply, Miami is primarily a seller’s market, and homeowners have increased their prices accordingly.

Moving forward, the lack of available listings will only continue to increase home values in Miami, to the tune of about 14.5% over the next 12 months. Therefore, today’s relatively high home values may represent a bargain in the Miami housing market.

Miami Real Estate Investing 2021

According to ATTOM Data Solutions’ second-quarter 2021 U.S. Home Flipping Report, “79,733 single-family homes and condominiums in the United States were flipped in the second quarter.”

Year to date, flips are up, but the country has seen a decline year over year. “The second quarter home flipping rate was up from 3.5 percent, or one in every 29 home sales in the nation, during the first quarter of 2021. But it was still down from 6.8 percent, or one in 15 sales, in the second quarter of last year and remained below levels seen throughout most of the past decade,” said the Home Flipping Report.

The year-over-year decline is most likely attributed to increasing home values and declining profit margins. This unique convergence has resulted in a lower return on investment for real estate entrepreneurs. In the second quarter of this year, in fact, the typical gross-flipping profit topped out at $67,000—or a mere 33.5% return on investment compared to the original acquisition price.

According to the Home Flipping Report, “The national gross-flipping ROI was down from 37.2 percent in the first quarter of 2021, and from 40.6 percent a year earlier, to its lowest point since the first quarter of 2011, when the housing market had yet to start recovering from a price slump brought on by the Great Recession in the late 2000s.”

Not unlike the rest of the country, the Miami real estate market appears to have reached a tipping point. Prices are appreciating at such a historical rate that gross flipping profits are growing slim. The last year saw prices grow at an average rate of 13.9%; that’s on top of the nearly ten years of appreciation that took place before 2020. Simply put, price increases have been eating into profit margins in Miami for quite some time, and investors are starting to take notice.

Prices are growing prohibitively expensive, which begs the question: Is Miami a good place to buy a property? Better yet, is it worth investing in Miami real estate? In a word: yes. While prices have increased exponentially in the wake of the pandemic, new economic indicators have brought about a more promising exit strategy: building a rental property portfolio.

There are three four, in particular, the Miami real estate investing community will want to consider buying rental properties in today’s market:

  • Lower borrowing costs

  • Lower risk of vacancies

  • Cash flow potential

  • Historically high home values

The demand for rental properties will increase due to the city’s 16.15 price-to-rent ratio. At its current level, the city’s price-to-rent ratio already suggests renting is more affordable than owning. It is only safe to assume home prices will drive more people towards renting. Subsequently, even prospective buyers will be relegated to the renter pool because of Miami’s insufficient inventory levels. The resulting demand will enable landlords to increase rental rates and mitigate the risk of vacancy simultaneously.

If local demand isn’t enough to convince the Miami real estate investing community to start building a rental property portfolio, today’s interest rates should “move the needle.” According to Freddie Mac, the average commitment rate on a 30-year fixed-rate mortgage dropped as low as 2.90% in September. While rates are up slightly year to date, they still represent a great buying opportunity. For starters, lower borrowing costs will help justify today’s higher home values. Additionally, lower mortgage rates will help Miami real estate investors increase cash flow from properties placed in operation. At the very least, the less rental property owners are obligated to spend on their mortgages each month, the more they can pocket from rent checks.

Investors are lucky to have several viable exit strategies at their disposal in the Miami real estate market. Still, none appear more attractive than building a proper rental property portfolio in the wake of the pandemic. Too many important market indicators are pointing towards becoming a buy-and-hold investor to ignore.

Summary

The Miami real estate market has been firing on all cylinders for the better part of a decade. Even amid a pandemic, real estate in Miami is nothing short of a hot commodity. Rental properties, in particular, appear to have several tailwinds supporting real estate investors. Low borrowing costs, increasing demand, and a lack of inventory all suggest that long-term buy-and-hold strategies are now just as attractive as their short-term counterparts. In fact, local investors may find that the pandemic has created a market that is more favorable to landlords. As a result, it looks as if the Coronavirus actually created a unique window of opportunity for passive income investors.

Have you thought about investing in the Miami real estate market? If so, what are you waiting for? We would love to know your thoughts on real estate in Miami in the comments below:


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Sources

https://www.zillow.com/miami-fl/home-values/
https://www.zillow.com/research/data/
http://www.freddiemac.com/pmms/pmms30.html
https://www.apartmentlist.com/research/category/data-rent-estimates
https://www.realtyhop.com/blog/housing-affordability-index-october-2021/
https://www.redfin.com/news/data-center/
https://www.redfin.com/county/479/FL/Miami-Dade-County/housing-market#trends
https://www.redfin.com/county/442/FL/Broward-County/housing-market
https://www.redfin.com/county/486/FL/Palm-Beach-County/housing-market#trends
https://theenergylogic.com/housing-tides/housing-tides-interface/
https://www.bls.gov/regions/southeast/fl_miami_msa.htm
https://www.census.gov/quickfacts/fact/table/miamidadecountyflorida/POP060210
https://www.attomdata.com/news/market-trends/foreclosures/attom-mid-year-2021-u-s-foreclosure-market-report/
https://www.attomdata.com/news/market-trends/flipping/attom-q2-2021-u-s-home-flipping-report/

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