The Miami real estate market has been in a state of flux for several years. The last quarter of 2022 saw sales declining and housing inventory increasing as a result of interest rate hikes and more people being priced out of the homebuying arena. Whether you’re moving to Miami for the first time or you’re a Miami resident ready to go from tenant to homeowner, it’s a good idea to take a hard look at the Miami real estate market as it unfolds so you can make the right moves in 2023 and beyond.
How Active Is the Miami Real Estate Market Right Now?
The Miami real estate market, similar to other major metro markets, is seeing a slow down in market activity and is inching closer to a more balanced market as inventory levels increase steadily.
In January 2022, Miami had only 1.8 months of single family home inventory. As of November 2022, Miami has 4 months of single family home inventory, a 122% increase.
Traditionally, a balanced market is characterized as having 5.5 months supply of housing inventory. Below 5.5 is considered a seller's market and above 5.5 is considered a buyer's market. Which means Miami's single family home market is still considered a seller's market at this time.
The Miami market is also seeing home transactions moving at a slower pace compared to earlier this year. Median time to contract increased from 15 days to 31 days from June 2022 to November 2022.
At the time of writing, December stats have yet to be released but we anticipate similar trends for December as well, especially when you add in the seasonal slowdown brought on by the holidays.
A Look at Recent Selling Trends in Miami
According to Miami Realtors Association, closed sales for November saw a dramatic year over year decrease of 38%, going from 1,168 to 718 closed sales. This also fell below pre-pandemic levels, considering that November 2019 saw closer to 972 closed sales.
In addition, the median home sale price for Miami single-family homes also has declined from a previous high of $570,000 in June 2022 to $550,000 as of November 2022. Although year over year, we saw an increase of 9.4%.
It appears that November market activity was impacted significantly by the Federal Reserves decision to raise interest rates towards the end of 2022, resulting in mortgages rates reaching a peak of 7.1% in early November.
At the time of writing, interest rates have decreased slightly. However, the Feds have indicated that another rate increase may be on the horizon for 2023.
It's difficult to say with certainty how this will impact the Miami real estate market as a whole.
If rates increase, mortgages will continue to be unaffordable for many home buyers and force them to the sidelines. Which could result in real estate sales activity to continue on this declining trend.
However, Miami is known to be a very resilient market and continues to have some insulation from national trends due to many factors such as steady interest from foreign buyers and high net-worth professionals.
Foreign Investments in Miami
South Florida real estate has always been a popular destination for foreign investment, and the past few years we've seen a surge in interest from foreign buyers from over 54 countries.
Many of the foreign buyers are coming from Latin American countries that are experiencing a change in political climate and not only want to park their money in U.S. real estate, but have plans to move here permanently.
For example, Colombian investors have beenscooping up Miami property in recent months due to a government change with the election of Gustavo Petro as Colombia's president. The recent Colombian investment surge is just one instance of foreign cash flooding this Miami Metro real estate market.
It's important to note that a lot of the interest from foreign buyers is directed towards the condo market. According to recent reports, 58% of foreign purchases in Miami last year were for condos.
In 2023, we may continue to see an increase in foreign investment in Miami real estate. Many foreign buyers are cash buyers, and may have the upper hand in our current high rate environment, as more and more buyers are being priced out due to traditional mortgages being too expensive to get approved for.
In 2023, the luxury real estate market will likely continue to grow in both importance and potential profitability, due to migration of high-net-worth individuals and corporate relocations to South Florida.
In 2022 alone, over 57 companies relocated or expanded into Miami, with 150 companies following suit within the next few years. According to the Miami-Dade Beacon Council, Miami-Dade county is expected to see over $800 million in recurring economic gains and over 8,000 jobs created with an average salary of $100k.
In 2023, we may see sales for homes under $1 million slow down as both buyers and sellers in this market tend to be more rate sensitive. However, the luxury market of homes over $1 million may pick up more steam considering buyers in this market tend to close cash.
How Are Miami Neighborhoods Ranked?
Miami’s neighborhoods are typically ranked highly in terms of atmosphere, quality of life, and recently have seen more job growth opportunities and investment in public transportation. Of course, they all benefit from the sunny Miami weather throughout the year as well.
What Are the Top Neighborhoods in Miami?
Many of Miami’s most popular neighborhoods have seen steady increases in home values, and are known for their cultural diversity, waterfront views, and proximity to beaches and world-renowned shopping and dining. These neighborhoods include:
Miami-Dade specifically is well known for both their excellent private and public schools. Miami has over 137 private schools serving close to 40,000 students from Preschool to Highschool.
Dade County also has some of the top public schools, including School for Advanced Studies, which is ranked one of the top 5 best public schools in the country, with a 100% graduation rate.
How Safe Is Miami From Extreme Weather?
From June through November, Miami is susceptible to the Atlantic hurricane season. Although recent government projects have attempted to mitigate the potential damage from hurricanes and floods, climate change and seasonal hurricane threats continue to bemajor hazards for new and current residents alike.
Whether this will affect the 2023 housing market remains to be seen — for now, it seems as though most investors and residents are continuing to buy property and adding more value to homes that have weather resistant improvements like impact windows and new roofing.
How Is Miami’s Public Transportation?
While Miami's public transportation has never been particularly newsworthy, that's changing with recent immigration trends. For example, Miami's urban core is in the process of potential redevelopment. Furthermore, a free Metromover and Brightline high-speed rail system is set to beexpanded to stretch from Miami up to Tampa and Orlando.
In 2023 and in future years, Miami’s public transportation could become even better, making it a proper hub for young professionals who plan to work in Downtown Miami, but live outside of Miami in more affordable areas like Broward County.
The Cost of Living in Miami: How High Is It?
According to certain sources, Miami has a relativelyhigh cost of living at 122.4, compared to an average of 100 throughout the USA and an average cost of living of 103.1 throughout the rest of Florida.
Will the Cost of Living Increase in 2023?
Given the inflation affecting the worldwide economy, it's likely that the cost of living will continue to increase in the foreseeable future.
We are expecting an increase in construction in 2023, which could further aid the need for more affordable housing in Miami. However, we're also expecting more people moving to Miami within the next few years, which could potentially offset the county's efforts to increase new build inventory.
Homeowners vs. Renters in Miami
Right now, many people rent in Miami as opposed to making a down payment on a property. Rental property prices have increased in Miami as more young professionals and early retirees seek the Miami condo lifestyle.
Fortunately there is more condo inventory coming to Miami hot spots like Brickell, Miami Beach, and Edgewater in the next few years, which will help cater to demand for condos from both buyers and renters.
How Does the Cost of Living in Miami Compare to Other Florida Cities?
Compared to other Florida cities, Miami is expensive. Again, its cost of living is 122.4 compared to the overall average cost of living throughout Florida, which is 103.1. Groceries in Miami cost more compared to the rest of Florida, as does healthcare, housing, and transportation.
However, Miami does have a lower average utility cost compared to other Florida cities, hovering at 95.5 compared to 101.3.
Nationwide, we're seeing housing markets come down from their COVID-19 pandemic-fueled growth. The Miami real estate market, while very resilient, is also starting to experience a cooldown as well.
The good news is that single family home inventory in Miami is increasing and showing signs of becoming a more balanced market. This will allow more buyers to take their time and game plan with their realtor and lender to get ready for homeownership in the near future.
From an investor standpoint, making a cash offer could give you the negotiating power you need to secure the right real estate for the right price. You may see more competition in the luxury condo space, where many high-net worth individuals and foreign investors are showing increased activity.
For those that are seeking creative financing solutions that can help you close as quickly as cash, consider connecting with a Vaster loan specialist. We are experts in the Miami real estate market and offer custom structured financing for luxury residential investors. Contact us today to learn more.