2019 Miami Real Estate Forecast

  • Gary Mitchell
  • 01/3/19

Housing

Real estate appreciation in Miami has been tracking above average for the last ten years, according to neighborhoodscout.com data. The cumulative real estate appreciation rate in Miami over the ten years has been +22.64% which ranks in the top 30% nationwide. This equates to an annual average Miami house appreciation rate of +2.06%. Appreciation rates are so strong in Miami that despite a nationwide downturn in the housing market, Miami real estate has continued to appreciate faster than most communities. Looking at just the latest twelve months, Miami appreciation rates continue to be some of the highest in America, at +7.56%, which is higher than appreciation rates in 82.79% of the cities and towns in the nation.

In Miami-Dade the housing affordability crisis is getting worse. According to the Miami Association of Realtors’ June 2018 report, median single-family home prices increased from $335,000 to $355,000 year-over-year; it was the 78th consecutive month of growth. Existing condo median prices rose 2.1 percent, from $235,000 to $240,000. For renters, Miami’s greater downtown area is the place to be.

Brickell, Downtown and Midtown are some of the top three hottest areas in Miami right now for renters. For buyers, the top three hottest areas are Coral Gables, Miami Beach and Coconut Grove. Budget-conscious home buyers should consider Homestead, Miami Shores and Kendall. Investors will want to pay attention to the Design District. Miami Beach remains popular but watch out for inflated prices. And traffic has become one of the key factors when deciding where to live.

For the fourth year in a row, Miami Beach was once again named the most overvalued neighborhood, with a median price per square foot price of $520, according to Zillow. Brickell clocked in second at $497 per square foot, while the luxury enclaves of Sunny Isles Beach ($554) and Key Biscayne ($753) tied for third. Homestead, where the median square foot price is $140, was deemed the most undervalued neighborhood. Miami Shores ($338) came in second, because its price is lower other areas with comparable housing stock and quality of schools, such as Pinecrest and Coral Gables. North Miami Beach ($237), Little Havana ($254) and Kendall ($226) tied for third. For more details you can read this report published in the Miami Herald.

Rentals

Miami Florida monthly gross residential rent in Miami according to Depth of Numbers The median gross rent in Miami was $1,316 in 2017 which shows a +3.79% increase.  The overall median gross rent in the US was +1.61%.  Median gross rent in Miami is at the highest level since the first statistics published in 2005.

Miami rental vacancy rate as a fraction of available rentals was 7.87% according to Census ACS data.  The data show a stable increase of +0.85% increase from 2017.

The percentage of Miami households that are occupied by renters is 40.54% which shows a 3-year change of +0.09%. Compared to the U.S. 3-year change of -0.77%.

Retail

THE MIAMI ECONOMY IS STABILIZING, according to TEN-X Local employment is at an all-time peak, and growth picked up to +2% year over year in December.

Retail jobs underwent a mild contraction from a year ago, but employment levels remain well above the recessionary trough.

​​​​​​​Growth has tapered in the prominent leisure/hospitality sector, though jobs are at an all-time peak. Hospitality employment grew +2.6% from a year ago.

Unemployment in the metro has fallen significantly from its peak, measuring 5.5% at the end of 2016.

STELLAR RENT GROWTH AND TIGHTENING AVAILABILITY ARE BOOSTING NOI


Vacancy dropped 50 bps from a year ago to a cycle low 5.7% as new supply was absent in 2016. With light deliveries projected, vacancies should drop to 4.7% by 2018 as demand strengthens.

Miami retail rents are at an all-time high per Reis data and are slated to grow in the mid-3% range through 2018.

NOI growth will soar nearly +10% this year as rents strive upward and will pull back to a still-healthy. 4.3% in 2018. NOI flattens to an aggregate 2% in our 2019-20 cyclicality model as vacancies rise.

As the nation’s retail market struggles amid store closings and mounting pressure from online shopping, South Florida stands out as a top market for retail assets, according to a newly released report.

Ten-X’s Retail Market Outlook ranked Miami as the top long-term “buy” market, based on demand.

In Miami, retail vacancies dropped by 0.05 percent to 5.7 percent at the end of last year. Rents averaged $23.37, and are projected to rise to $25.79 by 2020, according to the report. Fort Lauderdale retail vacancies fell to 8.9 percent last year, with rents averaging $17.86. Rents in Fort Lauderdale are forecast to rise to $20.20 in 2020.

Overall, retail vacancies were 9.9 percent nationwide at the close of 2016 and are projected to remain at that level in 2020.

According to MMG Equity Partners the key commercial stats for Miami:
​​​​​​​

  • Vacancy: 4.2% (Compared to 3.8% in Q2 2018, +0.4% change)
  • Absorption: -291,415 (Compared to 283,314 in Q2 2018, -574,729 change)
  • Asking rate PSF: $36.86 (Compared to $37.51, -$0.65 in Q2 2018)

10 Reasons to Invest in The Miami Real Estate Market in 2019

1. The Strong International Market

In 2011, nearly a third of residents were foreign born. However, about half of those become citizens, so we can say that Miami is simply considered attractive to immigrants. However, the Miami housing market is unusual in the number of foreigners buying homes here. Russians, Brazilians, Argentines, Turks, Chinese and British buyers are buying up properties here at a far higher rate than would be expected. Some see the property purchases as a safe investment, while others intend to use the beachside condos as vacation properties.

2. The Beach


Many tourists come for the beach, and many people want to live there, as well. Miami’s beaches are made more attractive by the year-round subtropical weather. This helps explain why Miami-Dade’s population is growing around 2% a year while south Florida’s population overall has been stagnant. It is considered the fifth fastest growing region in the U.S.

3. The Geographic Constraints


Many of the world’s fastest appreciating real estate markets are attracting people coming for work and quality of life, but they cannot expand the housing supply to meet demand. San Francisco is surrounded by water on three sides, and they make things worse by limiting the height of buildings, so they can’t build up the way NYC has. In Colorado and Utah, a mix of federal parklands and vertical mountains limit where developers can build houses.

We’ve already mentioned that Miami is on the water. Miami has experienced a spurt in high rise construction in downtown, giving it the third highest skyline in the U.S, but other areas limit it so that high rises don’t block the view of the water. However, that hasn’t prevented the Miami real estate market from becoming the sixth densest housing market in the U.S overall.

4. The Limited Supply of New Homes


There’s an interesting factor to consider in the Florida housing market, and that’s the massive retiree population. Many older people move to Florida for the mild weather, and they’re rather immune to housing price fluctuations. Older people who already live here stay in their homes. This results in fewer turnovers in the Miami real estate market, limiting supply for would-be buyers. That explains why Tampa and Coral remain over-priced markets though jobs aren’t as plentiful there. Retirees who do leave the state periodically tend to keep their Florida home as a second residence instead of selling it. The Gulf Coast is more of a vacation spot than retirement enclave, so there’s less competition for limited housing stock.

5. Jobs, Jobs, Jobs


Many people move to Miami for work. Miami is the largest urban economy in Florida, and it has the 12th largest GDP in the U.S. The World Cities Study Group classified Miami as an alpha city based on the level of business activity, human capital and cultural activity. The unemployment rate in Miami hovers around 4% today; it is currently in line with the national average but often below it. Only Orlando has a better job market.

6. The Tourist Market


The Miami real estate market does present an opportunity to those who want to cater to tourists. The Port of Miami is known as the Cruise Capital of the World, since it is the top cruise passenger port in the world. Landlords can rent to tourists who want to stay for a week in Miami before flying home or simply want to enjoy Miami’s beaches, cultural activities and sports teams. According to the Wall Street Journal, a $350,000 property can be rented out for $2500 per month. That’s a fair ROI, and you could easily rent out a vacation condo when you aren’t using it yourself.

7. The Massive Population of Renters


Two thirds of Miami residents rent, a rental rate rivaling that of New York City. This is partially due to the number of people working in seasonal and temporary jobs in the tourism business. It is partially due to the limited housing supply relative to demand. And it is partially due to the high cost of housing, even inland, relative to local wages. This is leading many investors in the Miami real estate market to buy single family homes to be carved up into multiple units, each one rented out individually.

8. The Strong ROI for Landlords


Investing in the Miami real estate market can give you strong returns. The high demand for properties in southeastern Florida relative to demand limits the ability of people to buy, creating a large pool of renters. Miami ranked second in the nation for the most cost-burdened renters in the country, paying more than half of their income in rent. Rents aren’t as high as they are elsewhere in the country, but given the lower property values than markets like Silicon Valley or NYC, it is a good ROI. For example, the median home price is around $350,000, while the median rent is $1900 a month. A $1900 a month rent would be considered a burden for a household earning $70,000 a year, while median incomes in the area are actually $50,000.

9. The Massive Student Market


As the largest city in Florida, it would end up with multiple large universities for that reason alone. However, Miami’s international appeal and unique position has made it an education and research hub, resulting in the creation of institutions like Florida International University. There are almost forty colleges and universities within forty miles of Miami, hosting over 350,000 students. Ironically, Miami University isn’t among them – that’s in Ohio. The University of Miami is in Miami and enrolls more than 17,000 students.

10. It Is Landlord Friendly


​​​​​​​Whether you’re renting to students, low-income workers or snowbirds, potential investors in the Miami housing market will be glad to know this is a landlord friendly market. Florida doesn’t have laws on rent control. Security deposits aren’t capped, and you can start eviction is the rent is three days late. Damage to the property requires a seven-day conditional quit notice, while repeated lease violations allow for a seven-day unconditional notice.

Work With Gary

An established luxury Real Estate agent since 1999, Gary Mitchell has the real estate knowledge, legal representation, translation services, and professional support to complete your purchase of Florida properties.

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