Miami is now experiencing a lull in sales with regards to condos and houses. Just a couple years ago, the condo market was booming due in part to second home citizens as well as foreign investors. But with the ups must come downs and a culmination of factors (oil prices and a drastic increase in condo supply) has led to a cooled down time period. The ultra-wealthy can’t purchase properties fast enough due to the short supply but other areas have witnessed decreased sales.
Home sales in the area have declined by 15% compared to 2014 data but prices have actually risen by approximately 12%. Prices continue to rise for average homes; all the while they’re decreasing in sales. Prices are likely to slip back to previous levels because buyers are wising up to the increased prices sellers are demanding.
There is undoubtedly a slowdown but condo sales in Miami increased at previous levels (less than 2%). Foreigner investors have since lost previous interest and no longer account for 1/3 of the condo market. Thanks in part to decreased wealth from the drastic decrease in oil prices, the previous driving forces of the Miami real estate boom have pulled out. What remains is a slowly stagnating market.
One area that seems to be immune is lucrative Miami Beach – home of the ultra-wealthy. Home to a recent record penthouse purchase of $60 million but also a large disparity between luxury home and average home prices. Shockingly, luxury homes are 12 times as expensive as their average counterparts in Miami Beach, which is double the rate of other large cities. Both home and condo sales in the high-end market remain strong, prompting new developments. Naturally, with increased demand for high-end properties comes with the scramble for developers and sellers to produce availability and strike while the iron is hot.
Some experts fear another housing bubble, waiting to burst somewhere down the road. Continued run-ups in prices can lead down a dangerous path. If the bubble bursts due to various shocks in the market (decreased foreign investment and/or diminished luxury market), Miami could be facing another destructive period similar to the one it endured in 2008. The housing market definitely was on the rise, booming from interest and recovery from 2008; but with the new global economic downturn, we can see a slowdown. Such a slowdown should warn of potentially dangerous results down the road.