Priced out of South Florida. Now what?

Over the past four years, the rules of real estate have been rewritten. The driving factor was the pandemic. It literally changed how Americans though. It made them think of their home as a place for work, it made them rethink the layout of their ideal house and South Florida became even more of a destination for many people in New York, Chicago, California and other urban, colder climates.

I always get asked ‘How is the market?’ but now the question has significant undertones. Rather than the question being solely about if it is the right time to buy or sell, it now has hints of a profound shift in motivation. Many people want or need to get out of South Florida these days. It has become entirely too expensive. And, it goes well beyond how much gas is, what a dozen cost, etc. Those are insignificant macroeconomic data points.

Here in South Florida, our microeconomics are about home, flood and windstorm insurance rates and the precipitously high values of homes. We all know the saying, “what does up must come down”; however, that isn’t always the case in real estate. Real estate can be resilient and it can be brittle, so it is no surprise that there are people on both sides of what our future looks like. I’m still of the belief that we will have a downward trajectory in pricing soon.

In the first few months of the lockdown, NOTHING happened in local real estate. I remember not being able to make appointments for the few people that were still looking to buy and how both buyers and sellers seemed to go into a deep hibernation. It was eerie. Then, ignited by historically low interest rates, the real estate market came back with a vengeance. Everyone congratulated me as a real estate agent because they thought I was making money hand over fist.

The truth is, I, and more importantly my customers, were experiencing a paradigm shift in how real estate is done. Sure, ‘location, location, location’ and ‘cash is king’ are still true, but little else seems like it is.

There are a million ways to break it down, but let’s focus on home prices in our immediate area. To do this, I am looking at three neighboring communities ranging from working class through wealthy. Cutler Bay, Palmetto Bay and Pinecrest are each very desirable areas of Miami-Dade County.

These charts are staggering! In just 4 years (pre-pandemic to post), Cutler Bay single-family home prices are up 66%, Palmetto Bay is up 81% and Pinecrest is up 185%. As we head up in affluence, the meteoric price rise is more pronounced. This is likely due to the ‘cash is king’ influence. When a home is purchased with cash, often there is no appraisal and many who put 20% or more down for a loan pay for the gap in appraisal to contract price.

If you were a Cutler Bay resident in April 2019, the average home was worth $334,741. Today it is $566,826. Sure, you have a paper gain, but you are paying higher taxes and insurance, some of which have more than doubled in just four short years. In Palmetto Bay, your April 2019 $564,256 home is now worth $1,021,562 and in Pinecrest your appreciation is $1,174,405 to $3,350,441. This goes beyond home price and cuts right into how people live their lives.

On the May 25 episode of ‘The MiamiHal Real Estate Show’ (broadcast from the Miami’s Community Newspapers Studios), I asked Miami-Dade County Mayor Daniella Levine Cava what the County was doing to help homeowners. “We declared a housing crisis April a year ago and immediately we raised funds to finish projects that created affordable housing. We also have a $25M program to provide mortgage relief to homeowners for their primary residents. It provides up to $1500 toward mortgage payment, HOA dues, and/or property insurance with priority going to seniors, the disabled, families with children and those who are overdue on mortgage payments by more than 12 month,” explained Cava. “We are also concentrating on affordable rentals. Government subsidies are provided to owners in exchange for upgrading their properties and stabilizing the rent rates for three years.”

The next few months will be critical to the future of our County and how people live in it. Interest rates and consumer sentiment are crucial to what our ‘new norm’ will be. Stay tuned to this column. I’m committed to keeping you in the know.