Home values have been rising steadily for the past year before falling off slightly in December. Standard and Poors’ Case-Schiller Miami Home Price Index rose 0.42 percent from September to October, up to 190.09. Realtor.com reported that sales prices fell 1.1 percent from November to December, down to $269,500 for the median home price. While median home prices fell month over month, they were up over last year by 2.1 percent.
Inventory improved significantly in Miami, according to realtor.com, with total listings having increased by 18.5 percent over last year, to 52,846. Month-over-month, listings were up by 1.2 percent in November. Still, it remains tight even as more new developments go up. The median number of days that a home was on the market before being sold was just 47 in November, according to the Miami Association of Realtors.
Although inventory increased, new construction inventory seems to remain stagnant. According to the Federal Reserve Bank of St. Louis, the number of housing starts dipped slightly to 439 in November, down from 470 in October and 533 in September. There were 540 housing starts reported in November 2013.
The U.S. Census Bureau reported that permits were issued for 393 single-unit homes in the Miami area. Additionally, 10 two-unit and 16 three- or four-unit structures were issued permits.
“Sellers do not appear to be over motivated,” Shear Construction president Gary Shear said. “Most sellers want market price or they are not selling, forcing buyers to pay a fair market value. I think the growth rate has consistently grown and expect the next several quarters to continue to be consistent. Prices on the high end have increased consistently.”
Developer Jeff Spear of The Spear Group has seen the difference in pricing between old homes and new homes is growing larger. Foreclosed existing homes are bringing down prices because they have to compete with each other, while condominiums with modern “starchitect” high-end design are driving up prices downtown and in Miami Beach. Prices in those desirable areas are shutting many younger buyers out.
“The younger Generation X and Millennials want to live in a downtown or urban environment, and frequently that’s where things are a little more expensive,” Spear said. “They want the walkability and proximity to all the entertainment and restaurants, but it comes down to what they can afford.”
Millennials age 18 to 34 make up about 22 percent of the population of the Miami-Fort Lauderdale-West Palm Beach population, according to the U.S. Census Bureau. While the number of Millennials is smaller than the national average of 23.4 percent, it is still significant. With median wages of $30,728 in the Miami area, home ownership appears out of reach for many Millennials. Nationally, Millennials earned a median income of $33,883.
Mortgage rates in Miami were at 3.96 percent in the final week of the Fourth Quarter for benchmark 30-year fixed-rate mortgages and 3.19 percent for 15-year fixed rate mortgages, according to BankRate. New lending rules could prove a game-changer for many in this demographic, just as the prospect of higher interest rates might convince many Millennials to finally get into the housing market. Fannie Mae and Freddie Mac recently lowered the down payment threshold to as little as 3 percent, but younger buyers still have hurdles to cross, Metrostudy Regional Director David Cobb said.
“You still have the stiff underwriting guidelines associated with high FICO scores and employment,” David Cobb said. “I’m a bit skeptical that it’s helping a lot, but I do think there’s going to be pressure from Congress to get more people qualified.”