Home prices in Miami are outpacing wage growth, new research from ATTOM Data Solutions confirmed. It’s a foundational problem that could lead to the market’s eventual implosion if the city can’t reverse it.
Some people called the 2007-2008 downturn a financial hurricane, others called it a nightmare, everyone called it a crisis. “It’s a crisis if everybody calls it a crisis,” said Morgan Downey, a managing director of LaSalle Global Fund Services in Europe.
Miami was definitely in crisis. From Q1 2005 to Q1 2011, home prices in both Miami-Dade and Broward counties plummeted. Miami-Dade’s median sale price fell from $210,000 to $90,000, while Broward prices dropped from $235,000 to $111,000. The declines represented some of the steepest in the country.
The silver lining was that while home prices in the area were falling, wages rose. During the six-year period, average annual wages increased in Miami-Dade County by $6,708, and in Broward by $5,252.
A familiar trend
Eventually, however, when the nation’s real estate market started to recover, and the slide of home prices reversed, the same happened in Miami. Home prices caught up to wage growth. But then it became too much, and affordability has suffered.
| Counties | Q1 2011 Wages | Q1 2011 Sales Price | Q1 2016 Wages | Q1 2016 Sales Price | Wage Increase | Sales Price Increase |
|---|---|---|---|---|---|---|
| Miami-Dade | $873 | $111,000 | $972 | $226,550 | 11.30% | 104% |
| Broward | $832 | $90,000 | $926 | $190,000 | 11.20% | 111.10% |
As we see from ATTOM’s data, since Miami-Dade and Broward counties’ low point in early 2011, wages have failed to keep pace with home price appreciation.
In Miami-Dade County, weekly wages from Q1 2011 to Q1 2016 have increased only 11.3 percent compared to a 104 percent leap in home prices. That translates to a $5,148 increase in annual wages compared to a $115,550 increase in the area’s median home price. In Broward County, the difference between wage and home price growth is $4,888 compared to $100,000.
The trend has lead to several rating agencies designating the Miami’s market “overvalued.” It’s also something we saw throughout the country in the build up to the market collapse. If people can’t afford homes, home prices fall, people lose equity, investors lose returns, builders and banks lose clients, and eventually, the market tumbles.