Months of stay-at-home orders, growing numbers of infections and deaths, working remotely while the kids are attending school in the next room, stop-and-start business closures, and no end in sight to the COVID-19 pandemic have all had an unexpected — and seismic — impact on Miami-Dade’s real estate market. It’s just not what you probably think it is.
“As the weeks ticked by, we were all getting stir crazy and our tempers were running thin, especially all of us glued together in a tiny apartment,” said Maria Ester Mercader, who lives with her husband and their three sons in a two-bedroom condo with no balcony in Key Biscayne.
Mercader had been thinking about buying a home for a couple of years, but COVID finally tipped the couple off the fence. “We felt really sad for our three boys who were now begging for a ‘big house’ with a ‘big patio,’” she said.
But like many people in Miami-Dade shopping for a single-family home within their price range, Mercader has come up empty so far.
COVID-19 has turned out to be an unexpected boon for the residential real estate market and yet another hurdle for out-priced home buyers. Historically low interest rates and condo-cabin fever have driven up demand (and prices) for single-family homes and are even moving the needle on the sluggish, overstocked condo market.
According to the MiamiReport Q3 Update released this week by RelatedISG International Realty, a joint venture co-founded in 2011 by Craig Studnicky, president of RelatedISG, and Related Group CEO Jorge Perez, only 0.67% of all single-family homes in Miami-Dade County — or 4,516 out of 678,860 — are currently listed for sale or rent on the Miami Multiple Listing Service.
The report shows that the percentages of foreign buyers versus domestic U.S. buyers have flipped since 2010, from 49% foreign and 21% domestic to the current 23% foreign to 49% domestic. Using data from tax returns, the study also indicates that Florida is the No. 1 choice for people relocating from New York, New Jersey, Illinois and Massachusetts.
That’s a huge improvement from April, when the world shut down and the volume of real estate transactions suddenly stalled to a trickle.
“I had lived through other recessions before — the early 1990s, Sept. 11, the 2008 banking crisis — but in April I thought we were going to slip into the greatest worldwide recession known to man,” Studnicky said. “This was unprecedented. I was thinking there could be bread lines.”
Five months later, the country is still wrestling with the pandemic, but the real estate market has rebounded with an unexpected strength.
“Houses are selling at such a feverish pace, inventory is getting unbelievably tight and prices are going up,” Studnicky said. “Now buyers are saying ‘Show me some condos’ because houses are a seller’s market now. Buyers are not going to find a bargain anymore. If they want a bargain, that’s condos now.”
Ron Shuffield, President and CEO of Berkshire Hathaway HomeServices EWM Realty, said the drop of inventory of single-family homes has been dramatic. Ideally, a healthy housing inventory should rest between a six-to-nine-month supply, meaning it would take that amount of time to sell all the properties on the market.
But since May 2020, the single-family home inventory has shrunk dramatically, from 7.3 months of supply to 3.2 months at the end of August. Median sales prices have also risen due to demand, from $375,000 in May to $425,000 in August (including last-minute closings). That’s the highest on record since 2007, when the median sales price hit a then-record $380,000, according to the Miami Association of Realtors, even though the existing inventory was much larger.
The change in the condo market is equally dramatic, from a 24-month supply in May to a 12.8-month supply by the end of August. Median sales prices in that market have also started to creep up — from $259,000 in May to $275,000 in August — but there is still enough inventory to make condos a buyer’s market.
“People who have been stuck in a 50-story building want to be in a townhouse,” Shuffield said. “Condos are a lifestyle decision. It was very inconvenient during the pandemic. But that inconvenience will go away pretty quickly. By this time next year, unless something happens to world health again, the sale of condos will have increased around the county.”
Where the sales are
Shuffield’s breakdown of sales activity of single-family homes, condos and townhomes by municipality in Miami-Dade shows the specific neighborhoods where buyers have gone over the last three months. Among the biggest gainers:
▪ In Miami Shores (median home value: $569,608), the number of closed sales jumped 42.6% between June 1-Aug. 31 over the same period last year. The total dollar volume in sales grew 29%, from $46 million to $51 million.
▪ Palmetto Bay (median home value: $310,471) showed an increase of 6.3% in closed sales and a jump of 14% in the total dollar volume of sales, from $65.1 million to $74.2 million.
▪ Key Biscayne (median home value: $1,079,895) saw a 43% increase in total dollar volume sales, from $101 million to $144 million.
Demand for those neighborhoods is driving prices up — and turning home buying into a gladiator sport.
“Miami Shores has been a conservative neighborhood when it comes to price appreciation,” said Ines Hedegus-Garcia, director of strategy and innovation at Avanti Way Realty. “Investment-wise, it’s solid…the increases have been gradual.
“[But] now we’re seeing multiple bidding-war scenarios. I have a buyer who has lost two properties in Miami Shores and has a backup contract on another property in case the pending sale falls through. We went to see it on the same day it appeared on the MLS and it already had a contract.“
“People who live in the Shores tend to stay in the Shores,” she said. “I’ve lived there for 35 years. I always liked my house, but I never loved my house. Now with the pandemic, I’ve realized how awesome my house really is.”
National home price growth
The same phenomenon is happening nationally. According to the September Monthly Housing Trends report by realtor.com, the number of single-family homes on the market is down 39% year-over-year from last September, equaling 529,000 fewer listings. Homes are selling 12 days faster than in 2019 and three days faster than August 2020. And the median sales price has shot up to $350,000, a year-over-year growth of 11%.
The report shows that even though the median sales price of homes in the Tri-County area keeps creeping up — $410,000 in September, slightly lower regionally than in Miami-Dade and Broward — South Florida clocked in at a lowly 47 in the list of the top 50 U.S. metros with the biggest jump in median prices year-over-year.
The top five slots on the list were taken by Cincinnati ($318,000, with 16.9% growth), Boston ($677,000, up 16.4%), Philadelphia ($344,000, up 15.6%), Indianapolis ($286,000, up 15.2%) and Buffalo ($230,000, up 15%).
Only Orlando, Pittsburgh and Los Angeles came in lower than South Florida.
“Many buyers tend to put their home search on hold after the start of the school year, but remote learning and the desire for more space continued to fuel buyer interest in September,” said Danielle Hale, chief economist for realtor.com. “Unseasonably high buyer interest coupled with historically low inventory and favorable mortgage rates are creating a perfect storm in the housing market. While this is good news for anyone looking to sell their home, it has created tremendous competition among buyers.”
Pending home sales, another indicator of a strong market, are also up. The National Association of Realtors (NAR) reports pending home sales were up in August 24.2% year over year and 8.8% over July 2020. Also according to the NAR, 33% of all U.S. home buyers in July were first-timers, with a median age of 33 and a household income of $74,900.
In Miami-Dade, the growth of that demographic has been explosive.
“A third of the mortgages we saw from June to August were first-time home buyers, a growth of 200% year over year,” said Alberto Carrillo, district sales manager of Miami Beach for The Keyes Company. “When there’s a lack of consumer confidence in the economy, people gravitate toward housing because it’s tangible. It’s an essential need, so it doesn’t lose its value.”
He suspects the region may see a run in divorces by the end of the year after people have been stuck in their homes for so long, but says “real estate won’t slow down.”
Carrillo said one of the neighborhoods with the highest sales activity is Edgewater — specifically the 33137 ZIP code, where Keyes has seen an increase in sales of 141% year-over-year and a decrease of cash sales from 47% to 24%. The median home value in that area, which consists primarily of condos and townhomes, is $310,471, according to Zillow.
The September 2020 Elliman New Signed Contracts Report also points to increasing demand. Miami-Dade saw a year-over-year increase of 20.8% in signed contracts — 1,335 versus 1,105 — with most of those going to homes in the $400,000 to $800,00 price range. New listings for homes in September priced below $399,999 plummeted 72% over the same period last year.
The condo market saw a more modest increase in overall signed contracts — 7% — but the majority of those were in the $200,000 to $500,000 price range. Overall new listings sank 46.4% year over year, with the biggest drops in the affordable ($200,000 to $299,999) and the $500,000 to $599,999 price ranges.
The boom in sales is also drawing new investors to the area. Jadon Newman, founder and CEO of the Austin-based Noble Capital Group, a private equity firm that specializes in real estate lending, said the company plans to expand into 25 markets around the U.S. — including Miami-Dade — after focusing on Texas for the last 18 years.
“We look at leading indicators such as shortage of housing and population growth, which are big factors in Miami,” Newman said. “The only way a market will continue to breathe is if new construction starts and there’s rehabilitation of older housing stock in downtown and college areas. Those markets are starting to soften a little bit, with people moving out to the suburbs.
“This pandemic has brought out whatever courage was needed to make life changes,” Newman said. “But the final impact of the pandemic is yet to be determined. Can you save money by letting your employees work from home? If so, how will that affect the real estate market?”