A new housing bubble is emerging in Miami, but only in some of the ritziest neighborhoods of the Magic City. According to a recent report by real estate appraisal firm Miller Samuel, Miami has gone from being known as a staple of irrational housing transactions and hotbed of foreclosure activity to one of the most sought-after regional markets in just a couple of years. Not all properties, however, are getting the attention of house hunters.
Cash Purchases Rule Miami
Oceanfront properties in trendy South Beach are attracting wealthy foreign investors who often show up to the closing table with impressive amounts of cash. According to a recent story in the New York Times, an Italian buyer paid $25 million for a luxurious penthouse. An opulent estate on the Indian Creek waterway between Lincoln Road and the Biscayne Bay was purchased by a Russian for a staggering $47 million. The quarterly report by Miller Samuel revealed that almost three quarters of condominium sales were settled with cash –even those not considered distressed properties.
Insufficient Inventory for Luxury Buyers
Real estate agents representing high-end buyers are scrambling to find suitable properties for their clients. Since many house hunters are bringing cash to the closing table as a bargaining tool, they are looking for deals that are truly special. Such listings are quickly running out.
Wealthy buyers from South America are demanding waterfront properties that are ready to move in, or ready to be flipped in some cases. Demand has gotten to the point that some Miami real estate agents are taking working vacations in South America, meeting with affluent prospects. While this situation unfolds in the coastal neighborhoods of Miami, inland communities like Homestead are seeing the other side of the bubble.
Rock-Bottom Deals in the Suburbs
Middle-class neighborhoods like Homestead are seeing the other side of this sudden bubble. Real estate investors flocked to Homestead in recent months, but they were looking for foreclosures, short sales, and bargains found in the Real Estate Owned (REO) portfolio of mortgage lenders. Like their counterparts on Miami Beach, these investors prefer to pay with cash –but the transaction amounts are much lower.
The average price of a median, distressed property in Miami is around $162,000. This price indicates an improvement from the all-time lows seen at different times since 2008, but the purchasing frenzy seems to have dried up. With almost 60,000 foreclosures pending in Miami-Dade County, real estate investors are looking for that shadow inventory to become available.
First-time home buyers are missing from the current Miami housing bubble, a sign that income levels are still low and credit requirements are still tight. Until these average home buyers can participate in the housing market, a full recovery cannot be ascertained.