Real estate & home market value, what to expect? Is a great question if you are still looking where to buy, or when to sell or invest in a property in Miami and in Key Biscayne.
After the years of high market value, prices experienced a slow process of price correction. Sellers were reluctant to accept the new demand expectation which resulting in a slow adjustments of price reduction. During 2019, the stagnant sales and slowed absorption rate pushed a clear Buyer’s market until the Covid pandemic hit us all.
How did Covid-19, Low-Interest Mortgages & Relocation Benefited
As Covid lockdowns impacted the country, so were sellers that felt scared of the situation’s uncertainty and the possibility of a major price drop. All forms of business were impacted by the measures, regardless, Real Estate activity never stopped. The industry rapidly adopted all the new tools, agents were wearing masks, gloves, shoe covers, carrying Lysol spray, and doing walk-thru on their phone. Discussing the property opportunity via Zoom and virtually executing closings with social distance. This practice became the new norm of doing business during the Covid-19 pandemic.
The Federal Reserve immediately proceeded with an aggressive measure lowering the bank rate for borrowing from 0% to 0.25%. This move was aimed at lowering the cost of borrowing on mortgages and many others, incentivizing and motivating buyers to finally acquires mortgage lending and be able to purchase or invest in properties. It was a boost dynamic that was felt across all the states.
Now, it has been the severe economic lockdowns in certain states during Covid-19 and the Florida taxation benefits that have accelerated the influx of people relocating from the heavily taxed states and cities. South Florida has become the favorite new destination.
Florida demographics continue to grow. With the national migration from other states, it has gained 660 new residents per day from July 2019 to July 2020.
Key Biscayne 2020 Real Estate Outcome
Single Homes Market, Key Biscayne 2020
Condo Real Estate Market, Key Biscayne 2020
Key Biscayne homes market started 2019 with 122 single-family homes for sale, the first quarter there were 25 closing right before Covid-19 hit us.The range $1-2M was very reactive to price correction, you can go to my Spring 2020 Market 2020 for more details.
After Covid-19, during the lockdown month, 23 additional homes sold leaving some segments of the market without inventory. By the 4th quarter of 2020, the Key Biscayne housing market was already back into a seller’s market with a tendency of price increments on certain segments.
Homes in the $1-2M sold at an average price of $640sqft, 20% less than the average price of $850 sqft during 2016. Most of these homes are not elevated some are renewed. In the range from $2-4M, 35 homes sold. A large number of these homes closing in this range during 2020 were sitting in the market for -/+ 700 days, closing +/- 35% lower than their original asking price. In the upper market $4M+, 19 homes sold and the price reduction from the original asking price was similar. *
As a whole during 2020, 85 single-family properties were sold. Considering that it was a difficult year with the pandemic lockdowns, Key Biscayne single-homes sales were impressive and most importantly the market returned to a healthier price point.
The Condo market started in 2020 with 301 properties units for sale, 75 units sold in the 1st quarter prior to Covid-19.
The condo real estate behaves differently, the area where the building is located has an impact to be considered but I like to analyze the closed resort-like communities separately as a whole from individual buildings.
Properties in the area of Galen Dr. and Sunrise sold at a year average +/- $640sqft during 2020. The year average price was +/- 20% lower when compared to 2016-15 period year average price of +/- $850sqft. *
On resort-like condominiums as for instance The Towers of Key Biscayne, properties sold at a yearly average of $415sqft during 2020. When compared to $ 622sqft during 2017, there is a +/- 35% price reduction. *
Newer condominiums behave differently on the Ocean Club primary towers by Club Beach House, the year average $ 950 sqft. When compared to $1200sqft during 2016-2017, there is a 20% price reduction.
The total sales for 2020 were 209 condo properties.
Real Estate Forecast 2021, Miami & Key Biscayne
As the world gets vaccinated the economies will steadily go back to normality most likely by the end of 2021 or even 2022 for some. The aftermath leaves many devasting life losses, an economic burden, and uncertainty.
Every economist has a different opinion of recovery, the new administration proposal to confront the crisis is focused on vaccination, testing, stimulus money for the people, and school re-opening during 2021, before talking about rebound. Federal Reserve Chairman Jerome Powell, re-assures interest rate and currency will remain as they are but allows inflation of 2%. It is not clear yet whether that 2% of inflation is a roof or the floor. And even though his measures have kept the stock market and Wall Street roaring we still do not know if the new administration has other plans.
Lately, some are leaving the gold & silver rush of 2012 behind to get back into blockchain and crypto coins. Some made considerable money with crypto coins and blockchains, but most lost it all. If you still do not know what route to take to safeguard your savings. I am here to tell you Real Estate remains the safest way to keep your capital.
Why it is the Right Time to Invest in Miami & Key Biscayne
Before we go through why it is the right time to buy a property, I want you to understand the following about the real estate market.
Absorption Rate for 2021
The absorption rate helps us identify how the behavior of the offer and demand is acting. It is also a mechanism tool to understand the price tendencies. The speed, rotation, and depletion of inventory give a clear indication of how the market is moving towards.
- The number of months gives the competitiveness and demand for that specific product home or area. It helps to determine the number of buyers looking for homes vs the actual number of homes available.
It helps determine when the demand vs supply will raise or lower the price.
Why Miami and Key Biscayne ?
Miami is the city that is mostly benefited by the exodus of people leaving states that imposed SALT a federal tax reform law passed in 2017.
Both residential and commercial real estate has been impacted. In particular, wealthy New Yorkers are relocating their family and business to the sunshine city. Miami‘s geographical location, the weather, and the multicultural melting pot have contributed to their final decisions.
The 1% that took the step include private-equity Blackstone Group who just signed a long-term lease at 2MiamiCentral in Downtown, Miami. The 41,000 square feet office will serve its internal technology needs that will eventually employ 215 people. Billionaire financier Carl Icahn moved his company to nearby Sunny Isles Beach earlier in 2020. Real-estate investor Starwood Capital Group is building a stylish new 144,000-square-foot headquarters in Miami Beach. Goldman Sachs Group Inc., JPMorgan are eyeing the region as a possible home for its asset-management arm. As well as hedge fund Elliott Management Corp. is moving its Manhattan headquarters to South Florida.
Tom Brady and Gisele Bündchen bought a $17 million teardown on Miami Beach’s ultra-exclusive Indian Creek island. Jared Kushner and Ivanka Trump, just bought an empty lot of $30 million, in Indian Creek Island as well. Billionaire Shutterstock founder and Executive Chairman Jonathan Oringer bought a 20,864-square-foot mansion in Miami Beach. But It’s not just happening on the East Coast. In the last few months, the venture capitalists David Blumberg and Keith Rabois left the San Francisco Bay Area to settle in Miami.
But why would this make it the right time to invest? there are many reasons but I am picking the most relevants:
- The exodus of the wealthy and businesses is irreversible for years to come. States like New York deficit plus the economic impact of the handling of the pandemic, the lockdowns impact, the violence, and lack of police are among the Mid-long term issues NY has to solve before people stop looking for relocating to better possibilities.
- The speed of how the real estate inventory is selling is leaving some segments with very low inventory to satisfy the demand so the higher prices tendency is inevitable.
- Single-family homes are experiencing up to an 8% price increase in certain segments and areas, as of today. As single-homes get harder to find condo inventory will fill up the demand for some time until inventory is absorbed.
- The remaining inventory is projected to be absorbed at a rate of 1.5 years and much less depending on the area.
- Additionally, the new condo development cycle is scheduled to start breaking ground in 2025 with delivery in 2028. This will leave a gap of nearly three years with only resale product inventory in the market.
- The mortgage rate is still very attractive and at this time there are plenty of funds and liquidity. We cannot foresee for how long it will stay this way before the rate starts increasing.
- The Feds have not announced a change on the interest rate but have mentioned it will happen.
- Once the interest rate starts going up the dollar currency will devaluate, making the Miami Real Estate market attractive again to foreign nationals especially South American. This would also help keep Miami Real Estate demand high.
During this pandemic crisis Miami real estate has been impacted much differently than the 2008 financial breakdown. One of the main reasons is the financial sector was coming out from very good years and the economy was booming right before the pandemic hit us. It is important you realize that if you are waiting for a market crash, big discounts, and huge foreclosures you might lose the opportunity to own a property in Miami.
Buying or selling a home can be overwhelming for some. It is not just to find the charming design that feels homy plus the convenient location, and then adding the fear of not knowing if your decision is the right choice or investment. This is why it is so important to have an expert helping you with every details througout the process.
If you are thinking of a bigger home, reducing, relocation or investing on properties you can contact me here at anytime