Miami Real Estate Learning Center

ARE YOU AN INVESTOR? YOU NEED TO KNOW THIS

Investors buying single-family homes slowed down by 29% in 2023 due to higher interest rates and really expensive homes. This decline matches the overall housing market, which had a 19% drop in existing-home sales, the lowest since 1995.

There are many reasons why investors stopped buying large number of homes. One of the main reasons is the lack of inventory, high prices and the slowdown in rent growth. However, if interest rates continue to fall and more homeowners feel comfortable listing their houses, the market dynamics could shift. Many acquisition firms have decided to build their houses instead of buying due to the inventory shortage. The Miami landscape is full of developers and builders whom are trying to offer new housing opportunities.

In 2023, investors accounted for 11% of all home purchases, and small investors with fewer than 10 homes dominated the market. Institutional landlords reduced their purchases by 69% compared to 2022. The current landscape, characterized by expensive housing and diminishing rental returns, has made such investments less appealing which is why small investors dominate the market at this time.

The current real estate market is difficult to predict and not only for individuals, but also for investors who have reduced their investment and portfolio. The housing market is expected to experience shifts in 2024, with changes influenced by factors such as fluctuations in interest rates, inventory levels, and the behavior of investors. I am looking forward to see the impact of the lower mortgage rates in the incoming months.

THE MIDDLE CLASS IS RELOCATING TO FLORIDA TOO

Since the pandemic, many Americans have moved to State such as Florida, who is offering larger homes, warmer climates, and lower or no personal income taxes.

Most of the time, those individuals are both wealthy and middle class, moving from expensive, high-tax states like New York and California to more affordable and tax-friendly states such as Florida, Tennessee, and North Carolina. The allure of significant cost savings is evident. Someone earning $150,000 in New York City potentially saving nearly $50,000 by moving to Miami, and those earning $650,000 or more could save up to $200,000 by making a similar move.

This trend is also notable for companies that are relocating to those state. Prominent companies, including Citadel, Indxx, AllianceBernstein, and Allspring Global Investments, have moved their headquarters and/or jobs to these states, citing favorable tax structures and business-friendly environments.

The trend extends to notable billionaires, with figures like Jeff Bezos relocating to states like Florida. Jeff Bezos purchased a $79 million mansion on Indian Creek Island in Florida, which is known for its exclusivity and privacy. His company Amazon is also looking for office space that features 50,000sqft in the area. More than 40 of his workers are located in the Miami region. Who will be the next big figure doing the same move?

AN INCREASE IN PENDING SALES

The real estate market in Miami has many cash buyers but some are still financing. Last year, mortgage rates were at their historical peak but the recent announcement regarding their decline has impacted the market.

The real estate market had a significant increase in pending home sales in December, with a rise of 8.3% from the previous month. This surge, the largest since June 2020, exceeded expectations. I believe the predictions for the real estate market are going to be revised. The projection for this year is going to be more than 10% increase in sales thanks to the decline of mortgage rates.

While the rise in contract signings and mortgage applications suggests pent-up demand due to declining mortgage rates, the housing market's recovery remains constrained by limited supply. Without more homeowners deciding to sell, sales growth may be hindered. I have many potentials buyers, but not many sellers. Not many of my clients are looking to sell because they think that they won't find something else for a similar price. Most of the time, my clients find something else before pulling the trigger on selling their own house.