Miami, South Florida Housing Market Singled Out as Top Performer

The latest update to the Case-Shiller Home Price Index was published earlier this week, and the Denver and Miami housing markets were singled out as top performers. Prices in those two metro areas rose by more than 8% during the last 12-month reporting period, more than any other city tracked by the index.

According to the report, “Denver and Miami reported the highest year-over-year gains, as [home] prices increased by 8.4% and 8.3%, respectively, over the last 12 months.”

Nationally, prices rose by around 4.5% in January 2015, compared to the same month last year. So these two markets have clearly outpaced the nation as a whole. (The report released on March 31 contained data through the end of January, due to a two-month reporting lag.)

I wrote about the Denver real estate market a couple of weeks ago, citing low inventory as one of the leading causes for price growth in the area. In short, there are more home buyers in and around Denver competing for fewer properties these days, and it’s driving house values north.

But it’s been a while since we took an in-depth look at the Miami real estate market. Here’s how things are shaping up in the South Florida housing market.

Miami / South Florida Real Estate Market Hot But Cooling

According to the latest Case-Shiller report, home prices in Miami rose by 8.3% from January 2014 to January 2015. That was the second-largest gain of any city tracked by their index.

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Miami’s real estate market was also a top performer at the monthly level, with prices rising 0.7% from November to December of last year, and another 0.7% from December 2014 to January 2015.

Over the last couple of years, housing inventory dropped rapidly across the Miami metro area. This, combined with steady and/or rising demand, led to the significant home-price gains we’ve seen over the last 12 months. But the inventory situation has leveled off, and today there is a better balance between supply and demand.

According to a recent report by Realtor.com, the total number of Miami homes listed for sale declined by only 3% over the last 12 months. By way of comparison, some metros experienced inventory declines of 20% or more. So the supply situation in Miami has been relatively stable over the last year, where inventory is concerned.

More Moderate Forecast Issued for 2015

While no one can predict the future with complete accuracy, most economists feel that home-price gains will continue to slow through the rest of 2015. This is true for Miami, and the broader South Florida real estate market, as well.

Last year, home prices in the area rose by more than 8% according to the S&P/Case-Shiller Index. But we probably shouldn’t expect such gains for 2015. In fact, current trends suggest the Miami housing market will end 2015 with more modest price gains compared to 2014.

This month, the real estate information service Zillow issued a 12-month forecast for home prices in the¬†Miami-Fort Lauderdale metro area. The company’s economists predicted that home prices in the area would rise by only 1.3% over the next 12 months, compared to an 11.7% gain over the last 12 months.

Low Mortgage Rates, Job Gains Driving Demand

On the demand side of the equation, low mortgage rates and job-market improvements continue to fuel home sales in the Miami housing market.

The metro area’s unemployment rate was 5.5% at the start of 2015, down from a recession peak of 11% in 2010. This means there are more well-employed home buyers in the market today compared to previous years.

Meanwhile, long-term mortgage rates continue to hover well below 4%, making home loans attractive to buyers. The average rate for a 30-year mortgage loan in Miami has been below 4% since November of last year, as shown in the chart below.

Freddie Mac Rate Chart, April

Long-term mortgage rates are expected to remain low for the foreseeable future, partly due to the Federal Reserve’s current monetary policy.

Disclaimer: This report contains third-party data and trends relating to the Miami and South Florida real estate market. Information provided by these sources is deemed reliable but not guaranteed. The publishers of this website make no predictions or assertions regarding future conditions in this or any other local housing market.

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