Bidding wars are raging as desirable houses within an affordable price range are getting hard to find. Indeed, in Miami Dade, fueled by foreign cash, the median price for a single-family home has gone up by 7% between 2014 and 2015 for similar periods, from $243,000 to $260,000.
As rental prices keep on rising, it makes more financial sense to purchase a unit. It is a nationwide trend too: housing becomes less affordable for Americans whose wages have only risen by 2.6% since last year. As a comparison, the midpoint price for a house has risen 4 times faster than the average wage growth. Houses are simply getting pricier. It reflects a lack of available homes in the preferred areas. Sometimes, listed properties receive several full offers, hence giving owners the opportunity to accept higher bids.
If we were to consider South Florida as a whole, home values have been up by 40% since the 2012’s recovery. It corresponds to the fastest growth in the country.
Moreover, inventory is tight because there is no more lot available for new developments while the influx of residents continues in Miami Dade. There are only enough homes on the market to last for 5.1 months, as compared to 5.5 months last year.
That is partly explained by the high demand at the lower end of the real estate market. When the inventory is low, the appreciation tends to be high. For example, houses below $300,000 have undergone a price rise by 18% and there is only 2.4 months of supply for such in Miami-Dade.
Is the lack of affordable housing a crisis? It can be a signal of a possible price bubble as the sales price exceeds by 10% the cost of renting. Let’s consider it an early warning. If homes are overvalued, owners could see their mortgages underwater after the bubble bursts.