Miami has seen strong home price appreciation over the past quarter century. But will this growth in home prices continue in the future? A look at Miami metro’s housing prospects.
High Historical Home Price Appreciation
The Miami-Fort Lauderdale-Pompano Beach MSA (henceforth, Miami) has historically seen high home price appreciation, compared to other metros. Prices have increased 250% over the last 25 years.
The question is – will Miami continue to remain a hot market in the future?
Let’s look at the data.
Slowing Population Growth
Miami has a reputation as a popular destination for both domestic and international migrants. However, this is not true in the case of domestic migrants.
Miami has been seeing negative domestic migration for the last 10 years. In fact, among comparable metros (the top 20 MSAs in terms of population), it ranks third from last in net domestic migration!
In fact, population growth has been slowing down at an alarming rate. This does not bode well for future housing demand.
An Ageing Populace
Miami has the oldest workforce among comparable metros, at 43.8 years. Since homeownership peaks in the 30s, this is another indication of uncertain future demand.
Miami also has the 2nd highest proportion of senior homeowners (aged 65 and above). As a section of older homeowners moves to adult facilities in the future, housing supply may increase. An increase in supply puts downward pressure on prices.
Miami also scores low on affordability. While it’s not as expensive to live in as Los Angeles or DC, its ratio of home price to household income, at 5.2, is significantly higher than the US average of 3.7.
All of this paints a pessimistic picture for future home price growth in The Magic City.
But the story is not over yet.
Constrained New Supply
New constructions are a crucial component of housing supply. And the authorities have been constraining this supply – by authorizing a limited number of permits every year.
Miami’s single family permits-job growth ratio (2019: 0.15) is far below the national average (2019: 0.34).
In summary, the Miami housing story is simple: Population growth is slowing down from negative domestic migration and an aging population. Supply from new construction is very low. Prices will likely appreciate.
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