Discover the challenges of the real estate market in Miami, where housing prices have reached record levels. Learn about the causes behind this situation, such as vacation rentals and homeowner association restrictions.

The annualized inflation rate reported for the Miami urban area, which includes Palm Beach, Broward and Miami-Dade counties, registered an increase of 9.9%, the highest figure in the country. This is mainly due to the pressure exerted by high housing prices in this area of ​​the country.

According to the inflation report from the United States Bureau of Labor Statistics (BLS), overall housing prices in the Miami area have increased 17.2% in the uacute ;last year.

There are specific reasons why Housing prices not only in Miami, but in much of Florida, continue to rise, while in some areas of the country they have begun to decrease or at least slowed down. A study by the College of Business at Florida Atlantic University (FAU), published this week, notes that the large number of short-term vacation rentals in the state, such as those listed on the digital platform Airbnb, and the policies Restrictive ethics of homeowners and condominium associations contribute significantly to the rental crisis being experienced in the state.

"Short-term rentals, such as those on Airbnb and similar sites, have depleted the inventory of available and affordable housing," explains Ken H. Johnson, an economist at the College of Business at Florida Atlantic University (FAU). . Additionally, Johnson notes that many HOAs and condominiums limit owners from renting their units for the first year and prohibit rentals altogether, creating even more pressure. in the housing market.

In this context, Florida is home to 9 of the 21 most expensive and overrated markets in the United States. A monthly report produced collaboratively by several universities in the state and Alabama shows that renters in the Cape Coral-Fort Myers area on the West Coast pay more than 18% above trend long-term rental in the country, while in Miami, with 15.96%, it is the second urban area with prices above the long-term trend.

On average, in the urban area of ​​Miami $2,787.71 is paid in rent, while the trend indicates that the average for this area should be close to $2,404.08, according to the report prepared by the Florida Atlantic University, Florida Gulf Coast University, Lucas Institute for Real Estate Development & Finance and the University of Alabama.

Tampa, Orlando, Deltona-Daytona Beach, Palm Bay-Melbourne, Jacksonville and Lakeland also have some of the highest rental premiums in the United States, with estimated overvaluation between 8% and 10%.

"As a state, we must be aware that the current rental crisis is happening. "Harming our economic growth potential and making it increasingly difficult for service workers to live within reasonable distances of their jobs," Johnson warns.

&Income index Waller, Weeks and Johnson

Florida metropolitan areas, November 2022

HOW TO STOP HOUSING PRICES?

Ken Johnson explains that developers and local governments need to build more units as part of a solution that must include other actions. "Given the sharp increase in rents over the past two years, short-term rental owners may find greater profits by converting their properties into long-term rentals," Johnson explains. He adds that homeowner association (HOA) boards that decide to relax or eliminate rental restrictions will further increase property values ​​for their residents. P>

"In both cases, there are incentives for homeowners and HOA boards to change what they are doing and, at the same time, it would help alleviate Florida's rental problem," Johnson says . "Markets will work over time and we will slowly build enough units to alleviate this crisis. But there can also be relief during that process.

The task of improving supply and meeting demand will not be simple. easy. The decision to increase mortgage rates has not had the expected impact in this region, unlike the rest of the region.the country. Even some experts believe that the increase in rates has put greater pressure on the market. "Increasing interest rates necessarily raises mortgage interest rates and discourages the construction of new homes. "This keeps pressure on the rental housing market," explains Herman Mark Schwartz, a professor in the Department of Politics at the University of Virginia, and one of the experts used in a study on inflation in the United States. United made by the WalletHub site.

Another factor to take into account is the number of foreign buyers, mainly from Latin America, who flock to the Florida real estate market. According to the Miami Association of Realtors' foreign buyers report in 2022, they purchased residential properties worth $6.8 billion, 34% more than in 2021 ($5.1 billion).< /p>

The sector is expected to remain strong in 2023 and that many people from the United States, Latin America and Europe will continue to show interest in purchasing properties in Florida, according to Jennifer Wollmann of the real estate firm Berkshier Hathaway of EWR Realty.

The best scenario for 2023 would be for prices to stabilize, the number of homes available for purchase and rent to improve, and financing options to improve.