With a large number of homes and condos, South Florida’s real estate is prone to boom and bust cycles that stem more from investment hopes than housing needs. The percentage of owing a second home increases as you head north from Miami, to 20 percent in Palm Beach County. This large pool of properties leads to the swing vote in home prices. It can swamp supply during a downturn but also represents the desire of future retirees as well as South American investors to buy while they can.
The economy of Miami is diversified with an important finance sector but as you move up the coast more jobs are in retail and services. The Healthcare sector is the largest creator of jobs in all the three counties, and growing rapidly. All this make the real estate market in South Florida very competitive.
Home prices were strong in the last two years up to about 40 percent and it is expected that they will keep rising 10 percent per year. From the real estate market trend, there are strong reasons to believe that prices will be high in areas like Broward County and Delray Beach. In other words a mini boom will fizzle after a few years though it might short-live. If you are looking to buy for the long-term, it is advised that you do it now.
During recession, rents hold up better than home prices, buying a property to rent out is an attractive option despite the recent rise in prices, less so in Miami-Dade, more so in Palm Beach County and Broward. Almost half of households in Miami are renters. With most the new healthcare and retail jobs paying low wages, the renting population will increase. In urban areas it makes more sense to buy a single-family house and split it into rental units. Apartment buildings are a good option in Miami if bought at the right price.
Mortgages are a difficult investment right now and every investor should endeavor to take calculated risks only. Because home prices will keep rising the next few years and the equity cushion for new mortgages will grow quickly. However, just because the last bust is over doesn’t mean a new one is not around the corner. Lenders should stay away from high loan-to-value mortgages during this period in the market. The same also apply for construction loans; new projects should be financed in very carefully at all stages.
Population is growing at an uneven pace. It is slower in Miami but faster as you move up the coast. The climate for investments in retail businesses and restaurants is best in Palm Beach County real estate market, where demand has grown quickly the last two years and average income is the highest. All three counties, but especially Palm Beach will need office space for the growing number of healthcare workers. This means there will be increased buyers or renters in the market.