It’s getting harder to afford a home – any home – in Miami and that is helping to lead the South Florida market to dominate a national list of most overvalued cities.
Nationally, first-time buyers must now earn 13% more than a year ago (or $64,500 annually) to pay for a starter home. Rising costs measure worst in Miami (up 24.8%), second only to Fort Lauderdale (28%) year over year, according to a recent report from Redfin.
According to this month’s Beracha and Johnson Housing Index, nine of the top 15 most overvalued and steadily rising metro areas in terms of value in Florida, including Miami.
The two most overvalued markets in the Index overall are Atlanta and Detroit, with buyers paying a 47.34 percent premium and a 46.08 percent premium on a home, respectively.
The research emanates from Florida Atlantic University and Florida International University and is based on available data from Zillow or other providers.
Currently, buyers are paying an almost 39 percent premium for the typical home in Miami, placing the area as the 11th most overvalued area in the entire country, the Index showed.
“Just a year ago, premiums in Miami were among some of the lowest in the list of measured metros in the United States,” said researchers.
The typical home price in Miami reached $458,749 at the end of June.
Ken H. Johnson, real estate economist with Florida Atlantic University, said in prepared remarks, “South Florida home prices have started to increase over the past few months. It is hard to tell if it is the summer selling season effect or the reigniting of price growth in the area.
“However, premium scores, the difference between actual average and statistically predicted prices, are remaining stable, suggesting that the rise in prices in the Miami area is probably more seasonally related.”
Tampa, where buyers are paying an average 42.56 percent premium for a home, tops the list for Florida metros followed by North Port, 41.93 percent; Cape Coral, 41.66 percent; Lakeland, 40.26 percent; Palm Bay, 39.89 percent; Jacksonville, 38.37 percent; Orlando, 38.18 percent; and Deltona, 38 percent.
Housing prices in Florida are being bracketed by two market forces keeping them stable.
Higher mortgage rates, lately at almost 7 percent, are preventing prices from re-escalating, while a limited supply of homes on the market and sustained demand combine to keep prices from falling, according to the report.
“We have a huge demand coming from an influx of population into Florida, as well as more new households being formed in the state,” Eli Beracha, Ph.D., of FIU’s Hollo School of Real Estate, said in prepared remarks.
“Millennials are forming households at a nearly unprecedented rate creating significant demand for housing.”