There is a fundamental disconnect between supply & demand in the Miami and Miami Beach condo markets. Inventory has steadily risen across market segments, all while transaction volume has dropped off. Higher price points are the worst offenders. The Miami $1M+ market saw a 147% increase in supply since 2013, while sales dropped 32% in the same period
Here’s a fact about the Miami condo market that surprises many people: neither median nor average condo prices ever got back to old highs.
The old high, for purposes of this discussion, is defined as prices reached during the last boom ending around 2007.
Without even adjusting for inflation, median condo prices have not reached old highs.
Adjusting for inflation would make the charts even more dramatic as the the USD has had over 17% cumulative inflation since 2007.
How can this be, you may be wondering? We have all heard about the remarkable recovery in Miami real estate, about sky high pricing, exciting new developments, etc..
This time, the Miami real estate boom has been in the high end.
The boom in the high-end condo market is clearly seen in the Miami Beach chart.
Miami Beach, a coast city in Miami-Dade, saw a great deal of high end condo development this past cycle. Average prices exceeded past highs.
Miami condo prices are still trending up despite a volume downturn.
If you look at the first two charts on this page, both median and average Miami condo prices are still trending up.
How can this be in the face steep condo sales volume declines?
(I wrote about the sales volume decline in a previous post).
The answer is that overall sales volume decline is due to a very sharp decline in the high end.
A very large percentage of high end Miami purchases are made by foreign buyers, and the dollar has been very strong.
Miami condos at price points supported by the local economy are still transacting.
In terms of transaction volume, lower priced condos make up the bulk of the market and there is demand for them.