Why is the middle class permanently priced out of Miami?
- The Wall Street Journal reports that more apartments are being built in Miami than anywhere else in the United States.
- About 90% of them will be luxury units, following the demographic shift in the area.
- This is likely the new normal, a senior housing expert told Insider.
People from all over the country have flocked to Florida during the pandemic, forever reshaping the housing market there.
“Florida’s housing market is now undergoing a restructuring as a result of the work-from-home phenomenon,” housing expert Jonathan Miller told Insider.
The Wall Street Journal reported this week that there is an onslaught of luxury residential towers designed for these newcomers expected to enter the market next year. Especially in South Florida, it’s a sign that these wealthier newcomers — most of whom are from the Northeast — have permanently changed Miami’s housing market, Miller said.
“The luxury market is broader and deeper than it was before,” Miller said, and that will make it harder for middle-class Miami residents who lived in the city before the pandemic to find housing they can actually afford.
An estimated 674,740 people reported changing their permanent address to Florida in 2021, according to Census data. This influx sent the housing market there into a frenzy.
In January 2020, the median home price in Miami was $343,500, according to Redfin. Last month, it reached $560,000 — an increase of 63% since the start of the pandemic.
“The fact that Florida is becoming more expensive makes it less attractive to homebuyers,” said Darrell Fairweather, chief economist at Redfin Corp. He told Bloomberg. “It becomes a concern for people trying to fix their monthly housing expenses.”
The Miami metro area is feeling the pinch of the new normal. Rich newcomers have raised the cost of living and forced them to move Miami residents for life to get away, as previously reported by Insider. The city saw its first population decline in a decade between 2021 and 2022.
“If you look at how much people are spending on rent, almost anywhere in Florida they’re spending about 10% to 15% of their income on rent today compared to just a decade ago,” said Eli Peracha, Hollow School principal. Real estate at Florida International University, for the Wall Street Journal.
Beneficiaries of this transformation: developers and immigrants from other countries.
For more affluent newcomers moving in from the Northeast, luxury housing in Miami is relatively cheap, Miller said. The average monthly cost to rent a unit in Manhattan last month was $5,552, according to Miller Market Report, which is much lower than the average cost of renting a unit in Miami, which is $2,438, according to Rent.com.
This, combined with Miami’s year-round warm weather, tropical beaches, and tax-friendly environment, has made the city a “feeder market” for commuters from the Northeast who are not tied to offices in some of the country’s most expensive cities. Miller added.
“There has been an increased demand for luxury” because of that, which is why developers are focusing on this type of housing, he said.
Lifelong residents of South Florida were forced to leave
The Miami metropolitan area, which consists of Miami-Dade, Broward, and Palm Beach Countieswas struggling for affordable housing.
For example, Miami’s middle-class residents — especially renters — are in crisis.
The Wall Street Journal reported Since 2019, rental prices have increased It increased even more in Miami Compared to almost every other major metro area, it’s up 56.5%, according to Zillow.
“We were We were forced to leave our city “Where we grew up, where we nurtured our roots, where we have a lot of connections and a lot of people who want us back,” Mercedes Cabrera, who has lived for decades in Hialeah, a city in Miami-Dade County, told local news outlet WLRN earlier this summer.
the Middle class buyers Palm Beach County “always comes in second or third,” WPTV reported last year.
In fact, in this “restructuring” in South Florida brought on by pandemic migration, new construction will skew luxury, Miller told Insider. He added that new housing would be created for middle-class residents “perhaps on the margin,” but rarely, if ever.
With current housing stock depleted, people seeking housing in South Florida “will not see any significant improvement in affordability,” he said.
“Miami and most of Southeast Florida have rebranded to more upscale markets. I don’t see that as a coincidence or an anomaly,” Miller said. “The price structure has been reset.”
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