Luxury Home Sales Surge and Redefine Pre-Pandemic Market Trends
Miami-Dade County's luxury real estate market, particularly homes priced at $1 million and above, has continued to surpass pre-pandemic levels, demonstrating robust growth in median sale prices. According to the April 2023 statistics released by the MIAMI Association of Realtors (MIAMI) and the Multiple Listing Service (MLS) system, the county's $1 million+ home sales increased by 94.3% compared to April 2019, with 340 transactions recorded, compared to 175 during the pre-pandemic period. This surge in luxury sales contributes to the ongoing boom in Miami's high-end real estate market, with nearly 45% of all $1 million+ sales occurring in the past three years.
The allure of Miami's real estate market can be attributed to a significant influx of wealthy buyers from California and New York, who have relocated their businesses and families to the city. This influx of demand highlights Miami's status as the city of the future, according to MIAMI Chairman Ines Hegedus Garcia. Acknowledging the increased demand, there is a pressing need to expand inventory and introduce new listings at various price points, which would unlock even greater sales potential within the market.
Florida has emerged as the leading state in terms of the largest net gain of adjusted gross income (AGI) resulting from domestic migration, with a total gain of $23.7 billion, as per the most recent IRS-SOI migration data. Furthermore, out-of-state homebuyers in Miami-Dade County, who obtain mortgages, boast a median household income of nearly $100,000.
Miami's global prominence in the real estate market is evident, as it ranks fourth in super-prime real estate transactions ($10 million+) and fifth in ultra-prime sales ($25 million+) worldwide, according to the 2023 Knight Frank Wealth Report.
However, it is important to note that the overall home sales in Miami experienced a year-over-year decline of 35.5% in April 2023. This decline can be attributed to rising mortgage rates, the recent banking crisis, and limited supply in certain price segments. Most of the homes purchased in April had negotiations initiated in March when mortgage rates started at 6.71% before reaching 7.03% on March 7, 2023. Although rates stabilized for a while, they have recently risen again. In comparison, mortgage rates on March 1, 2022, were at 3.90%.
The housing market is sensitive to changes in mortgage rates, and as per Freddie Mac, the 30-year fixed-rate mortgage averaged 6.35% as of May 11. This rate is slightly lower than the previous week's 6.39% but significantly higher than the 5.30% recorded one year ago. Despite the temporary impact of rising rates and the banking distress experienced in March, MIAMI REALTORS® Chief Economist Gay Cororaton anticipates that mortgage rates will move towards 5.5% by the end of the year, reinvigorating the housing market's rally witnessed in the first quarter.
In terms of specific property types, Miami's single-family home sales experienced a year-over-year decline of 19.7% in April 2023, dropping from 1,246 to 1,000. This decline can be attributed to a comparison with an exceptionally strong sales month in the previous year and the current market's limited inventory in certain price ranges, combined with higher mortgage rates. Similarly, existing condo sales in Miami witnessed a 44.4% decrease year-over-year, declining from a historic figure of 2,199 in April 2022 to 1,222 in April 2023, due to the scarcity of available inventory and rising mortgage rates.
Despite the decline in sales volume, Miami-Dade County's median prices for both single-family homes and existing condos saw year-over-year increases. Single-family home median prices rose by 6.2%, reaching $600,000 in April 2023 compared to $565,000 in the previous year. This marks the 137th consecutive month of price appreciation, setting a record as the longest-running streak. Similarly, existing condo median prices experienced a 6.4% year-over-year increase, rising from $390,000 to $414,900. Condo prices have witnessed growth in 137 of the last 143 months. The rise in prices can be attributed to the combination of low inventory and high demand. Additionally, rising rents also contribute to the support for home prices.
The inventory situation in Miami-Dade County is currently challenging, with April 2023 recording the second-lowest inventory levels for the month of April, surpassing only April 2022. Total inventory in the county experienced a 53.1% decline compared to the historical average for April, with only 9,414 active listings available. Similarly, new listings in April 2023 were the second lowest on record for the month of April, second only to the pandemic-affected month of April 2020. New listings were down 28.8% compared to the historical county average for April. As a result, the total active listings at the end of April increased by 32.5% year-over-year, from 7,077 to 9,378.
The inventory situation varies for single-family homes and condominiums. Active listings of single-family homes increased by 28.3% year-over-year in April 2023, from 2,366 to 3,036. Condominium inventory also experienced a 34.6% year-over-year increase, rising from 4,711 to 6,342. However, the number of new listings for both single-family homes and condos decreased. New listings for single-family homes declined by 30.1%, from 1,647 to 1,151, while new listings for condos decreased by 25.3%, dropping from 2,287 to 1,709.
The months' supply of inventory serves as an indicator of market conditions. In the case of Miami's single-family homes, the months' supply increased by 73.7% year-over-year to 3.3 months, indicating a seller's market. Similarly, the months' supply for existing condos rose by 113% to 4.9 months, also indicating a seller's market. In a balanced market, there should be between six and nine months' supply to cater to both buyers and sellers.
Nationally, the housing inventory at the end of April stood at 1.04 million units, representing a 7.2% increase from March and a 1.0% increase from the same period last year. Unsold inventory equates to a 2.9-month supply at the current sales pace, compared to 2.6 months in March and 2.2 months in April 2022.
The real estate sector plays a significant role in Miami's local economy, generating income through various channels such as commissions, fees, moving expenses, home-related expenditures, and new construction. In April 2023, Miami-Dade County's real estate market contributed to a local economic impact of $271.1 million through the sale of 2,222 homes. According to the National Association of Realtors (NAR), the total economic impact of a typical Florida home sale is estimated at $122,000.
The total dollar volume of Miami's real estate transactions in April 2023 amounted to $1.7 billion. However, there was a decline in the dollar volume for both single-family homes and condos. Single-family home dollar volume dropped by 26.67% year-over-year to $923 million, while condo dollar volume decreased by 48.15% to $802 million.
Distressed sales, including bank-owned properties (REO) and short sales, remained low in Miami's real estate market, accounting for only 1.3% of all closed residential sales in April 2023, comparable to the figure recorded in April 2022. This is a stark contrast to 2009 when distressed sales constituted 70% of Miami's total sales. Short sales and REOs represented 0.3% and 0.9%, respectively, of the total sales in April 2023.
Miami's median price appreciation outperformed the national and state levels. In Florida, closed sales of single-family homes decreased by 17.2% year-over-year in April 2023, while existing condo and townhouse sales declined by 26.8%. Nationally, total existing-home sales transactions dropped by 3.4% from March to a seasonally adjusted annual rate of 4.28 million in April, with a year-over-year decline of 23.2%.
The statewide median sales price for single-family existing homes in Florida remained unchanged at $400,000 compared to the previous year. For condo-townhouse units, the median price increased by 4.8% to $325,000. Nationally, the median existing-home price for April was $388,800, reflecting a 1.7% decline from the previous year.
In terms of market performance, Miami's properties are attracting offers close to the listing price. The median percent of the original list price received for single-family homes in April 2023 was 96.6%, down from 100% the previous year. For existing condos, the median percent received was 96%, a decrease from 99.4% in April 2022. The median number of days between listing and contract dates increased for both single-family homes and condos, indicating a slightly longer market time. However, the median number of days to finalize the sale decreased for condos, suggesting a more efficient sales process.
Cash sales remain prominent in Miami's real estate market, accounting for 37.9% of closed sales in April 2023. Although this percentage decreased compared to the previous year's figure of 43.8%, it is significantly higher than the national average of 28% cash transactions. The high number of cash buyers reflects Miami's appeal to foreign buyers and individuals relocating from more expensive U.S. markets who can leverage their profits from previous real estate sales.
In summary, Miami's luxury real estate market, particularly homes priced at $1 million and above, continues to thrive, surpassing pre-pandemic levels. The market's performance is driven by a wealth migration from California and New York, making Miami a top destination for buyers. However, overall home sales have experienced a decline due to rising mortgage rates and limited supply. Median prices, on the other hand, continue to appreciate, signaling a strong market. The inventory situation remains challenging, with low levels of new listings and active inventory. Nevertheless, Miami's real estate sector continues to make a significant contribution to the local economy, and distressed sales remain low. Cash transactions remain prevalent, emphasizing Miami's appeal to both foreign and domestic buyers.
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