I just finished a field trip in Miami and the general feeling of the housing market almost sounds too good to be true. Prices rising, floods of international money coming into the area, a high probability of a casino in Miami in the future. Grab the gold while you can.
Then I heard a term I heard from another investor, “drinking the koolaid”, and it got me thinking…
The housing market in Florida, much like California, has the attention of international investors. These investors need some type of stability to protect their money, and they choose these locations for several reasons:
- Perceived stability of our banking system
- Pleasant locations to visit due to temped climates, beautiful scenery and quality of life
- They want to be near family members and friends that are in that location
Miami being the international hub for Central and South America, it will never go away. There will always be a reason for Miami to exist, no matter how many hurricanes come through the area.
According to The Real Deal, “More than two-thirds of all sales in the Miami market are all-cash, and Florida is the number one state for all-cash buys in the nation.” My Investor Savvy Agent in Miami said that 5 years ago there was only 16% cash buyers.
When in an area where housing is in short supply, high demand, prices have NO CHOICE but to go up. Terms don’t count because EVERYONE has cash and promise to close quickly. Even the foreign investors can close quickly because their money is waiting for them at the Miami Branch of Bank of Panama, or wherever.
The future is so bright, I have to wear shades.
There are 2 ways this can go; continue to rise as demand increases, such as the family members from foreign countries wanting to be together, or there COULD be some homeowner “profit taking”.
Imagine the homeowner that has been “underwater” for the last 4 years and can finally sell their house and relieve themselves from the emotional turmoil they’ve suffered as they struggled to survive? What about the houses that were bought in the last 3 years – will they consider this sudden increase in housing prices as a good opportunity for profit taking? Could there be enough of these homeowners list their properties that can affect an actual price decrease in the Miami housing market?
So then I start to think about the poor families that just want to own a home. The working class that cannot get close to a house because of this significant cash influx. Where do they go? Do they just rent? Do they look outside to the secondary markets? Wouldn’t it be nice to be able to predict the future?
Every time there has been some kind of collapse in the financial markets, it takes everyone by surprise. What surprise is in store for Miami, if any?