What’s causing over-inflated housing prices across South Florida?

MIAMI – The Greater Miami area, which includes Broward and Palm Beach counties, is the 11th most overvalued area in the country. Nine other metropolitan areas in Florida are part of the 15 most overvalued cities of the 100 that make up the list in the United States.

Florida International University professor William Harding says is all about paying more for less. 

“Some of the newer units that we are building, especially in Brickell and some of those areas are relatively small,” said Harding, Dean of the F.I.U. Business School refering to one of the smaller apartments built in overvalued areas in Miami. “And what they want is different than what I might want if I have three children in middle school,” said Harding describing the profile of the residents who have caused homes to be heavily overvalued.

“Many of the people who moved to Florida are affluent or wealthy young professionals, they have more capacity to buy a home than the existing people in the market,” said Harding.

F.I.U. and Florida Atlantic University are the two institutions that participated in a study that analyzed 100 cities and ranked the top 15.

These are the Florida metropolitan areas where buyers are paying rising average premiums for homes, according to the Beracha and Johnson Housing Index:

• Tampa: 42.56%
• North Port: 41.93%
• Cape Coral: 41.66%
• Lakeland, 40.26%
• Palm Bay, 39.89%
• Greater Miami: 38.89%
• Jacksonville, 38.37%
• Orlando, 38.18%
• Deltona, 38%

“Miami is still more expensive than Tampa,” said Harding, when asked about the percentage increase in value at Tampa – which ranks #1 – versus Greater Miami, which is 38.89%.

He cited the overpriced value of property in Miami as higher in terms of price per unit in comparison to income and purchasing power.

Once faced with the question – what are the options for middle-class residents who dream of buying a family home?

“We will actually see a plateauing of prices,” responded Harding. He firmly believes that the supply of smaller units will outweigh the demand.

“When we live in a world where inflation is 4, 5 or 6% and real state is flat in real terms, you will see that people’s incomes are going to go up because it’s going to be adjusted to inflation, which gives them more ability to buy,” concluded this business professor.

Currently, new family homes recently build are valued at $900,000 dollars, in certain centrally located areas.

“The (middle class) buyers are not willing to pay that price, so we’re going to see within the next six to seven months and we’ll see who wins that tug of war, developers or buyers. Remain patient, it will get better,” said Harding.