Is Miami losing its luster?

With its lines of palm trees, breathtaking beaches and dazzling lifestyle, Miami has long been a vibrant real estate hotspot in the ever-popular Sunshine State, attracting people from all over the country eager to move in—especially since the pandemic hit.

But in recent months, Miami’s housing market has experienced an unusual slowdown, with listings getting “stale” on the market and sales slumping as buyers shy away from purchasing properties whose prices have eclipsed their pandemic peaks.

According to the latest data from Redfin, 452 homes were sold in June, down from 597 last year. Meanwhile, the median sale price of a home was $600,000 in the same month, up 1.7 percent compared to a year earlier.

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Perhaps because homes are still so expensive in the city and mortgage rates are still hovering around the 7 percent mark, buyers appear reluctant to conclude purchases.

The real estate brokerage reported that homes in Miami remained an average of 83 days on the market before going under contract, up from 75 days last year. A listing is considered “stale” after at least 30 days on the market.

“The Miami market is currently experiencing a slowdown, and many are feeling its impact,” Riley Smith, president of Riley Smith Group with Compass Florida, told Newsweek.

“Several factors are contributing to Miami’s current market conditions. Interest rates coupled with low single-family home inventory remains a challenge, despite some relief in Miami’s condo market inventory,” Smith said.

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“Additionally, we’re returning to pre-COVID seasonality in home transactions. With many people leaving town during the summer, we’re seeing fewer new contracts and less new inventory hitting the market.”

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According to data from the Miami Association of Realtors, Miami-Dade’s total sales decreased 13.2 percent year-over-year in June, from 2,364 to 2,051. Miami single-family sales declined 3.8 percent year-over-year, from 1,004 to 966. And existing condo sales decreased by 20.2 percent year-over-year, from 1,360 to 1,085.

The association attributes this decline to an ongoing lack of inventory, high mortgage rates, and, in the case of condos, the introduction of new strict regulations for owners and associations, which has caused a selling frenzy in the city.

Despite negative sale numbers, Smith doesn’t believe that Miami has lost its luster for good, attributing the current negative numbers to a seasonal slowdown.

“As we approach the end of the year, I anticipate the market will pick up again,” he said. “Historically, Miami’s market tends to pick up in the fall and winter season. While price reductions may seem more common, sale prices are still consistent and strong. The current slowdown is more about seasonality and inventory than a complete market downturn.”

Miami Association of Realtors Chairman-Elect Eddie Blanco agrees, saying that seasonal declines shouldn’t be misread.

“I feel like whenever you have a brush stroke of the market in general, it’s somewhat misleading. Real estate is so specific that things come down to the specific location of a single home—the neighborhood, the block, the subdivision, the city,” Blanco told Newsweek.

While home prices have experienced a recent downturn in Miami, the bigger picture tells a different story. “The price of single-family homes in Miami has actually gone up 245 percent since 2012,” said Blanco. “We’ve had 151 consecutive months of single-family median home price increases,” he added. “That’s 12.5 years. It’s the longest-running streak we’ve had.”

Blanco minimized the importance of a 3.8 percent year-over-year decline in the sales of single-family homes in Miami in June, as reported by its association.

“It’s not a significant concern,” he said. “That could just be a trend of, I don’t know, maybe the pace of migration. Maybe it’s just concerns over the overall economy. Maybe, in my personal opinion, it’s the election year. But a 3.8 percent year-over-year drop is a very marginal adjustment.”

Redfin data show that pending sales in Miami dropped by 11.7 percent in the four weeks ending June 30—the fourth-largest decline in the country. In the real estate brokerage’s report for the four weeks ending on July 28, Miami no longer appeared among the metropolitan areas with the biggest year-over-year decreases in pending sales.

Addressing concerns of the Miami housing market becoming overvalued due to weather conditions and prices plunging by the end of the year, Blanco said that these worries are “old news.”

“The idea that Florida will be underwater one day has gone around for years, and that obviously hasn’t impacted people’s buying. If it’s true that sea level rise is impacting our market, then we wouldn’t see that level of migration and the level of price increases that we’ve seen over the years,” he added.

That said, Blanco admits that the Miami housing market might be perceived by some people as overvalued, “but that’s because they may not be looking at how Miami has truly blossomed into a real international market in the past 20 years,” he said. “I’ve grown up here, and I watched Miami develop from a vacation destination into an international metropolis.”

When you compare Miami home prices to that of other major international real estate markets like London, “our price per square foot is still a discount,” Blanco said.

The only thing that troubles Blanco when looking at the future of the Miami housing market is not a real estate change but “some kind of global black swan event that could create an exorbitant amount of job loss, which could cause real estate values to come down.”

That doesn’t seem likely to happen at the moment, with the U.S. economy and the country’s job market still going strong. Apart from this, “as long as people can afford to pay the rents and pay the mortgage payments that they’re paying, that they have been paying for years, I don’t see how there could be a significant adjustment and decline,” Blanco said.