South Florida leads the nation in surging home values, putting more and more pressure on buyers who can’t afford to own a home, according to the South Florida Sun Sentinel. Higher prices and low inventory in the southern part of Florida are affecting Millennials, senior citizens, and newly arrived job hunters.
While that may be bad news for many homebuyers, it’s music to the ears of rental property investors, helping to explain why rental growth and the demand for rental property is so strong in South Florida.
South Florida is the southernmost part of the state and is home to about 100 cities and towns including Miami, Fort Lauderdale, West Palm Beach, Boca Raton, Boynton Beach, and North Miami.
Also known as the Greater Miami Area, South Florida is the 7th-largest metropolitan area in the U.S. and the 2nd-largest in the southeastern U.S., right behind the Washington-Arlington-Alexandria MSA. The region spans across more than 6,000 square miles and three counties – Miami-Dade, Broward, and Palm Beach - and is home to more than 6.7 million residents.
The job market, growing population, and quality of life help make the region golden for national and international business, locals and immigrants, and real estate investors seeking predictable cash flows and long-term appreciation.
Florida’s population is expected to increase by almost 26 million people by 2030, with South Florida leading the way, according to the Florida Chamber of Commerce. The influx of foreign-born residents plays a role in the population growth of South Florida.
Key Population Stats:
- Population of South Florida is 6.7 million.
- South Florida’s population is projected to reach 6.9 million in the next ten years, and 7.6 million by 2045, based on research by the University of Florida.
- Over the last four years, population growth rates in South Florida have begun slowing, averaging about 0.6% for the three-county region.
- Net population gains in South Florida are driven by foreign-born residents immigrating to the U.S., as reported by the Miami Herald.
- In fact, the region welcomes nearly as many new immigrants as New York City, with more than 87.2% of all foreign-born residents in South Florida coming from Latin America.
As the 12th-largest economy in the U.S., the economic output of South Florida is about the same as Hong Kong, Israel, Colombia, and Chile. In fact, the 120 miles along Miami-Dade, Broward, and Palm Beach counties in South Florida are often thought of as Florida’s Gold Coast because of the thriving amount of international trade and domestic commerce.
Key Employment Stats:
- GDP of South Florida is nearly $355 billion and has grown by more than 43% over the last ten years.
- Job growth rate in South Florida was 1.5% last year.
- Non-farm employment is more than 2.7 million, with nearly 70,000 new jobs added year-over-year, based on a report from the Business Development Board of Palm Beach County (BDB).
- Over the next seven years the job market in South Florida is projected to grow by 7.5%, according to the Florida Department of Economic Security.
- Unemployment rate in South Florida is at a record low of 3% and below the statewide and national unemployment rates.
- Business sectors in South Florida showing the strongest employment growth include education, health services, and professional business services.
- Fort Lauderdale has the 4th-highest number of openings for STEM jobs (science, technology, engineering, mathematics) in the state of Florida.
- Industries with the highest job growth projections over the next seven years include construction, retail trade, transportation, leisure and hospitality, and financial services.
- South Florida is the 2nd-largest international banking center in the U.S., according to Florida Trend.
- More than 1,400 multinational corporations and 75 foreign consulates and trade centers are based in South Florida.
- South Florida is home to the domestic and international divisions of Spanish-language broadcasters Univision Communications, NBC Universal Telemundo, and HBO Latin America.
- High-profile companies located in the South Florida region include German grocer Aldi, Ecolab, Chiquita Brands International, Sixt rent a car, and Hong Kong-based Techtronic Industries (maker of brands such as Milwaukee Tool, Ryobi, Hoover, and Oreck).
- South Florida companies that are expanding include aviation/aerospace firm Cyient Defense Services in Jupiter, FL; Fluorotek in Riviera Beach, engineering and tech company Levatas in West Palm Beach, physician staffing firm Hayes Locums in Fort Lauderdale, Kellstrom Aerospace in Miramar, financial consulting firm Slalom in Miami, and aerospace giant Bombardier in the City of Opa-Locka.
- Major public and private colleges and universities in South Florida include University of Miami, Florida International University, Miami Dade College, University of Fort Lauderdale, and Palm Beach State College.
- On average, 86% of the residents have a high school education or higher, and nearly 32% hold a bachelor’s or advanced degree.
- Interstate highways in South Florida include I-95, I-75, and I-395.
- PortMiami, Port Everglades, Port of Palm Beach, and Miami River Port are the four seaports in South Florida serving cargo and commercial cruise lines.
- Miami International Airport, Fort Lauderdale – Hollywood International Airport, and Palm Beach International Airport in South Florida provide service to nearly 90 million domestic and international passengers each year.
Real Estate Market
Recent articles in Florida Trend and the South Florida Sun Sentinel say that the housing crunch in South Florida won’t get much better this year due to rising prices and low supply. Combined with the region’s net population growth and strong job market, the housing shortage likely means a rising demand for rental property in South Florida.
Key Market Stats:
- Biggest cities: Miami, Hialeah, Homestead
- Median home value: $318,666
- Annual home value increase: 1.7%
- Projected annual increase: 1.5%
- Median listing price: $409,415
- Median selling price: $290,200
- Median list price per square foot: $308 per square foot vs. $230 per square foot average for South Florida region
- Days on market (average): 107
- Price reduction during listing period: 10% of homes listed
- Negative equity: 8.8% vs. 8.2% U.S. average
- Delinquent mortgage: 1.5% vs. 1.1% U.S. average
- Cities with highest home values: Country Walk, Richmond West, The Hammocks
- Cities with lowest home values: Richmond Heights, Kendall West, Homestead
- Biggest cities: Fort Lauderdale, Pompano Beach, Hollywood
- Median home value: $278,675
- Annual home value increase: 2.5%
- Projected annual increase: 2.0%
- Median listing price: $310,000
- Median selling price: $257,900
- Median list price per square foot: $196 per square foot vs. $230 per square foot average for South Florida region
- Days on market (average): 89
- Price reduction during listing period: 12% of homes listed
- Negative equity: 6.2% vs. 8.2% U.S. average
- Delinquent mortgage: 1.6% vs. 1.1% U.S. average
- Cities with highest home values: Southwest Ranches, Weston, Cooper City
- Cities with lowest home values: Miramar, Sunrise, Tamarac
Palm Beach County
- Biggest cities: Boca Raton, Boynton Beach, West Palm Beach, Palm Beach Garden
- Median home value: $293,823
- Annual home value increase: 2.1%
- Projected annual increase: 2.8%
- Median listing price: $350,000
- Median selling price: $267,100
- Median list price per square foot: $198 per square foot vs. $230 per square foot average for South Florida region
- Days on market (average): 98
- Price reduction during listing period: 13.7% of homes listed
- Negative equity: 6% vs. 8.2% U.S. average
- Delinquent mortgage: 1.1% vs. 1.1% U.S. average
- Cities with highest home values: Wellington, Loxahatchee Groves, Royal Palm Beach
- Cities with the lowest home values: South Bay, Pahokee, Golden Lakes
Strong Renters’ Market
The South Florida Sun Sentinel notes that shared housing in rental property just might be a solution to the low supply and high demand for homes in South Florida. For example, Society Las Olas in Fort Lauderdale is currently under development, targeting tenants who can’t afford to pay high-end rents of between $2,000 and $3,000 per month.
Key Market Stats:
Miami-Dade County (Miami)
- Median rent: $2,150 per month
- Annual rent increase: 3%
- Percentage of renter households: 45%
- Rent range: 69% of units have rents ranging from $1,001 to $2,000 per month
Broward County (Fort Lauderdale)
- Median rent: $1,800 per month
- Annual rent increase: 2%
- Percentage of renter households: 51%
- Rent range: 71% of units have rents ranging from $1,000 or higher per month
Palm Beach County
- Median rent: $2,025 per month
- Annual rent increase: 5%
- Percentage of renter households: 48%
- Rent range: 89% of units have rents ranging higher than $2,000 per month
Historic Price Changes & Housing Affordability
Analyzing the historic change in home prices and affordability are two techniques that real estate investors can use to help forecast the demand for rental property. Two readily-available resources for housing data are the FHA and Kiplinger’s housing affordability report.
Based on data from the FHA 2019 Q3 House Price Index report, these are the historic changes in home prices (including purchases and refinance mortgages) for South Florida:
Miami-Dade County (Miami MSA)
- 5-year change in home prices: 48.82%
- 1-year change in home prices: 5.80%
- Quarter change in home prices: 2.27%
Broward County (Fort Lauderdale MSA)
- 5-year change in home prices: 44.31%
- 1-year change in home prices: 5.33%
- Quarter change in home prices: 1.28%
Palm Beach County (West Palm Beach – Boynton Beach MSA)
- 5-year change in home prices: 50.81%
- 1-year change in home prices: 4.66%
- Quarter change in home prices: 2.05%
The housing affordability report from Kiplinger compares median home prices with the median income needed to purchase a home.
Kiplinger ranks the top 100 metropolitan areas on an affordability index scale of 1 to 10, where 1 represents the most affordable markets and 10 represents the least affordable housing markets in the U.S.
The firm’s analysis of housing affordability in the Greater Miami Area reports:
- Since the last real estate cycle market peak in May 2006, home prices in the Greater Miami Area declined by 17.1%.
- Since the last real estate cycle market bottom in March 2012, home prices in the Greater Miami Area have increased by 103.4%.
- Greater Miami has an affordability index of 8 out of 10, meaning that the market is one of the least affordable places in the U.S. to buy a home.
Quality of Life
Recently, the Miami Herald asked its readers if the quality of life in South Florida has improved. The response was an overwhelming “Yes!”. Here are a few stats that explain why the quality of life in South Florida is so great.
Key Quality of Life Stats:
- Only major metro area in the continental U.S. with a tropical climate.
- Less than a four-hour drive to world-class Orlando-area theme parks such as Disney, SeaWorld, and Universal Studios Florida, and Epcot.
- PGA of America rates the Blue Monster at Doral and Heron Creek Golf Club as two of the best golf courses in South Florida.
- Best beaches in South Florida include South Beach, Pompano Beach, and the Florida Keys.
- Cleveland Clinic Florida, Baptist Hospital of Miami, and University of Miami Hospital and Clinics – UHealth Tower are three of the top hospitals in South Florida, according to U.S. News & World Report.
- Pro sports teams in South Florida include the Miami Dolphins, Miami Marlins, and Miami Heat.
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