Dinorah Mancito has paused her search for an affordable home. Humberto Gil is only "window shopping" as he worries about rising rents. Steve Bussa sold his house fast, but then had trouble finding a new home in the school district he and his wife wanted.
Incomes are growing, unemployment has plummeted from its pandemic-induced surge, yet home prices and rents are jumping, making a South Florida home unaffordable or difficult to find for many.
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The median price of a single family home is now at least a half million dollars. That’s up at least 15% from a year ago. It is important to note this is the average sales price — not the average value of all homes whether they are for sale or not.
The average rent in Miami is over $2,200 a month for a 1-bedroom according to online rental platform Zumper. That’s up almost 40% in a year, making Miami home to the fastest rising rent in the nation.
"It's a question of after we pay the mortgage, what do we have left for other necessities like food and clothing and medicine?" said Ned Murray, associate director of FIU's Metropolitan Center, where he concentrates on economic development and housing.
"Every time we near the peak of a housing cycle, we start to talk about housing affordability," said Ken Johnson, a real estate economist at Florida Atlantic University. "We have just too few roofs under which people can either rent or own."
The shrinking supply is one contributor to home prices and rents rising much faster than local income. There's the gap between median-priced homes and condominiums and median household income.
"Affordable housing means that you can support your local economy across the economy," Murray said.
Median incomes in Broward and Palm Beach counties are about $17,500 short of being able to afford a median-priced single family home. In Miami-Dade, the gap grows to almost $30,000, and it rockets to $70,000 in the Keys.
These calculations assume a 20% down payment and do not include the cost of home insurance and property taxes, which would widen the gulf.
The picture for condominium buyers is a little better. The median household incomes in Broward and Palm Beach counties could afford a median-priced condo or townhome, using the same assumptions. Miami-Dade median condo prices required about $4,000 more in annual median incomes. A median-priced Keys condo remains far beyond the reach of a median income.
"A local worker is really not even in the game — the real estate game," said Murray. "We don't have the mobility that's so necessary in a healthy real estate market where people can move from rental to starter home to a mid-level home. That's all evaporated."
Instead, Murray said it's outside investors driving demand in a market with dwindling supply, especially in the rental market.
One indicator of investor interest is cash sales. A third of single family home sales that closed in December in Miami-Dade County were paid in cash. Same for Broward County.
"What we're dealing with is a market that is really externally driven by outside investors, coupled with the fact that we have a real shortage," Murray said.
Steve Bussa and his family experienced that shortage. He and his wife are optometrists. The owned a home in Pompano, but after refinancing their mortgage early during the pandemic, they decided to sell when they saw the increased appraised value. They wanted to move into a neighborhood because of its public schools. They found the neighborhood in Fort Lauderdale, but kept losing out on homes.
"You're looking for your your dream home in a market that's so quick and things are flipping so fast. And then you get beat out by these cash offers — sight unseen. It was just crazy," he said.
Dinorah Mancito's dream of buying a home also ran into cash buyers and low inventory. She is a manicurist who rents an apartment with her husband in Miami Beach. She called herself a "miracle in Miami Beach" for having a two-bedroom apartment for $1,300 a month. That has helped both her and her husband save money for a down payment on a home.
"I'm looking for a two-bedroom house (so) if my kids come and visit me, I can offer one bedroom for them. My in-laws live in Argentina. That's our culture — when relatives come, we don't send them to hotels," she said.
She also wants a home with a laundry area inside. She shares a laundry machine with seven other apartments at her rental now. "That's one of my things to feel at home."
She and her husband have a combined income over the median income, yet she has been stymied in her search. She said the homes she has looked at in their price range have needed significant repairs, or are in areas she does not want to live, or too far away from the salon where she works. "I need like $1 million or $500,000 to buy a decent house."
There is a squeeze of supply. Active listings of single family homes dropped by a third to half in December compared to a year earlier. The higher prices have not necessarily brought sellers to the market. "It's creating this major affordability issue," said FAU's Johnson.
"We try to solve affordability problems at the peak of housing cycles when land prices are tremendously overvalued and it's difficult to solve from a public policy standpoint. We ought to be talking about housing affordability when we're at the bottom of the cycle and it's not really on our minds. We're not going to solve the affordability crisis right now. We just can't."
Johnson is one of the local professors behind a buy-versus-rent gauge of the housing market. That gauge signals it's better to rent than buy in Miami and has been for more than five years.
Johnson is worried about the current run-up in home prices, but not as concerned as he was 15 years ago as the housing bubble burst first in South Florida before shaking the entire national economy and bringing on the Great Recession.
Humberto Gil got caught in that collapse of housing values. He's been a renter since and isn't eager to become an owner soon. Gil is an adjunct professor and occasional Uber driver who pays $1,425 for a two-bedroom apartment in western Miami-Dade County, where he lives with his son. Gil said his rent has not gone up since he moved in five years ago.
He sees neighboring buildings asking $1,800 for one-bedroom units. "I'm a little nervous looking around where I live," he said. "I know that the circle is closing in."
