Bluntly? You reap what you sow. The economy depends on young people entering the housing market as a young family, buying starter homes, freeing up another family to move into a bigger house. Right now homeownership is at a 50 year low, and student debt is at an all-time high, and though people may hesitate to use the word “bubble.” Real estate prices in Miami are approaching the point at which they exit the stratosphere and enter the mesosphere. We’re not just talking about a $50 million spec house in Coconut Grove with four kitchens in 20,000 square feet – and a flood insurance premium to match – but the fact that the median rent in Miami-Dade is $1,955 and a slightly less burdensome $1,750 in Broward County. This is also stacked against median home prices of $241,000 in Miami-Dade and around $200,000 in Broward. So let’s take a look at the top five reasons renters are not segueing into buying.
- Investors: Investors come with cash in pocket. No waiting for a first-time buyer approval, and will always take the prize in a bidding war. The home goes on the market as a rental because rental demand is high, or is fixed, flipped, and priced out of the range of young buyers.
- No money: When you’re forking out for a rental at these high rates, you don’t have a lot left over to stash away for a down payment.
- Double digit price increases: Home prices this year are up over 12 percent from last year. That just screams “bubble” to potential buyers who remember the last housing bubble very well.
- Falling new construction: With buyers of preconstruction condos getting shellacked in the resale market, the zest for buying before breaking ground is waning, aside from those who enjoy schadenfreude. As a result, new construction numbers are down since the preconstruction market is cooling off.
How to turn those renters into buyers is going to be a problem. When you price out the people who provide the backbone of a community – police, firefighters, teachers, and other workers – they will try to find some other place to work and to live. Affordable housing also needs to take into account that most recent college grads are carrying five figures in debt on graduation day, and that they are not only paying rent, but as much as $1,000 a month for their student loans. Blue-collar workers are also being shunted to the outskirts of homeownership with stagnant wages versus rising costs. Even seniors, long a Florida mainstay, are looking at tightening budgets after taking a hefty hit to investments, savings, and pensions in the Recession. It’s going to take a great deal of political backbone, respect for neighborhoods and lower income families, and younger people to even start having an effect. Our future does not depend on investors who never turn the lights on in the units they’ve scooped up, but on the people of Miami-Dade who love and work here.