It is that time in history when the millennials have reached the home-buying age, and according to a report, they are right on schedule. The housing market is relatively stable, the cost of borrowing is low, and buying is proving to be cheaper than renting. But even when the general housing market is showing positive signs, the housing market in South Florida is becoming unattainable for most millennials, according to consumer finance site, Nerdwallet. Those who want to purchase a home here have to sacrifice a massive deal, given the high prices of the houses and comparatively low-income capacity.
House Price Growth in Miami
The median home prices in Miami-Dade rose by 9 percent whereas the wages only rose by a mere 4 percent. Experts say that Miami is quickly moving towards house inaccessibility for first-time buyers.
Is there any affordable neighborhood left in Miami?
At no. 53, the Edgewater area that is north of downtown Miami is considered to be the most affordable area of South Florida. There are other new areas such as East Milton (located in the Florida panhandle), Lady Lake (near downtown Orlando) and Navarre (located on the Gulf Coast).
A research study shows that Miami is the priciest followed by Orlando and Tampa regarding the rental growth cities. The most expensive neighborhoods in Miami are South Beach where rents hover around $2,000 per month and Fisher Island where rents are as high as $7,800 per month. According to a recent report, working-class apartments in South Beach just sold for a total of $59 million which is just outrageous. The new landlords plan to increase the rents by 50 percent which means that the tenants may have to move out. It is only a glimpse of the soaring housing market in South Florida.
On the other hand, the least expensive neighborhoods in Miami are Little Haiti, Liberty City, El Portal and Brownsville where rents are comparatively low and hover around $1,000 per month. The problem is that the area is minimal and hence there are quite limited options to choose. Also, some of these areas are not safe.
According to Ali Bustamante, an economics professor at Florida International University’s Centre for Labor Research Studies, “The idea of buying your first home in your mid-20s or early 30s, that’s increasingly unattainable, especially in the context of South Florida.” Bustamante thinks that the reason why Edgewater landed at no. 53 is that of the concentration of relatively affordable but otherwise unwanted homes. And even that neighborhood is now going through a transition as the developers demolish the single-family homes in favour of high-rises. It certainly means that Edgewater will no longer remain a comparatively cheaper area in South Florida. “It’s a vicious cycle for would-be buyers,” said Bustamante. “They’re going to have to have a lot more time of savings and renting before being able to jump into the real estate market than they would have in the past … and the longer they sit out of the market, the higher the real estate prices will grow. So it’s a game of catch-up.”
How can the millennials afford such high housing prices in Florida?
According to the Consumer Financial Protection Bureau, a first-time home-buyer in Florida could afford to spend $1,179 per month on his mortgage and other homeowner costs. But Bustamante notes that in reality, the recommended saving rate for this spending is complicated to obtain as it takes much longer to save the 20 percent down payment that is usually required.
According to a study conducted by Trulia, an online real-estate company, it takes about 12 years for a college-educated person to save for a down-payment for a Miami house and 17 years for those without a college degree. It clearly shows how difficult it is for the young generation to afford a home in South Florida.
It is unlikely for most millennials to buy their first home in South Florida due to the outrageous prices. The real estate market is the 6th most expensive in the country alongside Chicago with a median of about $1,880 rent for a one-bedroom apartment.