Last week I met with a very successful real estate broker in Miami, He told me that the “Miami area was booming and was becoming a much better place to invest or buy a house than Palm Beach or Broward county”; In addition, I heard from a title agent that in the last year his business grew by 200%, and most of the deals were cash. By researching, I found that prices in South Florida grew by almost 10% in the last year and sales surge reducing the inventory in comparison to 2011.
The problem with this boom is that “flipping” a property is coming back to the market, and we know what that can do to a market that even though is growing is still weak as a consequence of the latest crash. However, there is hope that this “boom” would not create big consequences to the market; Fist, because most of the transactions are cash and investors or property owners are paying a much lower value than in 2007, we can argue that is more of a “honest” transaction. Buyers would not sale if the price is not right (they do not have the pressure of the bank) and by purchasing at a less value, the costs such as property taxes or even insurance are lower than before. In fact, maybe they can obtain a nice return by renting the property instead of selling in it right away. A second argument why this “boom” would not have big consequences is that there is an increase in regulation protecting the market and that banks are more willing to sell residential properties to homeowners than investors. A third and last argument is that even though we see an increase in construction, all developers are selling their units in cash and are not accepting (at least most of them) mortgages in their projects. As an example I can tell you that two projects in the Aventura area are asking for a DP of 10% when the contract is signed plus 5% every month after groundbreaking and until the buyer pays the entire amount of the unit. These units are not cheap and most of them cost more than a Million dollars. The good thing about this is that the developer do not have to start constructing the building until he knows he has the money to finish the project or at least the quantity of sales that justify the investment.
Therefore, I believe that this new “boom” would be good for the Miami area. This increase in prices would make homeowners more wealthy in their minds and more willing to maintain their investments/Homes, in addition these new demand would probably help reduce unemployment by creating new constructions and sales jobs; and all of these, at least for now, without the problems that created the latest crash.