The greater Miami area, spanning Broward and Palm Beach counties, holds the 11th spot on the list of the most overvalued areas in the United States. Notably, Florida features prominently with nine other metropolitan areas among the 15 most overvalued cities out of the 100 cities examined.
Professor William Hardin from Florida International University (FIU) attributes this trend to the idea of paying a premium for limited space. He underscores that some of the recently constructed residential units, especially in areas like Brickell, are relatively compact. Hardin, also the dean of the FIU Business School, highlights that these units may not cater to the needs of families or individuals with specific preferences and requirements, such as those with school-age children.
Moreover, the demographics of those relocating to Florida have shifted. Many newcomers are affluent or prosperous young professionals who have greater financial capacity to invest in homes compared to the existing residents in the market.
In a study conducted by FIU and Florida Atlantic University, analyzing 100 cities and ranking the top 15, several metropolitan areas in Florida stand out for buyers paying escalating average premiums for homes according to the Beracha and Johnson Housing Index:
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Tampa: 42.56%
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North Port: 41.93%
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Cape Coral: 41.66%
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Lakeland: 40.26%
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Palm Bay: 39.89%
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Greater Miami: 38.89%
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Jacksonville: 38.37%
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Orlando: 38.18%
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Deltona: 38%
Hardin points out that Miami remains pricier than Tampa, despite the higher percentage increase in value in Tampa. This is attributed to Miami’s higher property prices per unit relative to income and purchasing power.
Looking ahead, Hardin anticipates a stabilization of prices in the near future, as he believes the supply of smaller residential units will surpass the demand. He also notes that in an environment with inflation rates of 4% to 6%, stagnant real estate prices can lead to higher incomes adjusted for inflation, providing more purchasing power.
Presently, newly built family homes in centrally located areas are valued at $900,000. However, middle-class buyers may be hesitant to pay such prices. Hardin foresees a tug-of-war between developers and buyers in the upcoming months and advises patience, suggesting that the situation will eventually improve.
