What are the predictions for the Miami real estate market in 2025?
Home prices increase by 9.7%
The June 21 study "2024-25 Southeast Florida Housing Outlook: Sustained Price Growth and Sales Rebound," offers promising forecasts. For 2025, home sales prices are expected to rise by 6.5%, after a 6.9% increase in 2024. Median prices for single-family homes could soar by 9.7%, while condos and townhomes might see a 2.5% rise, possibly due to higher fees.
The Miami Association of REALTORS® (MIAMI) anticipates the 30-year fixed mortgage rate will drop to 6.6% by late 2024 and to 5.7% by the end of 2025. These predictions align with the Federal Open Market Committee’s (FOMC) plan for one rate cut in 2024 and four in 2025. In May 2024, Freddie Mac reported a 30-year mortgage rate of 7.06%. MIAMI's annual projection for 2024 was revised up from 6.0% due to steady FOMC rates and rising inflation in the first quarter.
Chart source: 2024-25 Southeast Florida Housing Outlook Sustained Price Growth and Sales Rebound in 2025
However, before we can continue to look ahead. Let’s look at now. (For 2025 forecast scroll down a bit).
Miami is calibrating
Miami-Dade, the county that went on overdrive due to COVID-19, is calibrating. There's no reason to panic or be swayed by sensational headlines. The sky is not falling. Sellers are still making money. They are just not making the astronomical figures of two years ago. And many potential buyers, especially new home buyers or buyers who can’t buy cash, are still waiting on the sidelines to buy. It is true that rising insurance costs and HOA fees can affect prices in Miami's condo market. It is also true that following the 2021 Surfside collapse, some sellers, especially those in older, coastal buildings can rush to list their properties, increasing new condo listings.
For example, in May 2024, Miami new listings rose by 14.12% compared to the previous year, increasing from 3,280 to 3,743. However, this boost has expanded the total inventory, giving homebuyers more options.
But, Miami-Dade's Inventory 33.9% Below Historical Average
We also have to peel the onion and understand that despite the rise in new listings, total inventory remains 33.9% below the historical average.
These trends do not represent a dramatic shift for Miami but a more stabilized, healthier price calibration. There is still scarcity in key price brackets, where demand significantly exceeds supply, leading to competitive market conditions and price increases.
Recent Market Performance
Home Sales Growth
In May 2024, Miami-Dade County witnessed a notable increase in single-family home sales, rising 6% year-over-year. This growth is part of a consistent trend, with sales gains recorded in six of the last seven months. This robust performance highlights Miami's resilience in a landscape where other U.S. markets are experiencing declines.
Single-family home median list prices have reached $630,000 in June 2024. The median sold prices for Miami-Dade is $525,000. The blended average discount % from list price to sold price is a 3.5%. And days on market is 68 days. This market stabilization, while having lower percentage increases, underscores a long-term upward trend in property values for single-family homes.
According to the Miami Realtor Association, Miami home sales priced at $1 million and up jumped 9.5% in May 2024, rising from 409 to 448. This growth is driven by an influx of new inventory. Meanwhile, mid-market condos priced between $400,000 and $600,000 saw a 7.5% increase, going from 334 to 359 sales year-over-year.
Comparison with National Trends
Miami's real estate market significantly outperforms national trends. While national existing-home sales saw a slight decline of 0.7% from April to May 2024, Miami's market demonstrated resilience and growth. The percentage of cash sales in Miami, which stood at 38.5% in May, remains substantially higher than the national average. The inventory for single-family homes is at 4.4 months, indicating a seller's market. Condominiums have an 8.6-month supply, reflecting a balanced market. Typically, a balanced market offers a six- to nine-month supply. Nationally, total housing inventory at the end of May was 1.28 million units, up 6.7% from April and 18.5% from a year ago. Unsold inventory is at a 3.7-month supply, up from 3.5 months in April and 3.1 months last May.
In-Migration Statistics
Miami's real estate market has seen a significant boost from robust in-migration, particularly from high-income regions like the Northeast. In 2023, Miami-Dade, Broward, Palm Beach, and Martin counties collectively saw an 8.3% increase from the previous year in the number of driver licenses exchanged for Florida licenses, indicating strong inbound population movement. This influx is a critical driver, increasing the demand for housing and pushing up property values.
Challenges
Affordability Issues
Miami's real estate market, while thriving, faces significant affordability challenges. The rapid appreciation in home prices, particularly in luxury segments, has outpaced income growth for many residents. This disparity is making homeownership increasingly difficult for average buyers, particularly as median prices for single-family homes in areas continue to rise. If they decrease a bit, they will be reduced from an already high mark.
Inventory Shortages
Another pressing challenge is the inventory shortage, especially in mid-market and affordable housing segments. Despite a surge in new listings, the overall inventory remains 33.9% below the historical average for Miami-Dade. New developments can’t be built fast enough. Some are still two to four years out. This is why Florida's Live Local Act was passed in 2023. This law encourages the development of affordable housing, by developers and investors allocating a significant portion of units to affordable housing.
Now, what is ahead for 2025?
Let's dive into the key takeaways of The June 21 study "2024-25 Southeast Florida Housing Outlook: Sustained Price Growth and Sales Rebound".
Home Prices on the Rise, single-family homes can increase by 9.7%
Despite a slowdown in sales, home prices are climbing due to limited supply and demand from wealthier buyers. In 2024, home prices are projected to increase by 6.9%, up from the previous estimate of 4.3%. By 2025, the overall median sales price is expected to rise by 6.5%, with single-family home prices jumping by 9.7% and condominium/townhome prices seeing a modest 2.5% increase.
Chart source: 2024-25 Southeast Florida Housing Outlook Sustained Price Growth and Sales Rebound in 2025
Home Sales drop by 5.5% in 2024, grow by 4% in 2025
Existing home sales are expected to drop by 5.5% in 2024, a revision from the previous 3.0% decline forecasted in March 2024. However, 2025 will see a rebound with a 4.0% increase, adding 3,421 more closed sales to reach a total of 85,025. This growth will be driven by a 7.8% rise in single-family home sales, while condominium and townhome sales will remain flat due to potential increases in condo fees and assessments from the Building Safety Act.
Chart source: 2024-25 Southeast Florida Housing Outlook Sustained Price Growth and Sales Rebound in 2025
Mortgage rates will drop by 5.7% in 2025
The Miami Association of REALTORS® (MIAMI) anticipates the 30-year fixed mortgage rate will drop to 6.6% by late 2024 and to 5.7% by the end of 2025. These predictions align with the Federal Open Market Committee’s (FOMC) plan for one rate cut in 2024 and four in 2025. In May 2024, Freddie Mac reported a 30-year mortgage rate of 7.06%. MIAMI's annual projection for 2024 was revised up from 6.0% due to steady FOMC rates and rising inflation in the first quarter.
Southeast Florida is set for a robust economic future in 2025.
MIAMI predicts a strengthening economy in Southeast Florida next year. Lower mortgage rates and rising business confidence are key drivers, supported by the region’s strong economic and demographic fundamentals.
The employment rate is expected to climb to 2.4%, up from 1.4% in 2024. This means an addition of 80,000 jobs.
Miami-Dade County is already showing impressive growth. In the fourth quarter of 2023, it led the top 10 counties in payroll employment growth. Since the end of 2019, Miami-Dade has also seen the strongest job and wage growth among these counties, with employment increasing by 6.32%. This is nearly double the national rate of 3.3%.
Business Rent Tax
Moreover, starting June 1, Florida’s commercial lease sales tax rate, or Business Rent Tax, will be cut from 4.5% to 2.0%. This reduction is expected to provide Florida employers with around $1 billion in tax relief. The lower tax burden will help existing businesses thrive and attract new ones to the region.
Looking ahead into looking ahead
The data paints a picture of a market characterized by robust sales growth, unprecedented price appreciation, and a competitive edge over national trends. These dynamics are driven by significant in-migration, economic vitality, and a strong influx of investor interest, all of which continue to shape Miami as a promising arena for real estate investments. Southeast Florida is poised to become a major hub for finance, sports, and culture. Through Opportunity Miami, business leaders are working to elevate the region into a global city by fostering innovation, entrepreneurship, and education. Highlighting this effort, a billionaire philanthropist recently donated $50 million to the University of Miami for cancer research.
As we look ahead, the future of Miami's real supply chain in the real estate market seems geared towards sustained growth, albeit with a cautious eye on the evolving challenges of affordability.
