M
iami's housing market has been labeled as a "bubble" by investment firm UBS, topping its annual Global Real Estate Bubble Risk Index of over two dozen cities across five continents. This is a significant shift from last year, when Miami ranked third on the list as "overvalued." The median price of single-family homes in South Florida continues to rise, albeit at a slower pace than in previous years, with increases ranging from 1% to 3% in Miami-Dade, Broward, and Palm Beach counties.
The UBS report assesses bubble risk by comparing home prices and rental rates to local incomes. While the report acknowledges that Miami's housing market is still robust, it cautions against reading too much into its use of the "B" word, noting that bubbles can only be proven after they burst. Jon Woloshin, head of U.S. Real Estate at UBS Wealth Management, attributes Miami's price increases to a strong economy and population growth, stating that the market has been driven by fundamental factors rather than speculation.
Woloshin notes that several key differences between the current market and the pre-2007 housing bubble period are in place, including improved mortgage underwriting standards and better buyer behavior. He also suggests that the slowdown in price increases may give local incomes and supply time to catch up with demand, particularly in west coast markets of Florida.
New regulations for condominium buildings in Florida, following the Surfside tragedy, could impact the regional housing market by affecting older condos and potentially balancing out supply and demand imbalances. Woloshin expects this to put a premium on single-family homes and notes that home insurance and environmental risks, such as sea level rise, are also risk factors in South Florida.
Local mitigation strategies, including flood protection measures and insurance reforms, could impact future price direction along the coast. While Woloshin is skeptical about immediate relief from insurance companies, he hopes that local and federal agencies will take proactive steps to address these issues and bring solutions to the table.
