Beyond any bubble, many Miamians face a housing shortage
By Michael Lewis
A USA Today report says that as housing prices escalate, "some real estate markets around the world are making the US look calm." Spiraling housing prices abroad, the report says, are rapidly outpacing ours.
That ought to make more credible the claims that Europeans are flocking to Miami-Dade County and fueling our condo boom. If Europeans pay more and more at home, Miami would look like a great investment.
The paper says that while US housing prices rose an average 12.5% for the year ending March 31, those in Spain rose 15.5%, France 15%, Hong Kong 19% and South Africa a stunning 23.6%, making the US increase a relative bargain.
Unfortunately, that 12.5% annual rise is for the US as a whole. It's far below the climb in housing prices here.
In the past year, the median resale price of a single-family home jumped 31% in Florida, 29% in Broward and 27% in Miami-Dade. Miami condo prices appear to be rising even faster.
Bargains here for Europeans diminish with each passing day as our housing prices soar far faster than theirs do. There's still a wide price gap between Paris and Miami, of course, but that gap is closing - and with it our competitive price advantage.
That doesn't make Miami one jot less desirable as a place to live - or as a place for a second or third residence. It just means that the decision to buy a Miami condo or vacation home must rest more and more on advantages other than price differentials from Europe or anywhere else.
Miami long since has ceased to be a low-cost place for retirement, as our population attests. When people reach retirement age, they are far more likely to move north from Miami than south into Miami, as was once the case.
The overwhelming problem, however, isn't that we're too pricey to be a low-cost vacation home site or a low-cost retirement Mecca but that today we can't house our own workers affordably.
As we and other media have documented, the gap between what most workers here can afford and the current price of housing has been a barrier not just to homeownership but to luring or retaining the workers we need to keep us prospering.
The saving grace, paradoxically, has been the condo boom. As investors stockpile units for future appreciation, they lease out many at prices far below their out-of-pocket costs.
As long as they're willing to carry this inventory at a deficit in hopes of future sale-price appreciation, a substantial amount of reasonably priced rental property will remain on the market.
If, however, a jump in interest rates or other carrying costs compels investors to thin holdings by substantially lowering sale prices - letting air out of the bubble - this pool of what is in effect subsidized rental apartments will dry up, making housing still less affordable for workers.
Though nobody can tally the housing units that are new and for sale, in the pipeline or in the planning process in Miami-Dade, 100,000 is a good estimate. In a community of 2.3 million, that should meet our needs for years.
It would, in fact, if most of these units weren't targeting the upper-income 5% to 10%, many the top 1%. Those folks won't be leaving behind affordable housing when they move in, either. So where in the world are Miami's workers to find homes?
Unfortunately, developers who would want to build reasonably priced housing for the 90% who aren't being targeted now would face problems. Land costs don't decline with the income of intended buyers. Neither do the soaring costs of building materials or labor.
Governments and civic organizations need to focus on how to house the majority of Miami's workers in decades ahead under such circumstances.
We do a pretty fair job for those in utter poverty, and private developers are doing a spectacular job housing the wealthy. But as housing costs soar, we must focus as hard on the gap in housing for the majority as we do on whether there is a bubble in housing at the high end.
Because even if our housing prices are rising more slowly than France's or Spain's, they're still rising too fast for the average Miamian to handle.