Bayfront home values fall, inland values rise: a sea change?
The latest report on Miami-Dade property values points to a sea change in the relative evaluations we place on dwelling places.
Look at data on taxable property values that Property Appraiser Pedro Garcia issued July 1. While many variables change individual properties’ values, collective figures show values of existing properties – not counting new construction – last year as a whole increased just 2.5%, a tick above the inflation rate of 2.28%.
But Miami-Dade communities varied widely in change in value of existing properties. The pattern is quite remarkable.
Desirable waterfront communities, where wealthier residents choose to live and where values tend to rise fastest in good times as people from around the globe flock to live in Miami-Dade, generally had small increases in value year over year or even declined. Meanwhile, the fastest increases in existing properties’ values were in seven inland cities, five of which have median incomes well below the county’s average.
Look at the two biggest gainers:
Florida City gained 9.5% in existing property values, highest percentage growth in the county, yet 41.2% of its 12,149 residents have incomes below poverty. The median household income is $34,545, compared to $52,205 for the county as a whole.
Hialeah, the county’s second most populous city, saw property values rise 8.9%, second-largest growth in the county. Of its 237,523 residents, 25.9% are below the poverty line, with a median household income of $31,012.
The other five biggest gainers were, in order, El Portal, Medley, Biscayne Park, Opa-Locka (median household income $16,271) and Homestead. In all of these, existing properties’ values rose 7% or more.
In every one of these seven inland communities, the percentage of persons living below the poverty rate is more than 18%.
On the other side of the coin, in six bayfront communities existing property values actually declined year over year. They all had poverty rates of 17% (Bal Harbour) or far below, falling as low as 6.47% for Key Biscayne, which has a mean household income of $128,563, nearly two and a half times the county average.
The other bayfront communities where existing properties fell in value were Bal Harbour, North Bay Village, Aventura, Surfside and Bay Harbour Islands, all prized waterfront living sites.
So what happened to cause areas that were most coveted to send existing properties’ values into decline while lower-income inland areas had increases?
“This decline of taxable value is primarily attributed to a decrease in condominium values in areas with high concentration of residential condominiums,” Mr. Garcia explained in a news release.
Yes, but precisely why that decline, and why did the value rises elsewhere?
One explanation could be that in the areas of decline new condominiums flooded the market, increasing supply and depressing the price of older units. In condos, the newest glittering units tend to attract newcomers, leaving older units with less demand. But were there that many new units?
Another possibility: condo ownership has become relatively less attractive. Some realtors are seeing single-family home sales outpacing condo sales for the first time in many years here.
It’s too early to say, but a deeper meaning may lurk in the figures: could large numbers of people have found waterfront living less attractive than higher-ground inland sites as rising sea levels threaten? Is the change in the sea causing a sea change in where people choose to live? It will take years to determine if this is a one-time change or permanent, or if there are other causes.
Residential property values could be rising in lower-income inland areas, for example, not because bayfront dwellers are moving there – many such moves are unlikely, given the natures of the communities involved – but because values are rising as landlords raise rents, driving up the value of those properties for new buyer-investors.
Rental properties have more potential tenants these days because families who once would have owned homes can’t afford to buy. That may contribute to making lower-income communities with a high percentage of rental properties the places where people live by necessity. It is unlikely that they attract former bayfront condo dwellers.
Analysis of whether this is a sea change also must consider what percentage of a city is residential. The fourth-largest increase of value in existing properties was 7.9% in Medley, an industrial area with only 1,111 residents. The gain was almost certainly based on rising values of commercial property.
Bear in mind that none of these value changes were related to the current pandemic. By law, taxable values are based on the value of properties as of Jan. 1. Mr. Garcia points out that values have taken a hit since the advent of Covid-19. That will only become evident in taxable values next year.
These numbers, of course, have more than curiosity value. Cities and the county base their budgets on income they anticipate from property taxes based on these values. As property values rise, so does municipal income.
But if municipalities guess too high on what’s coming, as Miami Beach did, it leaves a big hole in the budget. Miami Beach’s rise in existing property value was only 0.8%, far below the county average in a city where values in the past rose fast. Gains were below what city officials anticipated in planning income.
No doubt the impact of rising sea levels will be felt in property values in years ahead. A 30-year mortgage on a property that could be hit by rising waters in 25 years is an economic as well as human issue. So is the rise likely in property insurance payments as insurers take into account sea level rises.
Combine that change with the pandemic and property values will feel future impact, as will governments that rely on property taxes. The predictable annual property value increase well above the rate of inflation is certain to become less predictable.
That in itself is a sea change.
See 2020 Taxable County values here