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Miami rental market providing solid returns

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guest | 06 Sep 2011, 05:15 PM Agree 0

From 2006 and 2009, home prices in the city collapsed by as much as 50%, creating a wave of foreclosures and economic hardship. In fact, according to TD Economics report, the real estate downturn shrunk Miami’s economy more than 3% between 2006 and 2009. “Home ownership, the traditional engine of housing growth, was mortally wounded during the crisis and shows few signs of recovering,” the report stated. “In contrast, the rental market is becoming a major driver of renewed housing demand.” This trend has many Canadian investors rushing to Florida to take advantage of cheap houses which can still be rented out at competitive rates. Reports suggest that as much as 20% of Florida home sales are to foreigners.“Property investors are taking notice, buying homes, and even engaging in some minor building.  It   appears Miami home sales, alongside a modest increase in prices has more to do with investor demand than homeownership.”Home ownership levels in Miami plummeted by 6.2% between 2006 and 2009, with 84,500 families giving up owning a home.  Miami was hit much harder than the rest of Florida, which experienced just a 3.4% decline over the same time period, and the U.S., which experienced a 0.3% drop. The housing crash in Miami resulted from two major factors. First, severe job losses in Miami left many homeowners unable to make their mortgage payments. Second, the crash in home values left about 32% of Miami’s homeowners owing more on their mortgage than the value of their home. In the face of such a bleak situation, many homeowners willingly defaulted on their homes, choosing to move in with family, leave the city or rent a home instead. This massive move to the rental market between 2006 and 2009 has increased the number of renters in the city by 6.1%, or 40,000 renters.Rental rates, which did fall by 2.5% during the crisis, according to the Bureau of Labor Statistics, did not experience the losses felt elsewhere in the housing market and are already modestly rising. Given the low prices in the city, which plunged by 50%, and essentially unchanged rents, the cash flow investors have been earning in the city reached its highest level since 1997. TD Economics expects the strong rental demand in the city should continue for the next few years as job growth ramps up and the population, which already rose 1.3% in 2010, continues to grow. In the U.S. homeowners who default on their mortgage can have their access to credit restricted for two to seven years. So since 20% of the city’s mortgage holders are behind on the payments, as many as 174,000 could be forced out of the home-ownership market. “It seems likely that rental activity will remain a silver lining for Miami’s housing market over the next two or three years.  Many families will have no choice but to rent because financial headwinds remain a barrier to ownership.  Unfortunately, while this may steady Miami’s market for a time, a full recovery needs homeowners to enter the fold.”
  • Miami Real Estate - Ron | 11 Sep 2011, 10:38 PM Agree 0
    Great article! We are now living in a renters market, as mortgages are much harder to get. However investors from South America are helping to maintain the sales market.
  • Miami Real Estate - Ron | 11 Sep 2011, 11:38 PM Agree 0
    Great article! We are now living in a renters market, as mortgages are much harder to get. However investors from South America are helping to maintain the sales market.
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