In Miami-Dade, where the real-estate market is fueled by foreign cash, the median sales price for a single-family home rose 7 percent between April 2014 and April 2015, growing from $243,000 to $260,000. In Broward, the median sales price for a single-family home grew 5.3 percent, reaching $287,500 in April 2015, up from $273,000 in April 2014.
“There’s a lot of frustration from buyers because there are so many of them on the market,” said Liza Mendez, a former president of the Miami Association of Realtors. “Rental prices are going up, so if you can afford to buy, it makes more financial sense.”
Nationwide, the price trend is making housing less affordable for many Americans, who saw wages grow by just 2.6 percent since April 2014. The midpoint price for a home in the United States rose by 8.9 percent between April 2014 and April 2015, to $219,400. That’s more than four times faster than average hourly wage growth. The median home value is now just $2,500 shy of the 2006 peak.
While nowhere near the boom that preceded the bust in 2008, the price increases seem incongruent, Shiller suggested.
“We do see nationwide an increase in home prices, and I don’t know if things are better. This boom has negative color to it,” said Shiller, expressing concern that bid wars often reflect a lack of available housing in the most-desirable neighborhoods.
Mendez said listed properties can receive several bids at full price, meaning sellers will then shop around for even better offers.
“South Florida is a hotbed for bidding wars right now,” she said.
Overall, home values in South Florida are up 40 percent since the economy began recovering in 2012, one of the fastest rates of growth in the nation. Inventory is especially tight in Miami-Dade, where there is little land left for new construction but a daily influx of new residents.
In Miami-Dade, there are enough single-family houses on the market to last for 5.1 months, down from 5.5 months at the same time last year, according to Thursday’s report. That’s a 7.8 percent decline.
“There’s a lot of demand at the lower end of the market from single people, young couples and young families,” said Ron Shuffield, president and CEO of EWM Realty International.
Houses under $300,000 have experienced an 18 percent price increase in the last year, and there is only a 2.4-month supply of such houses in Miami-Dade. “You’re going to have double-digit appreciation when the inventory is that low,” Shuffield said.
The price increases have put a major squeeze on affordable, workforce housing, especially near the urban core. Local leaders have called the lack of affordable housing a “crisis.”
Nearly two out of every five working-class households in Miami spend at least half of their income on housing, according to the Center for Housing Policy in Washington D.C. That was tied with Los Angeles for the highest percentage in the nation.
Historically, home prices nationwide have averaged 3-4 percent growth annually with little risk for owners. In the mid-1990s, home prices began soaring to above 13 percent annual growth, before collapsing in 2008. It’s an open question as to whether housing reverts to historical growth rates.
“I think it’s overwhelmingly likely that’s what’s going to happen,” said Austan Goolsbee, a University of Chicago economist and former top adviser to President Barack Obama.
Addressing the Society of American Business Editors and Writers in April, Goolsbee expected more home rental, lower ownership rates and continued tight lending standards.
If that’s true, the sharp spikes in home prices in some parts of the nation could mean trouble.
Real-estate valuation firm Smithfield & Wainwright warns that at least 14 states and the District of Columbia may be experiencing inflated prices like those that preceded the U.S. financial crisis. (Florida was not among them.)
“You’re starting to get a disconnect,” David Macpherson, the company’s chief economist, said of rapidly rising prices in some markets.
His company compares home sales price data from the Federal Housing Finance Agency to the cost of renting a home or replacing one in areas across the country. When the sales price exceeds by 10 percent or more either the cost of renting or replacing a home, the valuation firm argues, it signals a potential price bubble that could burst.
“The banks are exposed and the homeowners are exposed because they both have a false feeling that the house is worth that amount of money. And that’s false equity,” warned Hogan E. Copeland II, chairman of Smithfield & Wainwright. “The equity they think they’ve built up in their home may prove ephemeral.”
During the first quarter of 2007, before the national home-price bubble burst, sales prices nationally were 39.7 percent higher than the cost of renting. In the first three months of 2015, sales prices were about 8 percent above the cost of renting, under Smithfield & Wainwright’s 10 percent “danger zone” but approaching it.
The states with prices 10 percent or more above the cost of renting or replacing a home are Alaska, Arizona, Colorado, Idaho, Louisiana, Massachusetts, Minnesota, Montana, North Dakota, Oregon, South Dakota, Utah, Washington and Wyoming, along with the District of Columbia.
The data should be viewed as an “early-warning system,” said Copeland, since it implies that lenders and government-controlled mortgage titans Fannie Mae and Freddie Mac might be exposed to losses if homes are selling for more than they are really worth and prices correct.
“If it looks like a bubble and acts like a bubble then it is a bubble,” Copeland said.
If homes are overvalued, homeowners who refinance at the peak will find their mortgages underwater after the bubble bursts, Copeland added.
The escalating prices are “certainly an indicator that things are trending in the wrong direction,” Macpherson said. “In the long run, home prices shouldn’t be growing at a faster rate than income,” he said.
But Shuffield said that price jumps were a result of the market making up the ground lost during the recession.
“We were giving away property in 2007 and 2008,” Shuffield said. “Prices were slashed during the foreclosure crisis.” He said he expects prices to grow at a more stable and sustainable rate over the next 12 months.
“We’ve returned to a normal market now,” he said.
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