The 3rd quarter of 2020 showed a continuous interest by buyers while investors will now focus on capitalizing and taking advantage of the opportunities present in commercial real estate. All this despite initial fears at the onset of 2020 and the year that will always be remembered for the Corona-19 pandemic.
Back in February 2020, the global pandemic rekindled fears of a subsequent recession, much more destructive than the banking crisis of 2008 as people were called to stay home and businesses found themselves pivoting to digital services. Many were forced to close down shop altogether and reconsider their business ventures. In November, only 40% of children attended in-person classes around the country, and a tremendous 42 per cent of the labour force is now working from home full time. Looking ahead, in 2021, it is predicted that more than 27% of Americans will continue to work from home. The closing down of schools and shift to remote learning, one of many measures imposed to curb Covid-19 infections has also meant families are navigating a tighter space around the house.
For those that had already been considering relocation or an upgrade to a bigger house, months of staying at home, working from a makeshift home office while the children are taking their classes in the next room, this has been the catapult to seeking new dwellings. The importance of space indoors but also outdoors like a patio or proximity to nature has never felt as significant as during this pandemic. Florida offers a competitive tax structure and ideal weather, and as such has topped the preferred list of destinations for relocating families around the country.
Miami has been at the receiving end of the northern flight of buyers, as low mortgage rates and low inventory not to mention the quality of life and mild weather have boosted its appeal. In Miami-Date County alone, home sales have seen an increase of 20.9 per cent year-over-year. This is all while, mortgage rates have been dropping to record levels all throughout 2020, leading to a significant year-to-year increase in mortgage applications. Buyers that were until now, hesitant to get on the property ladder have an opportunity that is too good to pass by. Rates have stayed under 3 per cent since June, with the average rate for a 30-year fixed-rate mortgage hovering at 2.67 per cent.
In Miami-Dade Country where demand has increased, median single-family home prices have risen to $450,000 from $365,000 in 2019. The general consensus among real estate and housing economists predicts rates will stay low for the start of 2021, and then steadily rise to average 3.1 per cent in 2021. Mortgage rates are expected to contribute to a surge of new homebuyers entering the market throughout 2021 before stabilizing as the economy settles.
Miami has long been an attractive option for Northerners, and with monthly mortgage payments equal or even lower than rent, this is a great opportunity to own a house in a coveted location. Based on tax returns, from the Miami Summer 2020 Report, Florida is clearly the preferred location for those from New York, New Jersey, Illinois and Massachusetts. The report also indicates a clear shift towards domestic buyers, compared to data from 2010 where only 21 per cent of buyers were domestic.
In addition, since traffic and commuting became a non-issue throughout 2020 and most people are expected to keep working from home, the appeal of the suburbs and extra space away from the hustle and bustle of the city has spiked. At the same time, the lingering effects of the pandemic, and the ability to isolate in low population density cities are still crucial. While the gradual roll-out of vaccinations will alleviate some of the issues and allow for a return to pre-Covid-19 socialization and activities, telecommuting and remote work are expected to retain their appeal. With the kids at home, all day, a pool, back-garden and home office space are now also in demand more than ever.
But it isn’t only families that are making the move towards south Florida. With most businesses now pivoting to telecommuting and remote work, companies can now explore locations they wouldn’t have considered otherwise. Low-tax states such as Florida and Texas have welcomed many old and newly established companies, and are actively working to attract and encourage relocation with innovative developments.
According to sources from Bloomberg, Goldman Sachs, the world’s most powerful investment bank is considering relocating one of its key divisions to South Florida and weighing properties in Palm Beach County or Fort Lauderdale. The decision came about after the success of the team in working remotely and will reduce the costs compared to their previous New York location. The trend has not escaped the affluent or celebrities either, that are finding the lower tax rates and quality of life in southern Florida a great advantage. From Ivanka Trump to supermodel Gisele Bündchen and quarterback husband Tom Brady, Miami is becoming a hotspot for the rich and wealthy buyers.
This unpreceded demand has caused a dramatic inventory dip and buyers are advised to act quickly. The median number of days a single-family home is listed before sold is now at a very low 23 days, a massive decrease from last years 54 days. Similar patterns have been observed in the luxury market with condos now only having to wait a mere 50 days, compared to 78 in 2019. While the luxury market has seen the biggest increase, single-family homes in all price ranges are expected to keep rising. Notably, just in November 2020, single-family homes in the $400,000-$600,000 price range have seen a jump of more than 50 per cent while similarly priced condominiums increased even more by 68.3 per cent.