The Miami real estate market has been ranked in the 12th position of the NAHB's list of improving housing markets.

By Carlo Calma

The Miami real estate market has been added to the National Association of Home Builders (NAHB)/First American Improving Market Index’s (IMI) list of improving housing markets.

The index tracks three sets of independent monthly data including employment growth in the area from the Bureau of Labor Statistics; house price appreciation from Freddie Mac; and single-family housing permit growth from the U.S. Census Bureau. The Miami market ranked 12th on the list (available for download on NAHB’s references page), while the state of Florida accounted for an another eight more metropolitan markets that have shown improvement.

Melissa Rubin, vice president and broker for Coral Gables-based development Platinum Properties, commented on this growth and highlighted three other factors in her argument regarding the state of the Miami real estate market.

Rubin pointed out three driving factors that have contributed to the Miami market’s overall growth: stricter lender guidelines; the effect of international buyers; and the market’s overall inventory/infrastructure. Though she acknowledges that “all three of them impact each other equally,” she does make distinctions between each factor.

The International Presence on the Miami Market

“Foreign nationals have always played a role in the Miami market,” according to a press release from Rubin, further stating that many buyers come in from Brazil, Venezuela and Canada. She also stated that foreign buyers have already purchased 65 percent of the Miami real estate market’s inventory, and that a “significant 90 precent of these international purchases [were] in cash,” a factor Rubin explained bears much weight on the market’s growth.

Cash transactions, according to Rubin, makes the property more desirable and boosts market values, but also creates less contingencies on the contract itself for the buyer.

“The cleaner the contract, the easier it is [for the buyer] to take,” added Rubin.

The Miami Market’s Lending Guidelines

These cash transactions also fit into Rubin’s argument regarding stricter lender guidelines contributing to growth. Rubin explained that now more than ever, “buyers must be able to part with significant money upfront,” much like in cash transactions.

Her release further explains, “Buyer candidates are pressed to secure 75 percent for homes, and condominiums […] up to a 50 percent downpayment.”

Barry Rutenburg, chairman of the NAHB also recognized this trend saying, “One thing most markets have in common […] is the tight lending environment for both builders and buyers that continues to drag on their positive momentum.”

The Market’s Current Infrastructure

The Miami real estate market’s overall infrastructure is another factor Rubin looked at in considering the market’s growth.

In May, The Miami Herald reported that, “47 percent of all closed residential sales in Miami-Dade were distressed, including REO’s […] and short sales.”

“Because we have so much distressed properties [the market’s] become desirable,” said Rubin, further stating that the percentage of distressed properties in Miami’s inventory have gone down from 70 percent to 49 percent recently, and that overall residential occupancy is at 94 percent.

Though the market has seen a “crop of new projects” in downtown areas like the new Brickell properties, Rubin explained that they will have no effect on the selling of current inventory.

“[New projects] will not be ready between two to four years [and] existing properties will be sold or reduced [by that time],” said Rubin.

The Trends To Sustain Miami’s Growth

So how exactly can Miami stay on the NAHB’s list of improving markets, and inch their way to the top?

Rubin explained that one change she’d like to see is a stronger focus on commercial growth. Considering the residency occupancy, she explained that commercial properties like grocery stores and shopping districts need to grow in the area so that residents won’t have to drive 20 minutes away to other cities.

Rubin also explained that she’d like to see the appraisal process become more stringent.

“The appraisers [now] appraise to the lower end so each transaction we never know how the appraiser will view it even though there are comps to support the sales,” she said. “This is making deals fall apart and is contributing to pricing not rising as quickly.”

Despite these areas that the Miami market can work on, David Crowe, NAHB chief economist, remains optimistic at what these growing markets could mean for the nation’s economic stability.

“The fact that we continue to see a strong core of metros showing up on the improving list each month adds to the growing evidence that [housing is returning] to its traditional role of driving economic growth,” said Crowe.