Miami's Real Estate "Recovery" Might Be All Wall Street Smoke and Mirrors
Miami was pretty much ground zero for the housing bubble bust, but things have begun to look up, at least according to some numbers. Home prices in the area are up 11 percent since last year, but the Washington Post warns that any semblance of a recovery might be the result of Wall Street strategy and not healthy, sustainable growth.
In fact, nearly 7 of 10 homes sold in the South Florida market are bought not by people looking to live in them but rather by Wall Street and other institutional investors. They're buying up homes in record numbers in the hopes that values will continue to increase and often renting them out in the meantime.
"There is the possibility that Wall Street and the banks and the affluent one percent stand to gain the most from this," Jack McCabe, a Florida-based real estate consultant, told the paper. "Meanwhile, lower-income Americans will lose their opportunity for the American dream of building wealth through owning a home."
"The investors are making it hard for a regular homeowner to buy a property," adds Robert Russotto, a Fort Lauderdale broker. "They are getting outbid by people with cash."
But investors and private equity firms remain undeterred. Some even sit glued to special computer software, waiting for deals and distressed homes to come on the market and swooping in to make cash offers.
A number of investors are not looking at these properties as things to flip once the price hits a certain level, but as sources of lucrative rental income for years to come.
One firm tells the Post it bought most of its houses in the Ft. Lauderdale area for between $60,000 and $70,000. Meanwhile, it charges rents in the range of $1,700/month, several times what a homeowner would pay each month in mortgage.
Though the real estate markets in Miami and surrounding areas continue to improve on paper, other economic indicators in the area aren't as good. The county's unemployment rate stood at 9.2 percent last month.