Miami's real estate prices have plummeted from their peak, but remain nearly 38 percent above their 2000 levels.
Florida's housing market is a misery, as I wrote about in a recent post. But as a commenter rightly pointed out, that this isn't the whole story. When you look at housing from a city level, some Florida metros, like South Beach and downtown Miami, have recovered nicely.
As the New York Times reported last week, Miami's housing market is doing much better than other warm, sunny vacation and second-home destinations, like Phoenix or Las Vegas. Even though its real estate prices have plummeted considerably from their peak, they remain nearly 38 percent above their 2000 levels according to the Case-Shiller Home Price Index, while Phoenix home prices are just 2 percent above their 2000 levels and Las Vegas home prices have dipped to nine percent below their 2000 values.
What forces have enabled Miami to rebound while the broader state of Florida and other U.S., resort, and second-home destinations have faltered? Well in several important ways, Miami is different.
First and foremost, Miami is a big metro, much larger than greater Phoenix or Las Vegas. It's home to more than 5.5 million people, making it the nation's eighth largest, roughly the same size of greater Washington, D.C., and just slightly smaller than greater Houston or greater Philadelphia.
Its economic output or gross regional product is more than $250 billion compared to $190 billion for Phoenix and just $91 billion for Las Vegas.* Plus, Miami is the economic hub of the enormous So-Flo mega-region, the world's 15th largest, home to 15.1 million people and producing $430 billion in economic output - bigger than Norway and about the same size as Taiwan or Sweden. Of course, Miami serves as a major center for Latin American and global commerce.
Miami's resurgence is being driven more by global than local forces. Miami is a hot spot for buyers from Latin America, Europe, and Asia who are drawn to its comparatively low prices as well from big U.S. metros like New York, D.C., Chicago, Philadelphia, Los Angeles, and Atlanta. As the Times notes:
As in New York, the very high end of Miami’s market is surging. The buzz among top brokers here is of big-ticket sales to deep-pocketed international buyers, rather than foreclosures, painful lessons from easy credit and unrestrained speculation.
After sitting on the sidelines during the crash, rich buyers started piling back in last year. “They realized that if they were going to buy they had better do it now,” said Jill Hertzberg, a broker with Coldwell Banker.
This is facilitated by its global connectivity. In contrast to many other resort cities, Miami is connected by direct flights to a wide variety of global cities in Europe, Latin America, and around the world.
There is a flip-side to Miami's rebound. While the super-rich are buying, locals continue to suffer. Wages and income levels are low, and the metro has a high level of income inequality. Miami's housing market and broader economy remains highly uneven and divided. While South Beach and the downtown corridor may be booming, the area inland is rife with housing misery, foreclosures and homelessness. The economic and social distance between the the global super-rich and suffering locals is substantial and growing.
Miami is not just a resort destination, but a global economic spike. The flip side of globalization has been the transformation of a small number of global cities — London, New York, and Hong Kong, for example — into locational hubs for what Chrystia Freeland has dubbed "the global super-elite." Miami fills an intriguing niche in the global economy, which combines elements of a global economic and financial center and an international resort and second-home destination, with all the growth and unevenness that comes with it.
* An earlier version of this post misstated the economic output.
Top image: Reuters/Carlos Barria