Pricey housing fueling Miami-Dade’s apartment supply wave: report

Downtown Miami from Brickell Key (Credit: Ines Hegedus-Garcia)
Downtown Miami from Brickell Key (Credit: Ines Hegedus-Garcia)

Miami-Dade County is facing a record year for apartment deliveries, with 3,000 rentals opened so far this year and thousands of more units expected to be completed by December.

But a new report from brokerage Marcus & Millichap states demand, buoyed by job growth and the high cost of housing, could keep the county from drowning in a wave of new supply.

According to the report, Miami-Dade’s rental market has already kept its strength despite contending with a new influx of supply.

Absorption in the second quarter blew through 3,400 units, shrinking Miami-Dade’s vacancy rate by 1.4 percentage points year-over-year to 1.4 percent. That decrease in vacancy is in spite of the nearly 3,000 units built during this year’s first two quarters, which already outpaced the 2,440 units built over the entirety of 2015.

Rents, as a result, are continuing to rise. The average monthly rent hit $1,330 countywide in the second quarter, rising 2.2 percent year-over-year.

Much of that demand is being driving by Miami-Dade’s expensive housing market, according to the report, with potential first-time homebuyers turning toward rentals in the face of surging single-family home prices.

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The median cost of buying a home in Miami-Dade was $295,100 in the second quarter, spiking 9.3 percent year-over-year. Meanwhile, median household income in the county rose only 2.7 percent to $45,800 per year.

Assuming a 10 percent down payment, according to the report, monthly payments on a median-price home would be $1,575 — $245 more than the average Miami-Dade rental.

That growing divide between the rental market and Miami-Dade’s existing housing stock could keep multifamily developers in good shape over the next year.

However, Marcus & Millichap’s report does not take into account a looming giant: a growing glut in the county’s condo market.

Roughly 11,000 condos are in the pipeline in Miami-Dade over the next two years, many of which could end up as rentals. That extra supply could have a chilling effect on the rental market, suppressing both rent and occupancy growth, experts say.