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HomeBusiness & Real EstateKB Home Prices Are Up 25%. Is it a New Normal?

KB Home Prices Are Up 25%. Is it a New Normal?

After years of flat sales, home prices are skyrocketing in Key Biscayne, with single family home prices up 25%, waterfront single family homes up 37% and condominiums up 16%. It’s part of a national trend – but is it a bubble — or the new normal? 

For a number of reasons (more on that below), most real estate professionals think the answer is that these values are here to stay. 

First, there are undeniable fundamentals. Newcomers love Key Biscayne for the same reason the rest of us were already here: summer all year round, an island resort lifestyle, more affordable real estate than most major U.S. cities, its international flair and the absence of a state income tax.  More recently, the buying frenzy has been fueled by the pandemic and the realization that people can work from anywhere, enjoy a better quality of life and do so at a lower cost.  All of this has been supported by low interest rates and a surge in wealth attributable to the stock market rally. 

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Here are the latest statistics from the Multiple Listing Service:

Single Family Homes 

The number of single family home sales in Key Biscayne through October 2021 was up 72% versus the same period in 2020 and 265% versus the same period in 2019.  The average number of days it took for homes to sell decreased by approximately 45%.

The average sale price for non-waterfront homes increased 25% from $2.2 million for the year-to-date period ending October 2020 to $2.8 million for the year-to-date period ending October 2021. Over the past 90 days, Key Biscayne’s “Mackle” homes built in the 1950s sold at an average price of $2.5 million, representing a 60% increase to the average sale price in 2019 of $1.6 million.

The average sale price for waterfront homes increased more dramatically: 37% to $10.1 million. More homes valued at $10 million or more sold in 2021 than in the last five years combined. 

Condominiums 

The number of condo sales in Key Biscayne through October 2021 was up 182% versus the same period in 2020 and 191% versus the same period in 2019. The average number of days it took for condos to sell decreased 19% to 204 days.

The average sale price for condos through October 2021 has increased 16% over last year, from $1.1 million to $1.3MM. 

Looking at the larger Atlantic Ocean complexes, In 2021, several units at Oceana sold for more than $2,000 per square foot this year. At Ocean Club, 11 units sold for more than $1,000 per square foot, with one selling for more than $1,250 per square foot.  At Grand Bay, one unit sold for $1,250 per square foot, the second highest recorded price per square foot at Grand Bay.  At Key Colony and The Towers, four units sold for more than $1,000 per square foot, the highest sales price per square foot ever recorded in those communities.

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Bubble? Probably Not. 

In comparison to the real estate bubble from 1997-2006, this surge is driven by a number of market fundamentals, as opposed to the risky loans and low underwriting standards which fueled the 2008 subprime crisis.

Demographics and Immigration. Florida is currently welcoming over 900 new residents per day, and 55% of its daily population growth occurs in South Florida.  Higher prices are a direct result of strong demand amid tight supply, not an artificial bubble created by investors seeking to park their money or generate returns by leveraging lenient lending standards. 

Favorable Tax Environment.  Unlike residents in other states which are subject to three levels of taxation on personal income (federal, state and city), Florida residents pay only federal taxes on personal income, representing savings of up to 14.7% on personal income.  In addition, the federal Tax Reform Act of 2018 put a $10,000 cap on state and local tax deductions, removing a tax shield that residents in high-tax states had historically enjoyed.  As a result, Florida has ranked #1 in U.S. domestic migration from NY, CT, NJ, IL and MA since 2018.

Corporate Relocations and New Business. Financial and tech firms started announcing Miami office openings in 2020.  City of Miami Mayor Francis Suarez fueled the fire with his business and tax friendly mindset and his December 2020 tweet “How can I help?” in response to a San Francisco venture capitalist who proposed moving silicon valley to Miami. 

Financial services firms such as Blackstone, Apollo and Millennium Management, as well as tech firms such as Apple and Blockchain.com are expanding in Miami while others are scouting for office space. In fact, Florida early-stage funding deals reached $1.3 billion in October 2021, nearly surpassing the sum of the last 5 years combined.  Miami continues to court businesses, and all of these newcomers need a place to live.

Supply and Demand 

In Key Biscayne, there are a total of 26 homes and 123 condos available for sale, representing only 3 and 5 months of inventory, respectively (less than 6 months of supply is considered a seller’s market given the limited choices for buyers).  As recently as last year, there were more than 300 condos for sale on Key Biscayne at any given time.

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So far, we’ve seen an influx of domestic buyers from high-tax states such as New York, New Jersey, California, Connecticut and the Midwest.  But after the U.S. travel ban was lifted on November 8th, we are now expecting a surge from abroad: prospective buyers from Europe and Latin America who have been prohibited from entering the U.S. by strict travel bans and who have been sitting on the sidelines since the pandemic began are now making travel plans and setting up appointments.

Rising inflation has increased the odds that the Federal Reserve Bank will raise interest rates, potentially discouraging some buyers away from the housing market and putting downward pressure on pricing.  But with peak season arriving, very limited inventory, and demand continuing to outpace supply, the beginning of 2022 looks like it will continue to be a very tight market for Key Biscayne real estate.


LUCIA A. MARIN is a real estate advisor at ONE Sotheby’s International Realty. She grew up on Key Biscayne, earned degrees from Princeton University and The Wharton School, and worked for more than 10 years in the private equity business.

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