Miami tops the UBS list as the most overvalued housing market

The data pointed to record high price-to-rent ratios, slowing price growth and affordability concerns. The report also noted that while a cooling in house prices is expected, there is no “sharp decline anywhere in the near future”.

Still, the headline labeling Miami as the world’s largest bubble market drew sharp reactions from local industry voices – including Ana Bozovic, founder of Analysis Miamiand Tim Weisheyer, president of Florida real estate agents.

Every one of them told it HousingWire that the UBS rating ignores key realities – from the region’s uniquely high share of cash transactions to strong job growth and domestic wealth migration.

Bozovic: Cash transactions remain crucial

Bozovic did not mince her words when describing her views on the UBS report.

“The reason they call it clickbait is because they know full well that when they lead with the headline that Miami is a bubble, it means in most people’s eyes that a crash is imminent,” she said.

“When you make a bold headline mentioning ‘the world’s No. 1 bubble’, what do you mean? You’re implying that there’s going to be a steep crash – and that’s alarming.”

She said Miami’s heavy use of cash home sales fundamentally separates the country from cities that have seen speculative, debt-fueled housing growth.

“We have an astonishingly high cash-only market … and the fact that that is not highlighted in this report is unbelievable,” she said. “This market is driven by cash. The Miami apartment market is over 70% cash. … If it’s over $2,000 per square foot – both for single-family homes and the condo market – it’s over 80% cash.”

UBS’s index measures bubble risk at scale; low (below 0.5), moderate (0.5 to 1.0), elevated (1.0 to 1.5) and high (above 1.5).

A different kind of boom, fundamentally

Bozovic also wanted to debunk comparisons with the 2008 financial crisis.

“The bubble that everyone will think of when they use Miami in this headline is one that has been created by the incessant use of irresponsible over-indebtedness,” she said. “When you experience a sudden crash, as happened then, it is almost always when the underlying assets can no longer support the debt burden.

“Then it collapses like a house of cards because the whole thing has been driven up by debt. That’s the diametric opposite of what’s happening in this market right now.”

Bozovic pointed to Miami’s booming influx of domestic wealth as a powerful, often misunderstood market driver.

“At the higher end of our market – above $3,000 per square meter – we are up 3,400% in transaction volume compared to pre-coronavirus,” she said. “The very high end is almost in a world of its own. Why? Because of domestic wealth and talent.”

She said Florida’s tax policies continue to attract investors and entrepreneurs.

“Miami and South Florida remain a destination for domestic wealth,” Bozovic said. “We are seen as one of the destinations in this country and in the world that is very friendly to wealth and capital,” she said.

The stock remains balanced and does not overheat, she added.

“Our stock levels are still below pre-corona levels,” Bozovic said. “If we say in the context of a bubble discussion that there is a dangerous situation, one thing you would expect is a sharp increase in inventory, which means the market is not clearing up. That is not happening.”

Weisheyer: Perception trumps reality

Weisheyer echoed that sentiment, saying many reports exaggerate Florida’s market risks while overlooking its fundamentals.

“I don’t think buyers are really looking at that, to be honest,” he said. “When some of these reports come out at a higher level, they’re speculative. Buyers are calling their agents and saying, ‘Hey, what does this really mean?'”

He said the real estate markets in Miami and Florida remain healthy – and emphasized that no red flags are being seen at the state level.

“When you look at the South Florida market, it’s also always really important to note that it’s such a large condo market, and an international-heavy market as well,” Weisheyer said.

Interest rates and demand rebalancing

Weisheyer said buyers in Florida have been able to adapt more flexibly as mortgage rates stabilize.

“For so long, buyers had concerns about interest rates and even the perception that interest rates were high,” he said. “Buyers are now realizing that if they can get a 6% interest rate – or even negotiate terms with their lender and their seller to buy out the interest rate – it is still a good choice to buy a home and stick with it, as opposed to dealing with rent increases that will materialize over time.”

Markets such as Miami, Orlando and Tampa continue to attract buyers due to strong job growth and development, Weisheyer said.

“The Florida market is dynamic and there is a lot of momentum coming to the southeastern United States,” he said. “Florida is the state that is taking the lead in this.”

Insurance costs

Weisheyer also addressed insurance issues, saying public perception has not caught up with reality.

“We will certainly have buyers from time to time who express concerns without really understanding whether it is a real concern or not,” he said. “They will read a headline talking about the insurance market in Florida and the increases that have been achieved.

“Well, when I sit with them and tell them that 17 new insurance companies have come into the state, and that Florida has the lowest annual premium increase of any state in the entire country, they say, ‘Really? I don’t think I really understood that.'”

Premiums are often misunderstood because rising home values ​​affect replacement costs, Weisheyer added

“A big part of that is the cost of labor and raw materials, which certainly impacts the cost of replacing homes, as well as the cost of repairing a home,” he said. “The second thing, which is really a blessing, is that home values ​​are in a really strong place right now, so their premiums are derived from what it would cost to replace this home.”

Weisheyer dismissed the rumors of a housing bubble outright.

“I wouldn’t even call it a bubble, but I understand that’s their term,” he said. “I don’t see a bubble to any extent. Miami has been such a hot market with such incredible demand and so much growth – including attracting a lot of people from the financial services industry to the market.”

“If you map out the impacts of COVID, there was just a big boost in all of our metropolitan markets and submarkets across the state.”

Market changes seen today should be seen as an inevitable return to earth, and not as a warning sign, Weisheyer said.

“We’re in a transition market where you’ve come out of radical growth over time with home values ​​and inventory demands, and now we’re in a very balanced market,” he said. “This is the type of market we want, where buyers and sellers have both options.”