Based on economic position, a new report from Fitch Ratings says that the Miami-Dade County housing market is one of the most overvalued nationwide. As of the quarter ending September 2015, home values in Miami-Dade were as overrated as much as 15 to 20 percent just like the San Francisco, Phoenix and Riverside, California markets.
Based on Zillow figures through December 2015, the median home value in Miami-Dade County is $244,500. Home values are up by 9.7 percent over the past year but expected to go down by 0.7 percent in 2016. It may not be so high like the median home value in Manhattan that is $1,320,500 but according to Miami Herald, home values in Miami-Dade were 15 to 20 percent overvalued.
In the Broward County up north, home values were 10 to 15 percent overvalued like Dallas, Houston and Los Angeles. While Palm Beach County further north, have overvalued houses up to 5 to 10 percent like Tampa and San Diego.
According to South Florida Business Journal, Fitch Ratings measures whether housing prices reflect the economic situation which includes income, population and supply of new homes among others. Fitch Ratings associate analyst Marc Gilbert said that South Florida is dealing with a short supply of housing. When demand outperforms supply, home values move upward. Gilbert added that developers are trying to build more houses to catch up with demand.
In this type of situation, high prices may become unsustainable and this could result in higher interest rates to provide cushion against such risk. Grant Bailey, a managing director at Fitch Ratings warns that in a market where rates are overvalued, banks may increase interests as cautionary measures. Gilbert said, "You have a number of potential outcomes. Incomes could rise and they could catch up to the overvaluation. Or you could see a tenuous decline or stagnation [in pricing]."
