There was a time when people could afford to buy a home with a single minimum wage income. Now though, things have changed, and in some places, for the worst. In the past decade, the housing crisis has been steadily increasing. This is especially bad in metropolitan cities where there’s not only a shortage of land but also a shortage of living spaces compared to the number of people.
States such as Florida are hit harder by this housing crisis because of the higher cost of living. As a result, Miami has become the forefront of this crisis, where the median asking price for a house is around $615,000. Take a look at the factors contributing to the skyrocketing prices of the housing market in Miami.
For Profit Investors
The housing crisis started to get bad when big investors got interested in the market. These investors look for high-profit markets to invest in. However, for the average homeowner, this meant not being able to find affordable housing. These investors buy houses intending to flip them for a higher profit. Flipping means buying a house, renovating it to look modern, then selling it for a higher profit. Continued flipping ultimately increases the property value of the entire area and makes it harder for people to buy houses.
Renting Culture
Rents in Miami have skyrocketed in the past few years while the minimum wage has stayed pretty much the same. People now need to put away 80% of their income, on average, to even qualify for a housing loan. On top of that, renting culture makes it harder for them to buy houses. Landlords have good credit scores and better repayment histories, meaning they easily qualify for mortgages compared to their tenets. Additionally, the rents have significantly increased too, which makes it harder for people to put aside money for a house.
Mortgage Qualification
Credit availability is at its lowest compared to the past nine years. In addition to that, interest rates are also at an all-time high and are expected to grow more in the upcoming months. An average worker doesn’t make enough income to qualify for mortgages with such high interests and low credit options. But investors and landlords can easily qualify for them, which is further driving the divide between homeowners and housing businesses.
Inflation And Minimum Wage
Inflation has increased by 6.5% in the past year in Miami, and it’s driving housing prices up. People looking to flip houses are charging a high premium on their properties while the minimum wage hasn’t increased since 2009, and it’s not following the inflation rate. This has made it difficult for people to qualify for housing, especially in low-income neighborhoods where the flipping has increased the divide between classes.
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