Miami Real Estate Carrying costs make 2023 good time to sell home in Key Biscayne

Adriana Montbrun Key Biscayne and Miami Realtor

By Adriana Montbrun

Wondering if the spike in real estate carrying costs across Miami and South Florida makes 2023 a good time to sell? Let’s explore

By now, we all know the story: home value appreciation has gone through the roof across South Florida and Miami-Dade since summer 2020. Across Key Biscayne, real estate appreciation numbers are at least as positive as the rest of Miami Dade, having registered historic appreciation levels since COVID with many properties appreciating above 50%. 2023 continues to show very low home and condo inventory levels and high prices across Key Biscayne. 

As prices hit new heights with levels few could have envisioned just three years ago, homeowners continue to ponder whether selling their home is the right decision to lock-in real estate appreciation gains. This, of course, is a challenging decision as it is not driven solely by financial drivers. 

In fact, most Key Biscayne residents not only like their lifestyle but, unlike other neighborhoods in Miami, do not think a Key Biscayne home can be replaced by a house with similar features and amenities in another community. No matter if a new home offers good schools, safety, beach, or waterfront access, it simply isn’t Key Biscayne, and Key Biscayne is in a class of its own. 

To complicate things further, prices remain high while inventory remains at historic lows, even if we’ve witnessed some short-lived spikes. However, sales activity has also slowed down dramatically yielding a more balanced market with months of supply off the historic lows achieved early in 2022 -see graph below. So, selling to catch the top of the market has been a little bit of a slippery slope but there is no denying great profits have been locked in over the past three years. With tight home availability across Miami-Dade, the question remains: where do I move if I sell?

Key Biscayne Real Estate Months of Supply 2018-2023 Single family homes + Condos

Key Reasons why Key Biscayne Homeowners may want to Sell Today

Let’s explore some critical financial reasons sellers in Key Biscayne are moving today. However, chances are the primary motivation is more than economic in nature. Sometimes, it’s just time to make a move that better aligns with one’s changing needs and priorities. 

Key Biscayne and Miami Real Estate Carrying Costs

Key Biscayne homeowners have a new and critical driver to consider in their selling plans, regardless of whether they own a Key Biscayne waterfront home or a regular non-waterfront one. Real Estate carrying costs are the critical new factor that includes all expenses an owner incurs to live and maintain a home in working condition. These expenditures can be grouped into three separate categories:l

1. Running your home

Homeowners face rising costs for running their homes, including utilities, cable, pool and lawn services, and general maintenance. These expenses have increased significantly due to inflation and the high demand for these services in Miami-Dade.

2. Mortgage and Taxes

This category is critical and may represent a significant cost increase if you have a mortgage with a variable rate, given that 3% rates have more than doubled to 7%, 8%, or more. Of course, If you have already paid off your home or have a low fixed rate, this may not be relevant to you, but it’s still wise to consider the potential opportunity cost.  

Taxes and home values have also increased, which can be capped if you have a homestead exemption. A wild card in Key Biscayne is the potential new fees and assessments associated with new projects, such as stormwater and vision plan to address sea rise. Their approval will likely increase homeowner tax bills beyond the raises associated with millage rate and home appreciation. 

3. Home Insurance

Miami home insurance is highly complex, challenging, and expensive particularly in coastal locations across Florida, and it has been for several years now with average premium raises of +30% per annum. This increase responds to several factors, but mainly to hurricanes and other events in the state, which have yielded ever higher premiums after being plugged into the insurance risk models. 

Raises, however, are only part of the story, as risk levels shown by these models have been deemed too risky for large commercial carriers that have taken the strategic decision to exit the Florida homeowner’s market. This situation has been going on for years and accelerated over the last two or three. 

There seems to be no relief in sight for at least a couple of years as we wait for the positive impact of the already enacted 2023 Florida legislation. There are high hopes this will improve the financial bottom line of insurance carriers, which will trickle down to the actuarial models that drive rates for the state. However, this will take time and must be balanced with the potential impact of new hurricanes, wildfires, and other incidents considered in these models. 

There are multiple anecdotal stories, and you don’t have to go much further than a recent story from The Key Biscayne Independent, where long-term residents saw their homeowners’, policy rise by $34k over the past year after being unilaterally canceled by their carrier -unfortunately a widespread practice these days in South Florida and particularly in Barrier Islands such as Key Biscayne. Homeowner policies in Key Biscayne have been written with premiums as high as $180,000 annually. 

Moving forward in 2023/2024 with your Key Biscayne Home

While Key Biscayne and South Florida home supply is likely to remain constrained, we’ve reached a point where incremental appreciation will likely not be as strong as it’s been and may not even be able to offset the cost of capital. If we add carrying costs, this means the decision to keep a home is wise for those committed to the Key and willing and able to fulfill the increasing financial obligations. 

If, however, you as a homeowner have a home that is bigger or has more features than you need and money is a consideration for you, then it may be wise to consider selling as there might be better options for your money at this point. 

Bottom Line: Advice for Sellers

Deciding whether it’s the right time to sell your home is personal. There are numerous essential questions to consider, both financial and lifestyle-based, before putting your home on the market.

If you’re thinking about selling your home in Key Biscayne, it’s crucial to consider the financial implications that might be driving your decision. However, it’s equally important to consider other factors that could influence your choice. Perhaps you’re looking to improve your living situation as your family grows, or maybe you’re approaching retirement and want to downsize. With the significant increase in your home’s equity, you might want to use it to finance your next purchase, enabling you to borrow less than anticipated or pay in full cash. 

When you are ready to prioritize your reasons for moving, let’s connect. I am happy to help you think through this decision and evaluate alternate home options where you can maintain the lifestyle you desire on or off Key Biscayne while making the right financial move for you and your family. I’ll also be happy to share how these Insurance and carrying costs apply to Key Biscayne condos, which face compliance and building certification pressures.