This traditional Spanish-Deco home can be yours for under $1 million in Miami, Florida. Source: Realtor.com.
(Want to learn more? Be sure to check out what $1 million will buy you in Dallas, Phoenix, New York, and San Francisco!)
Sand, sun, glitz and glamour mark Miami, Fla., as a gateway between the U.S. and the Latin American nations in Central and South America.
For under a million dollars, you can beat the South Florida heat in your very own pool, which comes with this 4-bedroom, 3.5-bath North Miami home. The house has 3,200 sq. ft. and is built in that classic Miami Spanish-Deco style.
A history of boom and bust
Since the 1980s, the Miami real estate market has been known for its massive bubbles and devastating crashes. Sudden and oftentimes massive influxes of cash -- too often a result of the South America drug trade -- can send the market soaring. These booms lack widespread economic support, inevitably leading to a market correction.
In the 1980s, the boom days were a direct result of cocaine trafficking. In this excerpt from the book "Miami Babylon," by Gerald Posner, the author describes just how central cocaine money was to the metro's entire economy -- from jobs to real estate:
In the depths of a recession, the drug trade provided demand for an estimated 25,000 legitimate jobs in banking, real-estate construction, and the service industries. Dade County brought in $400 million extra a year in sales tax receipts. Ten thousand building permits were issued at a time when national construction was at a standstill. More than 20 skyscrapers were erected. "Cocaine was the currency that built that skyline," Alex Daoud told me, while looking at the dense clusters of mainland high-rises across Biscayne Bay.
While certainly not on the same scale, the problem still exists and can still be a major driver of market forces in the region. Just look here for a more recent example.
A particularly bubbly bubble
With that history in mind, the boom years in the mid 2000s were particularly bubbly.
Zillow (ZG 0.94%), a leading real estate website, estimates the value of the that Spanish-Deco home mentioned above peaked at $1.2 million in late 2006. Today, Zillow estimates the home's market value to be just $795,000, which is notable for the sharp 34% decline from the peak, and that it's over $100,000 less than the current asking price.
The chart above goes a long way to explain the seller's current optimism. From those extreme highs in 2006 and 2007, the Miami real estate market fell hard in 2009 and 2010. But since then, the market has rebounded, with the home price index exceeding growth around the rest of the U.S.
In Miami, it's just another boom-bust-boom cycle playing out before our eyes.
Two more examples: Boom, bust, and boom
This home, with 5 bedrooms and 4.5 bathrooms, in a private, gated community is currently listed for $996,000. It was last sold in June of 2011 for $790,000. It was then listed in May of 2014 for $1.05 million. The price dropped to its current asking price in July.
Or take this home, a 4-bed, 2.5-bath home with a full acre in another gated community. The seller is asking $998,000 today. However, the property has been listed for sale off and on over the past three years, beginning in March of 2011 with an asking price of over $1.3 million.
In both of these examples, very nice homes with excellent amenities and features are for sale at a a very good discount to prices seen in the bubble years of the mid 2000s. However, in both cases, the sellers are pricing their properties at optimistic levels (that optimism is particularly extreme in the second example).
You can get plenty of house in Miami for a million dollars. The key, it seems, is to buy low and sell high, riding the city's wild waves of boom and bust.
