What comes to mind when you think of Miami?

It's easy to picture the high-rise condos in Brickell, the hotels in South Beach, and the multi-million dollar homes overlooking the ocean.

However, the actual income of residents might surprise you.

The median household income in Miami is about $55,000 per year.

Compared to the national median household income of $78,538, that's roughly 30% lower.

This raises an interesting question: why are home prices so high when incomes are below the national average?

This is a crucial aspect to understand Miami's real estate market.

Miami has two very different economic zones mixed within the same city.

On one side, there are many people working in the service industry, including hotels, restaurants, tourism, cleaning, and retail. Among them, there are a significant number of immigrant households.

On the other side, there are high-income earners working in finance, real estate, international trade, and law.

Additionally, wealthy individuals from other states and international investors are also entering the market.

So, looking at the median alone doesn't give a clear picture of Miami's reality.

Home prices tell a more definitive story. If we estimate the median price of single-family homes in Miami to be around $600,000 to $650,000, that is about 11 times the median household income of $55,000.

This level is quite burdensome for an average worker trying to save up to buy a home.

However, in places like Brickell, the story changes.

Condos priced over $1 million are common, and depending on the location and building, you can easily find properties worth several million dollars.

So, who exactly is buying these homes?

Miami is a city where the person buying a home doesn't necessarily have to earn a salary in Miami.

For a long time, Miami real estate has been a means for wealthy individuals from Latin America to store their assets in U.S. dollars. Funds are coming in from Brazil, Colombia, Argentina, Venezuela, Mexico, and more, while people from high-income areas like New York and California are also moving in.

This influx of external capital weakens the connection between local residents' incomes and home prices.

In simple terms, just because a Miami resident earns $55,000 a year doesn't mean that Miami's home prices need to align with that income. If someone from outside is willing to buy a condo for $1 million, prices can move independently of local salaries.

This issue becomes even more tangible in the rental market.

Let's say a one-bedroom rental costs between $2,200 and $2,800 a month. If you simply divide the annual income of $55,000 by 12 months, the pre-tax monthly income is about $4,583.

If the rent is $2,500, then more than half of the income goes to rent before taxes are deducted.

To keep housing costs around 30% of income, a rental of $2,200 would require an annual income of about $88,000.

This is a significant gap from the median income.

As a result, in real life, couples often work together, or they live with roommates, move to slightly cheaper areas, or commute from places that are quite far from their jobs.

This is why the Miami that tourists see is quite different from the Miami that residents experience.

While tourists may first notice the glamorous high-rises and yachts, the biggest concern for many people who actually live in the city is rent and living expenses.

This is why the figure of $55,000 for Miami's median income is so important.

While home prices alone may suggest a wealthy city, when you consider residents' incomes, a very different city emerges.

It seems more accurate to view Miami not just as an expensive city, but as a city where the gap between the money earned locally and the money needed to buy a home is particularly large.