This week I decided to compile a condo index for Brickell Key. The data wasn’t quite as shocking as the condo index for Brickell but it did provide a few surprises. Overall, condo units in Brickell Key are listed at an average price per square foot of $519.97, or $16.31 per square foot less than condos in Brickell. The average price per square foot is $513.19 for listed units when using a weighted average. The latter is a bit lower due to a higher percentage of the units in Brickell Key residing in older buildings that have a lower price per square foot.
The average price per square foot for condos sold in the past six months in Brickell Key is $445.59, or $441.05 when weight adjusted. This is $26.17 per square foot less than condo units sold in Brickell over the last six months, or $54.08 per square foot less when comparing their weight-adjusted averages. These figures in themselves are a bit shocking because most would think that units sold in Brickell Key would bring higher prices as it has the reputation of being a more exclusive area. A few of the older buildings in Brickell Key did bring down the overall average but I feel that the difference is more attributable to the mortgage fraud that has occurred in a few large buildings in Brickell. I think we’ll see prices in Brickell Key surpassing Brickell as prices in Brickell readjust to account for the mortgage fraud. Many of those buildings already have a high percentage of foreclosures and those will bring down the overall average in Brickell as other units will need to adjust their prices downwards.
While the price per square foot for listed and sold condos in Brickell Key might be less, the average condo is mispriced by a greater percentage than units in Brickell. The average Brickell Key condo is listed 19.20% higher than what condos have actually sold for in the past six months, or 25.01% when weighted. This is well above the 13.98%, and 10.48% weight adjusted, numbers for Brickell.
I used a total of 10 buildings in Brickell Key to derive the condo index for that neighborhood. Those 10 buildings are found below, along with the statistics that were calculated. The first set of numbers are for condo units that are currently listed in those buildings.
The following numbers represent the average price per square foot of the closed sales within the past 6 months in each building. It is important to note that there was only one closed sale in Courvoisier Courts over the past six months. I feel that the particular unit that did close had a price per square foot that was well above the price per square foot of units that will close in the upcoming months. Prices should, and will most likely, end up more in line with condo units at the building called Courts Brickell Key.
Isola – 770 Claughton Island Drive | 33131 | $477.28
One Tequesta Point – 888 Brickell Key Drive | 33131 | $449.42
St. Louis – 800 Claughton Island Drive | 33131 | $ 466.15
Three Tequesta Point – 848 Brickell Key Drive | 33131 | $520.86
Two Tequesta Point – 808 Brickell Key Drive | 33131 | $447.32
As mentioned earlier, the average condo in Brickell Key is overpriced by 16.65%, or 22.15% when weight-adjusted. The break-down for each building is below.
Isola – 770 Claughton Island Drive | 33131 | 15.03%
One Tequesta Point – 888 Brickell Key Drive | 33131 | 9.87%
St. Louis – 800 Claughton Island Drive | 33131 | 16.46%
Three Tequesta Point – 848 Brickell Key Drive | 33131 | 10.46%
Two Tequesta Point – 808 Brickell Key Drive | 33131 | 31.27%
I’d love to hear some feedback regarding these numbers. Were they revealing to you or were they as expected? Next, I’ll hit South Beach.
Villa Magna Project Still a Possibility
Reports surfaced a few weeks ago that the Brickell luxury condominium project known as Villa Magna was canceled. Miami Today News reported earlier today that the project may move forward but with a significant change in the development plan. Villa Magna developer, Tibor Hollo, wants to replace 178,506 square feet of condominiums with hotel suites.
The 2.5 acre development site of the $200 million project known as Villa Magna is located at 1201 Brickell Bay Drive. It is the last bayfront parcel in Brickell. The previous plan called for 1,120 total condominium units.
The article mentions that local hospitality experts feel that competing with nearby luxury hotel brands such as the Mandarin Oriental and the Four Seasons Hotel would be a bad move by Mr. Hollo.
It will be interesting to see what becomes of this valuable parcel of land in the coming months. I will keep you posted as new information becomes available.
Miami Condo Index – Brickell – June 2007
Last week I mentioned that I was planning to create a Miami Condo Index to provide pricing insight to homebuyers in various neighborhoods in Miami and Miami Beach. This week I decided to kick things off with Brickell.
It was difficult to come up with a final list of buildings that should be included in the Brickell index. For example, is Neo Vertika in Brickell or should it be in a different category like West Brickell? Is One Miami part of downtown or should it be grouped with Brickell buildings? After much thought, I decided to include both. There simply aren’t enough buildings of interest in West Brickell or downtown to necessitate a separate neighborhood index for West Brickell and downtown. Eventually, One Miami will be grouped with downtown buildings as more developments are completed north of the Miami River. Another question remained as to whether buildings in Brickell Key should be grouped with buildings in Brickell to create a Brickell/Brickell Key index or should a separate index be created for each? I decided on the latter.
Earlier today, I finished crunching the numbers and evaluated my findings. Much of it was quite shocking. I took 18 prominent buildings in Brickell and created two separate spreadsheets. The first spreadsheet calculated the average price per square foot of units currently listed in the 18 buildings in Brickell. The second calculated the average price per square foot of units that have sold in those 18 buildings in the past six months. I also weighted each building according to how many units they had when compared to the sum of the units of all 18 buildings. This helped to arrive at a more accurate representation of the typicalBrickell condo.
First I’m going to show you the average price per square foot of the units currently listed on the market:
Some of those averages shocked the hell out of me. How can condo units at The Club at Brickell Bay have an average list price of over $650 per square foot? (I’ve heard reports of mortgage fraud in that building as well as at Jade and Vue at Brickell.) The average price per square foot for condos currently listed in Brickell using these 18 buildings came out to $536.28. The weight-adjusted average came out to $547.06. The Club at Brickell Bay, with 642 total units, skewed the weight-adjusted average higher than the regular average.
Next we’ll take a look at the average price per square foot in these buildings based on closed sales. Keep in mind that this is the average price per square foot. Condos that have a better view or are on a higher floor than the average condo in the building will obviously have a higher price per square foot. These figures were equally shocking.
Atlantis – 2025 Brickell Ave | 33129 | $335.12
Brickell on the River – 31 SE 5 St | 33131 | $411.79
Solaris at Brickell – 186 SE 12 Ter | 33131 | $436.21
The Club at Brickell Bay – 1200 Brickell Bay Dr | 33131 | $634.15
The Mark on Brickell – 1155 Brickelly Bay Dr | 33131 | $506.81
The Palace – 1541 Brickell Ave | 33129 | $350.88
Villa Regina – 1581 Brickell Ave | 33129 | $316.62
Vue at Brickell – 1250 S Miami Ave | 33131 | $556.59
Condo units at The Club at Brickell Bay had a higher average price per square foot than condos at Santa Maria when looking at closed sales. I had to double check my work once I saw that, but everything checked out.
I tried to eliminate any data that was irregular. For example, in the past six months Pharrell Williams purchased developer Ugo Colombo’s Penthouse unit at Bristol Tower for $13,950,000, or over $1,500 per square foot. I discarded it because it was deemed irregular.
The average price per square foot for these 18 buildings, based on closed sales, came out to $471.76. The weight-adjusted average came out to $495.13.
Using both data sets I also wanted to figure out how overpriced listings are in Brickell when compared to what they actually sell for, on average. I also was curious to find out which buildings were the most overpriced. Here is the data below:
Atlantis – 2025 Brickell Ave | 33129 | 0.73%
Brickell on the River – 31 SE 5 St | 33131 | 12.01%
Solaris at Brickell – 186 SE 12 Ter | 33131 | 16.09%
The Club at Brickell Bay – 1200 Brickell Bay Dr | 33131 | 3.63%
The Mark on Brickell – 1155 Brickelly Bay Dr | 33131 | 2.78%
The Palace – 1541 Brickell Ave | 33129 | 9.99%
Villa Regina – 1581 Brickell Ave | 33129 | 29.67%
Vue at Brickell – 1250 S Miami Ave | 33131 | -1.04%
On average, condo units at The Sail on Brickell have a list price that is 45.78% higher than the average sales price of units sold in the past six months. Either owners of units in that building have unrealistic expectations or agents conducting business there have not provided their clients with an accurate comparable market analysis.
On average, Brickell condo listings were priced 13.98% over the average sales price of units sold in the past six months in these 18 buildings. When using a weighted average, the typical Brickell condo is overpriced by 10.48%. The weighted average is lower because most of the large differences occur in smaller buildings such as The Sail on Brickell.
Keep in mind that statistical data is never perfect. It grows more accurate as additional data is incorporated. The same holds true for a major league baseball player. The first five at-bats in his major league career won’t dictate how the rest of his major league career will fair. The Miami Condo Index will shed more light as time goes on and patterns and trends begin to emerge in the data.
In the next two weeks I will reveal the findings for Brickell Key and South Beach. I will follow-up each neighborhood index report with a post highlighting any fantastic deals that I come across in the buildings covered.
Luxury Homebuyer Trends
REAL Trends, Inc. recently reported the results of The 2007 Membership Survey of Luxury Housing Market Trends. I found the results to be quite interesting.
The largest percentage of luxury homebuyers falls into the 40-50 age group (48%) followed closely by the 50-65 age group (44%).
The most common occupation of luxury homebuyers is that of an entrepreneur (51%), followed by large business executive (46%) or medical doctor (24%).
The number one service affluent homebuyers are interested in receiving from their luxury home specialist is help in finding a home (86%) followed by help in managing the transaction (56%) and expert counsel during a negotiation (43%).
The typical luxury homebuyer makes a large cash investment in his or her home purchase amounting to more than a third of the overall purchase price. In many metro markets this would exceed a quarter of a million dollars. This compares to the median amount financed by all buyers in 2006 of 91 percent of the purchase price.
The average luxury homebuyer spends 11 weeks looking for a home and views 12 homes.
Luxury homebuyers on average search for homes consisting of at least 3,500-4,000 square feet, with 4-5 bedrooms and 3-4 bathrooms.
The amenities most popular with luxury homebuyers include gourmet kitchens (95%), master bedroom suites (86%), specialty construction items (66%), high-end appliance packages (64%), home office suites (58%) and home theater rooms (55%).
The average listing price for luxury homes is nearly $900,000 dollars, or more than four times than the median price of all U.S. homes as of May 15, 2007 ($212,300).
Source: REAL Trends, Inc.
Flashback to 1983
Yesterday I was given the link to an interesting news article that was published in The New York Times on March 21, 1983 entitled, “Auctioneer’s Gavel Finally Moves Luxury Condominiums in Miami”. You can find that story below or by clicking the link above:
Three hundred people spent a sunny afternoon today in the shade of a big white tent listening to the patter of an auctioneer hawking luxury condominiums, many of which were sold at discounts of 30 to 45 cents on the dollar.
As the market for luxury condominiums remains soft, more developers are taking this route to dispose of their inventory to cut their losses.
About 60 units were sold for $125,000 to $190,000 in the first day of a four-day auction at Biscayne Cove, a luxury high-rise complex overlooking blue waters, nestled among other luxury dwellings in North Miami Beach.
“We decided to auction off and give the people a bargain,” said Morton Littlemen, a representative of the developers. “We want to give the people a condominium they can afford to own.”
One two-bedroom penthouse that was originally offered for $248,000 was sold for a high bid of $150,000. Condominium prices in the two-building complex range from $100,000 to $334,000.
Biscayne Cove is the fifth such auction that Martin Higgenbotham, an auctioneer, has handled in the last year for the developers, subsidiaries of Cadillac Fairview Corporation and Southeast Florida Properties. It is, Mr. Higgenbotham said, the largest single condominium auction in Florida: 225 units on the block at a value of $46 million. It is more than the total of 152 units sold at the other four complexes in Miami Beach and Hallandale.
The condominium auction business has been “heavy,” Mr. Higgenbotham said. In the last 12 months his company has sold about 1,000 condominiums at auction. Previously it handled 250 units in an average year.
The decision to auction the properties was not taken lightly, according to Lewis Goodkin, a real estate consultant whose firm conducted a marketing study for Biscayne Cove and recommended the auction for fast results. “The purpose is, let’s get out of this stuff and let’s get out of it fast,” he said. Normal advertising and deep discounting is “like a prolonged agony.”
Mr. Goodkin’s study concluded that, even under good conditions, it would take three years for the market to absorb existing inventory and that it did not pay for developers to hold onto the property. “We have in Miami today the most overbuilt luxury condominium market in the country,” Mr. Goodkin said.
He foresaw more auctions of this magnitude. “When the last recession hit us, we had a lot more inventory, but the inventory was more affordable,” he said. “A tremendous number of the public could respond. It could be absorbed. Today, our big invetory is in the luxury ranges where the market is not deep and you don’t have the response from the South American markets because their economy is weak or low.”
While the glut is most severe in Miami, it is not exclusive to this area, Mr. Goodkin said.
Is this the fate of the luxury condo units that will come to market in the next 12-24 months in Miami? 20,000! That is the number that has been thrown around for the number of new condo units that will close in 2007 and 2008. It is difficult to imagine that a supply of that magnitude can be absorbed in such a short period of time. It will be interesting to see what percentage of people walk away from deposits rather than close. If a significant portion walk then developers will likely be forced to take immediate action which could recall memories of 1983.
Buying a Foreclosure Doesn’t Have to Be Difficult or Risky
A client of mine closed on a foreclosure unit this past Friday. It was the smoothest transaction that I’ve ever had. I wish all of my deals were like that one.
Many people believe that buying a foreclosure can be risky. When a bank lists a recently foreclosed property with a traditional real estate agent, this just isn’t true. In most cases, the bank will clear any problems with the title and an inspection period is afforded to the buyer. My client was given 7 days to inspect the property that he had under contract which was more than enough time. We had a property inspector in the unit within two days after having a fully executed contract.
A foreclosure that is purchased on the steps of the county courthouse, however, is just the opposite. In many cases the title can be clouded and the buyer is not allowed to conduct a full inspection.
My client’s appraisal came in 30% higher than what he paid. As a result he didn’t have any problems obtaining financing. We had a 30-day close and during that short time not one issue came up.
An Analytical Analysis of Analyzing Condominiums
People often ask me why I chose to focus on condominiums rather than single family homes when I began my career in real estate. I guess the answer is mainly attributable to my formal education and the work experience I gained after graduating college.
As mentioned in the About Me section of this site, I graduated from the University of Illinois at Champaign-Urbana with a Bachelor of Science Degree in Finance with a specialization in Investments. After graduation, I worked as an equity options trader on the floor of the Chicago Board of Options Exchange for four years.
It became second nature for me to begin to analogize most aspects of my life in investment terms. Condominiums to me had similar homogeneous characteristics as that of a financial security than single family homes.
In my opinion, it is much easier to analyze the true market value of a condominium than it is for a single family home. A price per square foot analysis of condo units in a building, and even a neighborhood, reveals more truth than the price per square foot analysis of single family homes on a particular street or in a particular neighborhood.
A 2 bedroom condo in a particular building, in many instances, will have the same characteristics of another 2 bedroom condo in that same building, such as shared common areas, amenities, year built, square footage, appliances, floor plan, maintenance fees, view, parking spaces and so on. Any differentiations in the aforementioned qualities can be easily adjusted in the value of the subject property versus comparable properties.
It is much more difficult to assess the value of a single family home. It is common to see a small, outdated home situated right down the street from a large, recently built home. Of course there are ways to appraise the values of each by making adjustments for any differentiations in each home but it just isn’t the same, in my mind. A home buyer may fall in love with one home while he or she finds the home right down the street an eyesore.
It becomes much more expensive to turn a home down the street into your dream home than it is to turn a condo down the hallway into your ideal abode. The expense of replacing or changing the floors, paint job, window treatments, light fixtures and other elements of a condo can more easily be ascertained.
These thoughts guided me into the decision of choosing to specialize in condominiums over single family homes when I began my career in real estate. As the housing bubble talk began to escalate a few years ago, I began to think of how nice it would be conceive a way to hedge real estate investments for the average home purchaser or investor in case of a bubble-popping scenario.
I guess fellow Chicagoans at the Chicago Mercantile Exchange had similar thoughts. They created a tradable home market index based upon the Case-Shiller Home Price Index, which measures home prices based on recorded changes in home values and a repeat sales methodology.
The futures and options instruments that were enacted by the CME began trading in May of 2006. The purpose was to offer jittery homeowners a way to hedge the investment in their homes against future price declines. The CME also saw a large interest from investors to directly participate in the much-talked-about housing market.
While being a giant leap in the right direction, the CME’s housing index is far from perfect. They introduced tradable securities based upon large metropolitan areas which include the following: Miami, Chicago, Boston, Las Vegas, Los Angeles, New York, San Diego, San Francisco, Denver, Washington, as well as a weighted composite index.
However, it is difficult to adequately hedge the value of a condo in a building such as The Setai in South Beach from a condo in a boutique building in Hialeah using their index.
I have decided to create my own, localized, index. This index will be based upon market data derived from major condo buildings in Miami. I will create a graphical representation of a six-month price per square foot moving average using data of closed sales and a month-to-month price per square foot analysis of units currently on the market. I may include other relevant statistics in the future to provide more in-depth information relevant to the Miami condo market. I hope you guys trading the Miami housing index at the CME appreciate the information. I’d love to hear from you.
I plan to release an index update each week. At the outset, I will rotate Miami neighborhoods for a total of four neighborhoods (South Beach, Brickell, Arts & Design District and Miami Beach minus South Beach). In the future I plan to add Downtown Miami and Park West as its own index once the nearly constructed buildings in those areas are fully built.
I’ve decided to name my index the “Miami Condo Index”, or MCI for short. Obviously my index won’t be tradable as is the Chicago Mercantile Exchange’s housing index, but I hope that it will provide more insight to localized housing markets throughout Miami’s major neighborhoods.
The Miami Condo Index will launch next week with an in-depth look at Brickell.
I urge other Realtors throughout the country to create their own localized housing indices to fully encompass their own markets and provide market transparency to home buyers like no other.
Foreclosure Listings at Vue at Brickell Doubles in Three Weeks
On May 24, 2007 I posted an entry entitled, “Vue at Brickell – Overpriced or Insanely Overpriced?“, in which I questioned the average price per square foot of the condo units at a building called Vue at Brickell. I surmised that mortgage fraud may have been partly at fault for prices at Vue at Brickell reaching such irrational levels.
At that time there were three listed foreclosure units in the building. Now, there are a total of six. In three weeks the number of the listed units that are currently in the foreclosure process have doubled. Those are just the ones that are listed. I’m sure there are others. Below you will see those six listings, as well as relevant property information.
(FL#=floor number, #BEDS=number of bedrooms, #FB=number of full baths, #HB=number of half baths, LA=living area square footage, LP$=list price, LP$/SqFt=average price per square foot, #GAR=number of parking spaces, WTRFR=waterfront?)
I find it humorous that two of the listings categorize Vue at Brickell as being a waterfront building. It is far from being a waterfront building.
As you can see, the average price per square foot of the listed foreclosure units at Vue at Brickell is currently $475.81. The non-foreclosure units in the building have a much higher price per square foot. Only one of the six listings penetrated the $400 per square foot mark on the downside. Mark my words, within 18 months the majority of condo listings in Vue at Brickell, both foreclosure and non-foreclosure, will be under $400 per square foot. The availability of such a large number of newly constructed condo units within the next 18 months, in much higher-end buildings, will be the driving force. These buildings already offer price points below $400 per square foot and the growing supply will push those prices even lower.
It now more important than ever that you research various buildings in the neighborhood and receive a comparative market analysis when making a home purchase to ensure that you are making a wise investment. You know what they say…”Buying a home is the most important investment that you’ll make in your life”.
Site Updates – Real Estate Videos Section Added
You may have noticed that the site has undergone some cosmetic changes in the past couple of days. I would like to make everyone aware of a few other changes that may not be so apparent. The most significant change that I have made is the addition of the “Real Estate Videos” link to the header of the homepage. As you might guess, the link directs you to a page which displays various real estate videos, with the most recently posted video displayed first.
These videos are searchable in a few different ways. The best way to search for a video is using the catalog pull-down menu along the right-hand side of the page. There you can search for property videos by zip code, neighborhood, and type of property (condo, single family, etc). The ability to search by number of bedrooms, price and more shall be added in the coming days. This type of search is made possible through the use of tags. I will utilize tags to make searching as efficient and effortless as possible. This may not be a big deal now, seeing that there are less than ten property videos, but it will prove beneficial down the road as more videos are added. I plan to add at least ten new videos within the next week.
You will also be able to differentiate amongst the following types of videos, which will have the following tags:
Real Living Properties – These are property videos that are of listings associated with Real Living Properties (either my own or someone else in the office).
Investment-Grade – These are property videos that I feel are good investments. These may be foreclosures, short-sales, distressed properties or just below-market-priced listings.
Neighborhoods – I will occasionally add a neighborhood video to the site as well. The purpose of this is to primarily educate nonlocal investors.
You can also use the search box to find relevant posts as well. This type of search cannot read tags, however. It will provide better search results in the future once I have time to provide a more detailed summary of each property to ensure that all possible keywords that are relevant to that property are included within the actual posts.
I will also update posts associated with each listing to make people aware of any status change in the property. For example, if a property is pending sale I will make note of it in the post specific to that property. If the property has already closed, I will let everyone know and then most likely remove the posts after six months.
I am open to posting video listings of other Miami and Miami Beach-based real estate agents on this site. Once you have a video file and a property summary, drop me an email or give me a call and we’ll make it happen.
I have also included a “Property Search” link to the header of the homepage as well. It was there before but did not function like I wanted it to when clicked. It now works appropriately.
Additional changes shall follow in the coming months to allow for a more unique and efficient way to search for real estate. Enjoy!
Cynergi Buyer Wants Out
A guy named Evan left a comment on this blog and dropped me an email over the weekend. He bought a 1 bedroom/1 bath (D floor plan) with 962 square feet of interior space and a 204 square foot balcony on the eighth floor at Cynergi. He went into contract on his unit in June of 2005 and is looking to find a buyer to take over his contract. The price that he locked into was $380,000 but he is willing to accept $360,000 to get out. His unit comes with a $10,000 upgrade package, a full granite backsplash, washer/dryer and one parking space. The following are the prices that the sales agent working for the Cynergi developer quoted him in March 2007 for other D units in the building:
2nd floor – $425,000
3rd floor – $430,000
6th floor – $450,000
7th floor – $460,000
8th floor – $470,000
My reaction was holy crap! Those are unrealistic prices! I dug through some of the old price lists that I still have for Cynergi to see what those units were listed for a year or two ago. I used to get regular pricing updates emailed to me by a few of the sales agents who worked for Cynergi. I found a price list dated February 6, 2006. It has D units priced from $395,000 (2nd floor) to $425,000 (8th floor). Looks like Evan did get in pretty early. I still think that the prices are high even at $360,000 but I figured that I would post his situation on here in case someone knows somebody out there who is looking to buy a unit at Cynergi. Maybe they can help each other out.
Also, I’ve heard rumors that the developer of Cynergi is thinking about downgrading the kitchens and bathrooms on the remaining unsold units to cut back on costs. Does anybody out there know if there is any truth to this? It makes sense to me since it will be nearly impossible for them to sell those one bedroom units priced in the $400K’s.
The picture slideshow below will show you the floor plan for a D unit. It will also show you the kitchen and bathroom as they should be delivered to contract holders. I took these pictures a while ago when the model showroom still existed.
If anyone else out there is looking to get out of their contract to purchase a Miami preconstruction condo before they close, feel free to send me an email or drop a comment describing your scenario. Later this week I’ll discuss 10 condo units that are up for grabs at Midtown 4 They were purchased by an investment group when sales first launched. The group is looking to sell the condos for exactly what they paid. I will post that story once I get all the details from a member of the investment group that I met this past weekend.
Update: Evan has reduced the price of his one bedroom unit at Cynergi to $345,000. He will consider all offers.
